2022 (10) TMI 1092 - AT - Income Tax

Levying penalty u/s. 271(1)(c) - differential amount of opening WDV of assets as on 01.04.2015 and the closing WDV of assets as on 31.03.2015 - HELD THAT - Before us, the Chartered Accountant Shri B. Jeevarathinam categorically admitted in writing that the duplication of assets has happened while calculating the depreciation as per Income Tax Act while computing the tax computation sheet by his staff. He admitted that while doing so, the staff has wrongly computed the deprecation value filed 15% block of assets with respect to the said assessment year and accordingly, excess depreciation claimed was made to the extent of Rs. 17,86,187/-. As noted that this mistake has occurred at the office of the Chartered Accountant and there is no intention of the assessee to evade the tax. Moreover, the assessee has already accepted assessment and paid taxes. In view of the facts and circumstances narrated above and the cumulative effect of the facts, if we analyze, it clearly shows that the assessee was under bonafide belief in claiming this depreciation. Hence, we delete the penalty and allow the appeal of the assessee.

Summary

Issues:
1. Penalty under section 271(1)(c) of the Income Tax Act on differential amount of opening WDV and closing WDV of assets.
2. Maintainability of an appeal filed by an individual against a penalty order imposed on a company.

Analysis:

Issue 1: Penalty under section 271(1)(c) of the Income Tax Act on differential amount of opening WDV and closing WDV of assets:
The case involved an appeal by the assessee against the penalty imposed by the Income Tax Officer under section 271(1)(c) of the Income Tax Act. The penalty was levied due to the differential amount between the opening Written Down Value (WDV) of assets as on 01.04.2015 and the closing WDV of assets as on 31.03.2015. The Assessing Officer disallowed the claimed depreciation due to discrepancies in the calculation, resulting in the penalty. The assessee contended that the error occurred at the auditor's office, leading to the incorrect calculation of depreciation. Despite explanations provided by the assessee, both the Assessing Officer and the CIT(A) upheld the penalty. However, the Tribunal considered the facts and circumstances, noting that the mistake was unintentional and made in good faith. The Tribunal accepted the assessee's explanation, acknowledging the lack of intention to evade tax, and subsequently deleted the penalty, allowing the appeal.

Issue 2: Maintainability of an appeal filed by an individual against a penalty order imposed on a company:
In a separate appeal, the Tribunal addressed the maintainability of an appeal filed by an individual, M. Prabakaran, against a penalty order imposed on the company, RKP Poly Bags Pvt. Ltd. The Tribunal observed that the penalty was levied solely on the company and not on the Managing Director individually. As a result, the appeal filed by the individual was deemed not maintainable and was dismissed accordingly.

In conclusion, the Tribunal allowed the appeal in ITA No. 548/Chny/2021 concerning the penalty on differential WDV amounts, as the penalty was deleted based on the unintentional nature of the error. Conversely, the appeal in ITA No. 145/Chny/2021 filed by an individual against a penalty on the company was dismissed due to lack of maintainability. The Tribunal's decision highlighted the importance of intention and factual circumstances in determining the imposition of penalties under the Income Tax Act.