2019 (5) TMI 627 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - unabsorbed depreciation carry forward - depreciation were available to the AO in the return filed u/s 139(1) and return filed u/s 153C - explanation of assessee shows that there was unabsorbed depreciation in preceding AY 2005-06 which was claimed in assessment year under appeal i.e. 2006-07 u/s 139(1) of the Act. However, while filing the return of income for assessment year under appeal i.e. 2006-07 u/s 153C, the same figure of unabsorbed depreciation has been picked up by the system. Therefore, it is a mistake on the part of the assessee in taking the same figure while filing the return of income u/s 153C - HELD THAT - Error occurred because of figures automatically picked up by the system itself. Thus, the assessee disclosed all the facts in the computation. It, therefore, appears that it was an inadvertent mistake. The explanation of assessee shows that there was unabsorbed depreciation in preceding AY 2005-06 which was claimed in assessment year under appeal i.e. 2006-07 u/s 139(1) While filing the return of income for assessment year under appeal i.e. 2006-07 u/s 153C, the same figure of unabsorbed depreciation has been picked up by the system. Therefore, it is a mistake on the part of the assessee in taking the same figure while filing the return of income u/s 153C of the Act. However, all the facts relating to unabsorbed depreciation were available to the AO in the return filed u/s 139(1) of the Act and return filed u/s 153C of the Act. In the case of Price Water House Coopers Pvt. Ltd. Vs. CIT 2012 (9) TMI 775 - SUPREME COURT cancelled the penalty because the claim of gratuity was not allowable deduction which was inadvertent silly mistake on the part of the assessee - nature of addition made by the authorities below, we are of the view that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. We, accordingly, set aside the orders of the authorities below and cancel the penalty. - Appeal of assessee is allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2006-07 based on unabsorbed depreciation carried forward in the return filed under section 153C.

Analysis:

1. Facts of the Case:
- Search and seizure operation under section 132 of the Income Tax Act was conducted, leading to the discovery of a significant sum of money.
- Statement of the Managing Director revealed that the money was withdrawn from the company's bank account.
- Assessment was finalized under section 153C read with section 143(3) of the Act, resulting in an addition to the income.

2. Penalty Imposition:
- The Assessing Officer (AO) imposed a penalty under section 271(1)(c) after finding discrepancies in the return filed under section 153C for Assessment Year 2006-07.
- The AO noted that the same unabsorbed depreciation amount was claimed twice in the returns, which was considered a violation of tax laws.

3. Assessee's Explanation:
- The assessee explained that the error occurred due to the system automatically picking up the unabsorbed depreciation amount from the previous year's return.
- It was clarified that there was no intention to claim the excess amount, and the mistake was inadvertent.

4. Judgment and Decision:
- The appellate tribunal considered the explanation provided by the assessee and found it to be a genuine mistake.
- Citing a previous Supreme Court case, the tribunal highlighted that inadvertent errors, such as the one in this case, do not warrant the imposition of penalties.
- Based on the facts presented and the nature of the addition made by the authorities, the tribunal concluded that it was not a suitable case for levying a penalty under section 271(1)(c).
- Consequently, the tribunal set aside the orders of the lower authorities and canceled the penalty, allowing the appeal of the assessee.

5. Conclusion:
- The judgment emphasized the importance of considering the circumstances and intent behind apparent discrepancies before imposing penalties under tax laws.
- In this case, the tribunal found the error to be unintentional and ruled in favor of the assessee, highlighting the need for a balanced approach in penalty assessments under the Income Tax Act.