2024 (8) TMI 917 - AT - Income Tax

Penalty imposed u/s 270A - difference between the assessed income and the returned income - difference in opening written down value (WDV) in the ITR for AY 2017-18 and closing written down value for AY 2016-17 - HELD THAT - Assessee s stand in the case in hand is that the difference between the assessed income and the returned income was on account of depreciation, where inadvertently the opening written down value (WDV) of the assets was taken at book value in the audited annual accounts prepared under the Companies Act instead of written down value (WDV) under the Income-tax Act by the auditors in their tax audit report u/s 44AB of the Act. Both the accounts and the said report were submitted with the return of income. The learned First Appellate Authority in the impugned order has discussed the issue elaborately and in deleting the penalty levied u/s 270A of the Act has relied on the ratio of decision of Prem Brothers Infrastructure LLP 2022 (6) TMI 130 - DELHI HIGH COURT - DR has not been able to prove the case of assessee on different footing. Thus, no infirmity. It is well said to error is human a bona fide error cannot be basis of imposition of penalty - Thus, impugned action of the CIT(Appeals) is justified in deleting the impugned penalty, same is hereby affirmed - Decided against revenue.

Summary

Issues:
Appeal against deletion of penalty under section 270A of the Income Tax Act, 1961 for assessment year 2017-18.

Detailed Analysis:

1. Facts of the Case:
- The assessee filed its return of income for A.Y. 2017-18 declaring income of Rs. 383,45,50,210.
- Discrepancy of Rs. 1,63,21,921 in opening written down value (WDV) was noticed during assessment proceedings.
- Assessee accepted the mistake and offered excess depreciation claimed for taxation.
- Assessment completed u/s 143(3) assessing total income of Rs. 385,08,72,140.
- Penalty proceedings initiated u/s 271A for underreporting due to misreporting of income.
- Penalty of Rs. 1,13,76,592 levied by AO @ 200% of tax payable.

2. Arguments:
- Assessee's counsel argued that the error was inadvertent, a clerical oversight in adopting the incorrect figure for opening WDV.
- Assessee disclosed the mistake to the AO before assessment proceedings were completed.
- No mala fide intention to underreport income, as advance income-tax was deposited even after the addition.
- AO levied penalty solely on the ground of not filing a revised return u/s 139(4).

3. Decision of CIT(A):
- CIT(A) deleted the penalty, considering it a case of inadvertent mistake with no deliberate underreporting.
- Found the explanation offered by the assessee to be bona fide and all material facts were disclosed.
- CIT(A) disagreed with AO's findings on misreporting of income under section 270A.

4. Legal Precedents Cited:
- Rajasthan High Court and ITAT Mumbai decisions highlighted where penalty was quashed due to lack of clarity on misreporting.
- Delhi High Court decision emphasized that furnishing all transaction details does not constitute misreporting.

5. Conclusion:
- CIT(A) justified in deleting the penalty under section 270A based on the facts and binding precedents.
- No infirmity found in the decision, as a bona fide error cannot be the basis for penalty imposition.
- Appeal of the Revenue dismissed, and the penalty of Rs. 1,13,76,592 directed to be deleted.

This judgment revolves around the inadvertent error made by the assessee in claiming excess depreciation due to a clerical oversight in adopting the incorrect figure for opening WDV. The CIT(A) found the explanation offered by the assessee to be bona fide and concluded that there was no deliberate underreporting of income. The decision was supported by legal precedents emphasizing the need for clarity on misreporting before levying penalties under section 270A. Ultimately, the Revenue's appeal against the deletion of the penalty was dismissed, affirming the CIT(A)'s decision.