2016 (11) TMI 1065 - AT - Income Tax

Penalty u/s. 271(1)(c) - incorrect claim of set off of unabsorbed depreciation - claim voluntarily rectified by filing Revised Computation during the assessment proceedings - Held that - Claim was made without any personal knowledge or involvement of the assessee. There is uniformity in the averments made by both the above said persons. None of the lower authorities have deemed it necessary to cross examine either of these persons and without their cross examination lower authorities have chosen to disbelieve the averments made on oath by these persons. In our view, the approach followed by the lower authorities is neither fair nor justified. The penal provisions are quite harsh in nature, in as much as, confirmation of the penalty may lead to prosecution of the assessee. Therefore, the revenue officials are expected to observe due diligence in discharge of their legal obligations while levying or confirming the penalty. It appears that approach to the lower authorities in this case has been that since incorrect claim has been made, then penalty must be levied irrespective of the fact whether the incorrect claim was as a result of bonafide mistake or a genuine human error or otherwise. Thus, we find that penalty in this case has been wrongly levied and therefore, same is directed to be deleted. - Decided in favour of assessee.

Issues Involved:
1. Justification of penalty under Section 271(1)(c) for incorrect claim of set-off of unabsorbed depreciation.
2. Consideration of the inadvertent mistake by the Assessee and its voluntary rectification.
3. Appropriateness of the higher penalty rate (135%) instead of the minimum penalty (100%).

Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The primary issue in this appeal was whether the penalty imposed under Section 271(1)(c) for an incorrect claim of set-off of unabsorbed depreciation amounting to ?75,07,162 was justified. The Assessing Officer (AO) argued that the claim was patently erroneous and incorrect, thereby warranting a penalty. Conversely, the Assessee contended that the claim was made inadvertently without any mala fide intention and was voluntarily corrected by filing a revised return before any objection was raised by the AO.

2. Consideration of the Inadvertent Mistake:
The Assessee's representatives argued that the mistake was a bona fide human error made by the accountant, Mr. Surendra Gupta, and the Chartered Accountant, Mr. Snehal Uttarwar. The Assessee realized the mistake during the assessment proceedings and voluntarily filed a revised computation of income before any query was raised by the AO. The Assessee's counsel relied on the Supreme Court judgment in the case of Price Waterhouse Coopers Pvt. Ltd. v. CIT, which held that a bona fide and inadvertent error does not amount to furnishing inaccurate particulars or concealment of income.

The Tribunal examined the facts and found that the Assessee had filed the original return within the stipulated time and had made the incorrect claim of set-off of unabsorbed depreciation. However, before any specific query was raised by the AO regarding the claim, the Assessee voluntarily filed a revised return and paid the due tax. The Tribunal noted that the incorrect claim was a result of copying and pasting the computation sheet from the previous year, where the unabsorbed depreciation had already been exhausted.

The Tribunal also considered the affidavits submitted by the accountant and the Chartered Accountant, which stated that the error was inadvertent and was corrected voluntarily. The lower authorities did not cross-examine these individuals but chose to disbelieve their sworn statements. The Tribunal criticized this approach and emphasized that penalty proceedings are independent of assessment proceedings, requiring a higher standard of proof for concealment or furnishing inaccurate particulars.

3. Appropriateness of the Higher Penalty Rate:
The Assessee also challenged the imposition of a higher penalty rate of 135% instead of the minimum penalty of 100%. The Tribunal found that the lower authorities had not substantiated any reasons for imposing the higher penalty. The Tribunal reiterated that penalty should not be levied in a casual or light-hearted manner and should be based on objective parameters and material on record.

Conclusion:
The Tribunal concluded that the incorrect claim made by the Assessee was a bona fide mistake or genuine human error. Therefore, the penalty under Section 271(1)(c) was not justified. The Tribunal directed the deletion of the penalty amounting to ?35 lakhs and allowed the appeal of the Assessee.

Result:
The appeal of the Assessee was allowed, and the penalty levied was directed to be deleted. The order was pronounced in the open court on 7th October 2016.

← Previous Next →