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2013 (7) TMI 354 - AT - Income TaxPenalty u/s 271(1)(c) - Interest paid to bank disallowed under Section 43B - Held that - Assessee has duly disclosed the particulars of interest payable in the balance-sheet, however, it could not disallow the interest payable at the time of computation of income as this was the first year in which such a claim was to be disallowed in view of Section 43B. Under these circumstances it can be held that there was a genuine inadvertent mistake by the tax consultants in this case. The ratio laid down in the case of Price Waterhouse Coopers Pvt. Ltd vs. CIT & another (2012 (9) TMI 775 - SUPREME COURT) wherein concluded that if there is a bonafide and inadvertent mistake by the assessee while submitting the income in the return, it cannot be held that assessee was guilty of either furnishing inaccurate particulars of income or concealment of his income. Thus, no penalty can be levied on such bonafide mistake and accordingly the same is deleted. In favour of assessee. Disallowance of depreciation on BSE membership rights - Held that - As decided in Techno Shares and Stock Ltd. case (2010 (9) TMI 6 - SUPREME COURT OF INDIA) BSE Card is an intangible asset entitled for depreciation if the card has been acquired after 01.04.1998. In this case, the assessee has acquired the card on 31st December, 1997 i.e. three months prior to it. In such a situation, it cannot be held that the assessee s claim for depreciation of BSE Card was bogus or non-genuine. Moreover, it is purely and legal issue that depreciation would be allowable on the card which has been purchased after 01.04.1998 and would be disallowed if it has been purchased slightly prior to this date. Therefore, such a claim cannot be held to be purely not bonafide. Thus, such a disallowance does not warrant any penalty for concealment of income or for furnishing of inaccurate particulars - penalty levied on this score also stands deleted. In favour of assessee.
Issues:
Penalty under Section 271(1)(c) for disallowance of interest under Section 43B and disallowance of depreciation on BSE membership rights. Analysis: 1. The appeal was against the penalty imposed by the CIT (Appeals) in relation to the assessment year 2004-05. The penalty was imposed on two additions: disallowance of interest paid to the bank under Section 43B and disallowance of depreciation on BSE membership rights. 2. The assessee, engaged in brokerage business, did not file the income tax return under Section 139(1) of the Act. The Assessing Officer disallowed the claimed financial cost of bank interest under Section 43B and the depreciation on the BSE Card. The penalty was levied based on these disallowances. 3. Before the CIT(A), the assessee argued that the disallowance under Section 43B was a genuine mistake by tax consultants due to a change in the law from the assessment year 2004-05. The assessee had disclosed all relevant information, and the penalty was not justified. Regarding the depreciation on the BSE Card, the assessee claimed it was a legal issue and relied on relevant case law to support their position. 4. The learned counsel for the assessee contended that there was no intention to evade tax, and the disallowances were due to genuine mistakes. On the other hand, the standing counsel argued that the revised computation did not rectify the initial non-disclosure, indicating a concealment of income. The standing counsel also cited case law to support the penalty imposition. 5. The Tribunal considered both parties' arguments and found that the disallowance under Section 43B was an inadvertent mistake by the tax consultants due to the recent change in the law. Citing the Supreme Court's decision, the Tribunal held that no penalty could be levied for a genuine mistake, and thus, the penalty was deleted. 6. Regarding the disallowance of depreciation on the BSE Card, the Tribunal noted that the card was acquired just before the cut-off date for depreciation eligibility. Considering it a legal issue, the Tribunal held that the disallowance did not warrant a penalty for concealment of income or furnishing inaccurate particulars. Consequently, the penalty on this account was also deleted. 7. In conclusion, the Tribunal allowed the appeal filed by the assessee, and the penalty was deleted on both grounds. Judgment: The Appellate Tribunal ITAT Mumbai, in the citation 2013 (7) TMI 354, allowed the appeal filed by the assessee against the penalty imposed under Section 271(1)(c) for disallowance of interest under Section 43B and disallowance of depreciation on BSE membership rights for the assessment year 2004-05. The Tribunal held that the disallowances were due to genuine mistakes and legal issues, not warranting a penalty for concealment of income.
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