2020 (12) TMI 352 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - Non specification of charge - HELD THAT - In the assessment order the AO has recorded satisfaction for furnishing inaccurate particulars of income. It is also an undisputed fact that the penalty has been levied for concealment of income. Therefore, it cannot be said that the AO has made it clear to the assessee under which limb he is going to impose the penalty. Penalty levied by the AO u/s. 271 (1) (c) of the Act is bad in law and deserves to be deleted. We order accordingly. Assessee claimed depreciation inadvertently as the flats were shown in the block of assets in the balance sheet - Assessee has claimed depreciation on flats. It is equally true that when the returned income of the assessee is in crores a claim of paltry sum of few lacs would do no tax benefit to the assessee. In our considered opinion the claim is definitely a human error and merely the claim was not allowable the same cannot lead to the levy of penalty u/s. 271 (1) (c) of the Act as held by the Hon ble Supreme Court in the case of Reliance Petro Projects Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT . Considering from this angle also we do not find impugned appeals fit for levy of penalty u/s. 271 (1) (c) of the Act. We accordingly direct the AO to delete the penalty. Appeal of assessee allowed.

Summary

Issues Involved:
1. Assessment order quashed by Tribunal for A.Y. 2004-05.
2. Disallowance of depreciation claim on flats leading to penalty u/s 271(1)(c) for A.Y. 2005-06 to 2010-11.

Issue 1: Assessment order quashed by Tribunal for A.Y. 2004-05:
- Sudhir Engineering Co. appealed against the assessment order framed under section 143 (3) r.w.s. 153 A for A.Y. 2004-05.
- The Tribunal declared the assessment order void ab initio due to foundational issues.
- Consequently, the penalty under section 271 (1) (c) of the Act was directed to be deleted as the basis for the penalty was removed with the quashing of the assessment order.

Issue 2: Disallowance of depreciation claim on flats leading to penalty u/s 271(1)(c) for A.Y. 2005-06 to 2010-11:
- Dispute arose regarding the penalty levied under section 271(1)(c) for disallowance of depreciation claim on flats, part of the block of assets, during assessment proceedings.
- The AO contended that the claim was not allowable, and upon disallowance, penalty was imposed.
- The counsel argued that the penalty notice did not specify under which limb the penalty was leviable, relying on legal precedents where such notices were deemed invalid.
- The Tribunal found that the penalty levied was bad in law due to the lack of clarity in the penalty notice and ordered its deletion.
- Additionally, the counsel argued the claim was an inadvertent error, and the Tribunal agreed, citing that the claim, being a human error without tax benefit, did not warrant penalty under section 271(1)(c) as per relevant legal judgments.
- Consequently, the Tribunal directed the AO to delete the penalty for all the relevant assessment years, thereby allowing all the appeals filed by the assessee.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, the legal precedents relied upon, and the final decision rendered by the Tribunal, ensuring a comprehensive understanding of the legal aspects and implications of the case.