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2023 (2) TMI 591 - AT - Income TaxPenalty u/s. 271(1)(c) - Notice issued for concealment of income or furnishing of any inaccurate particulars of income - wrong claim of depreciation - disallowance of depreciation in the absence of purchase bills - HELD THAT - As undisputed that the depreciation was claimed by the assessee, as worked out by the auditors. It is also not in question that the assessee company is running in profit from year to year and if depreciation were to be reduced in one year, it would have led to increase in depreciation in the subsequent year. Thus, there is no case of furnishing of inaccurate particulars of income. The claim was a bona fide claim made by the assessee on the working of the auditors. Depreciation on purchase of machinery - As per the assessee, the duplicate bills could not be produced, as the vendor having closed shop, the assessee could not obtain the same, when the original bills stood misplaced. However, as rightly observed by the ld. CIT(A), in the event of the assessee not being able to obtain copies of the bills from its vendor, it ought to have provided the details of such vendor to the Department so as to enable it to ascertain the factual position. The assessee not having done so, an adverse inference was correctly drawn against the assessee and the penalty was rightly levied. However, the penalty ought to have been levied at the minimum rate, i.e., 100% and not @ 111.5%, as has been done. The AO is directed to scale down the levy of penalty on this count accordingly. On the first issue, i.e., wrong claim of depreciation of Rs. 15,31,989/-, the penalty levied is deleted. The penalty levied on the second issue, i.e., of disallowance of depreciation of Rs. 2,09,550/-, is directed to be scaled down from the rate of 111.5% to the rate of 100%. Ordered accordingly.
Issues Involved:
1. Whether the penalty under section 271(1)(c) of the Income Tax Act, 1961, for furnishing inaccurate particulars of income was justified. 2. Whether the Assessing Officer (AO) failed to specify the grounds for issuing the notice under section 271(1)(c) of the Act. Detailed Analysis: Issue 1: Justification of Penalty under Section 271(1)(c) Assessment Proceedings: - The AO noted an increase of Rs. 2,68,12,425 in fixed assets during the financial year 2011-12. Major capital expenditures were incurred on items purchased from Pevonia Spa Care Pvt. Ltd. and other entities. - The AO disallowed depreciation of Rs. 15,31,989 due to the incorrect claim of full-year depreciation instead of half-year, based on the date the assets were put to use. - Additionally, depreciation of Rs. 2,09,559 was disallowed for assets worth Rs. 27,94,120 due to the inability of the assessee to produce invoices. Penalty Proceedings: - The AO imposed a penalty of Rs. 6,00,000, holding that the assessee furnished inaccurate particulars of income. - The CIT(A) upheld the penalty. ITAT Findings: - The ITAT remitted the matter back to the CIT(A) to pass a speaking order on the additional legal ground raised by the assessee. - The CIT(A) dismissed the appeal in toto, leading to the current appeal before the ITAT. Arguments by Assessee: - The assessee argued that the penalty was wrongly confirmed and that the depreciation was claimed based on the auditors' working. - The assessee cited various judicial precedents to support the contention that the claim was bona fide and not a deliberate attempt to furnish inaccurate particulars. Judicial Precedents Cited: - Price Waterhouse Coopers (P) Ltd. vs. CIT: The Supreme Court held that a bona fide and inadvertent error does not amount to furnishing inaccurate particulars or attempting to conceal income. - CIT vs. Sidhartha Enterprises: The Punjab & Haryana High Court held that penalty under section 271(1)(c) is imposed only when there is a deliberate default, not for a mere mistake. - CIT vs. Rajiv Bhatara: The court held that no intention to furnish inaccurate particulars was evident, hence no concealment penalty was justified. - Manoj Ahuja vs. Inspecting Assistant Commissioner: The court held that no litigant should suffer for a mistake of his counsel. - CIT vs. Deepak Kumar: The court held that acting on the advice of counsel in good faith constitutes a bona fide mistake. - Pawan Garg vs. ACIT: The Tribunal held that a bona fide mistake does not justify the levy of penalty under section 271(1)(c). ITAT Decision: - The ITAT found that the depreciation claim was based on the auditors' working and was bona fide. Hence, the penalty for the wrong claim of depreciation of Rs. 15,31,989 was deleted. - For the disallowance of depreciation of Rs. 2,09,559 due to missing invoices, the ITAT upheld the penalty but directed it to be levied at the minimum rate of 100% instead of 111.5%. Issue 2: Failure to Specify Grounds in Notice under Section 271(1)(c) - The assessee raised an additional ground that the AO failed to specify whether the notice under section 271(1)(c) was for concealment of income or furnishing inaccurate particulars. - The ITAT remitted this issue to the CIT(A) for a speaking order, but the CIT(A) dismissed the appeal without addressing this ground adequately. Conclusion: - The appeal was partly allowed. The penalty for the wrong claim of depreciation of Rs. 15,31,989 was deleted, and the penalty for the disallowance of depreciation of Rs. 2,09,559 was scaled down to 100%. Order pronounced on 27.01.2023.
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