2005 (11) TMI 56 - HC - Income Tax

Penalty under section 271(1)(c) - 1. Whether Tribunal had enough material to hold that the claim for depreciation and investment allowance on machinery was due to the bona fide mistake? - authorities below have concurrently held that when the mistake was pointed out, the assessee had withdrawn his claim for depreciation and investment allowance on the machinery and filed a revised return and this action of the assessee shows their bona fides. It is also not the case of the Revenue that the assessee had the mala fide intention of furnishing inaccurate particulars with a view to falsely claiming depreciation and allowances to evade taxes.- Tribunal had enough materials to hold that the claim for depreciation and investment allowance on machinery was only due to bona fide mistake - hence, Tribunal was right in quashing the penalty under section 271(1)(c)

Summary

Issues:
1. Whether the Tribunal had enough material to hold that the claim for depreciation and investment allowance on machinery was due to a bona fide mistake?
2. Whether the Tribunal was right in quashing the penalty under section 271(1)(c) for the assessment year in question?

Analysis:
The High Court of MADRAS heard tax case appeals against the Income-tax Appellate Tribunal's order related to the assessment year 1990-91. The assessee had claimed depreciation and investment allowance on machinery received after the previous year ended. The Assessing Officer imposed a penalty under section 271(1)(c) for falsely claiming these benefits. The Commissioner of Income-tax (Appeals) later deleted the penalty, leading the Revenue to appeal to the Tribunal. The Tribunal dismissed the appeal, stating that the assessee's withdrawal of the claims upon notification showed their bona fides. The Revenue challenged this decision, raising two substantial questions of law.

The first question was whether the Tribunal had enough material to conclude that the claim was a bona fide mistake. The second question was whether the Tribunal was correct in canceling the penalty under section 271(1)(c). The High Court referred to a similar case under the Wealth-tax Act where the Gujarat High Court emphasized that penalties require a mala fide intention, which is a question of fact. The High Court noted that the authorities had found the assessee's actions to be in good faith, withdrawing the claim upon notification, and filing a revised return. The Revenue did not prove any mala fide intention on the part of the assessee.

The High Court upheld the Tribunal's decision, stating that there was enough evidence to show that the claim for depreciation and investment allowance was a genuine mistake. The Court agreed with the Tribunal's decision to quash the penalty under section 271(1)(c) of the Income-tax Act. Consequently, the appeals were dismissed with no costs incurred by either party.