2024 (3) TMI 1124 - AT - Income Tax

Penalty u/s 271(1)(c) - loss on sale of machinery which was not eligible for deduction in the profit and loss account - assessee has made adjustment on the sale of plant and machinery in the block of asset which evidences that the assessee has not claimed any excessive depreciation therein, such loss on the sale of machinery was inadvertently not added back in the computation of income - HELD THAT - We note that the assessee has made necessary adjustments in the block of assets of the plant and machinery which was also not doubted by the authorities below. From the above, it is transpired that the assessee on one hand has adjusted the gross block of asset but on the other hand omitted to make the addition on the loss of sale of machinery to the total income of the assessee. Thus, we find there is a contradictory stand taken by the assessee as evident from the financial statement and computation of income. This contradictory stand of the assessee gives reason to believe that such mistakes has been committed by the assessee due to oversight and inadvertently, therefore we are of the view that the assessee should not made to suffer if such bona-fide mistake is committed by the assessee. Decided in favour of assessee.

Summary

Issues Involved: The appeal against penalty order u/s 271(1)(c) of the Income Tax Act 1961 for Assessment Year 2011-12.

Details of the Judgment:

Issue 1: Confirmation of Penalty under Section 271(1)(c)

The only issue raised by the assessee was the confirmation of the penalty of Rs. 13,83,130/- under section 271(1)(c) of the Act. The penalty was levied due to the claim of loss on the sale of machinery which was not eligible for deduction in the profit and loss account. Both the Assessing Officer (AO) and the Learned Commissioner of Income Tax (Appeals) upheld the penalty.

Issue 2: Claim of Inadvertent Error

The assessee claimed that the loss on the sale of machinery was inadvertently not added back in the computation of income, despite making adjustments in the block of assets of the plant and machinery. The assessee argued that there was a bona fide mistake and the penalty should not be levied u/s 271(1)(c) of the Act.

Issue 3: Judicial Review and Decision

After hearing both parties and examining the submissions, the Appellate Tribunal noted that the assessee had adjusted the gross block of assets but omitted to add the loss on the sale of machinery to the total income. The Tribunal found a contradictory stand taken by the assessee, leading to the belief that the mistakes were committed inadvertently. The Tribunal referred to a similar case and held that the penalty on the assessee was not justified. It was concluded that the assessee had committed an inadvertent and bona fide error and had not intended to conceal income or furnish inaccurate particulars. Consequently, the Tribunal set aside the orders of the lower authorities and allowed the appeal of the assessee.

Conclusion

The Tribunal held that the penalty u/s 271(1)(c) should not be imposed on the assessee due to the bonafide mistake committed. The findings of the Learned Commissioner of Income Tax (Appeals) were set aside, and the Assessing Officer was directed to delete the penalty. As a result, the appeal filed by the assessee was allowed.

Note: This summary provides a detailed overview of the judgment, highlighting the issues, arguments, and the final decision made by the Appellate Tribunal ITAT Ahmedabad in the case.