2005 (4) TMI 11 - HC - Income Tax

During the course of assessment proceedings, the Assessing Officer noticed that extra-shift allowance at 10 per cent, on plant and machinery had been claimed by the assessee on the basis that the factory had worked three shifts daily. On being asked to substantiate the claim, the assessee stated that extra-shift allowance had been claimed through oversight. The Assessing Officer held that the assessee had furnished inaccurate particulars of its income in respect of extra-shift allowance and levied penalty for a sum of Rs. 54,176 under section 271(1)(c) of the Act which was 100 per cent, of the tax effect attributable to the claim of extra-shift allowance - Tribunal was right in cancelling the penalty under section 271(1)(c)

Summary

Issues:
1. Whether the Tribunal was right in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961?

Analysis:
The judgment pertains to a case where the Assessing Officer imposed a penalty under section 271(1)(c) of the Income-tax Act, 1961 on the assessee for claiming extra-shift allowance on plant and machinery during the assessment year 1978-79. The penalty was levied as the Assessing Officer found that the assessee had furnished inaccurate particulars of income. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Tribunal, in the second appeal, deleted the penalty. The Tribunal noted that the claim for extra-shift allowance was due to oversight, and the assessee would not have benefited from it as the figures of income remained the same before and after the claim. The Tribunal emphasized that depreciation is allowable only up to the cost of plant and machinery, and no excess amount can be claimed. The Tribunal found no admission by the assessee regarding concealed income or furnishing inaccurate particulars, stating that the claim was made through oversight, which was not untrue.

The Tribunal's decision was based on the factual findings that the claim for extra-shift allowance was a case of oversight and that the assessee would not have gained any benefit from it. The Tribunal correctly interpreted the statutory scheme regarding depreciation and found no fault with the reasoning adopted. The High Court observed that the Tribunal's decision was in accordance with the provisions of the Act and that it had the authority to arrive at a decision based on the statutory scheme, even if certain aspects were not specifically pleaded before it. Therefore, the High Court upheld the Tribunal's decision to cancel the penalty under section 271(1)(c) of the Act, ruling in favor of the assessee and against the Revenue. The court disposed of the reference accordingly, with no order as to costs.