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Facts
The assessee, a transport company, filed its return declaring nil income and a loss for AY 2016-17. The case was selected for scrutiny due to issues with sales turnover and depreciation claims. An excess claim of depreciation of Rs. 28,04,248 was made due to an error in calculating the opening WDV.
Held
The Tribunal held that the excess claim of depreciation and the non-offering of interest on refund were bonafide mistakes and not due to any intention to conceal income or furnish inaccurate particulars. Reliance was placed on Supreme Court and High Court decisions regarding bonafide mistakes.
Key Issues
Whether the penalty levied under Section 271(1)(c) for excess depreciation claim and non-offering of interest on refund is justified when the mistakes are considered bonafide and inadvertent.
Sections Cited
271(1)(c), 143(2), 142(1), 32, 115JB, 274, 273B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
ORDER Per: Smt. Beena Pillai, J.M.: The present penalty appeal filed by the assessee arises out of order dated 09/10/2024 passed by NFAC, Delhi, for assessment year 2016-17 on following grounds of appeal:-
1. Fair Opportunity of being heard is not given: On the facts and in the circumstances of the case, the Appellant submits that they were prevented by the A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. circumstances beyond his control to reply to the various notices issued and upload responses for the submission during the appeal proceedings. The Appellant submits that an opportunity of being heard be given as a matter of natural justice.
2. Penalty of Rs. 2,99,243/- u/s 271(1)(c) levied: a. On the facts and in the circumstances of the case, the Appellant submits that the Hon'ble Commissioner of Income Tax Appeals erred in upholding the action of the Assessing Officer of levying the penalty u/s 271(1)(c) for furnishing inaccurate particulars of income on excess depreciation of Rs. 28,04,248/- claimed oversight computed by considering as opening WDV as on 01.04.2014 instead of opening WDV as on 01.04.2015. The Appellant submits that the depreciation u/s 32 was claimed oversight be not treated as furnishing of inaccurate particulars of income and that the penalty levied u/s 271(1)(c) on the same be deleted as it is a bonafide mistake. b. On the facts and in the circumstances of the case, the Appellant submits that the 4 Hon'ble Commissioner of Income Tax Appeals erred in upholding the action of the Assessing Officer of levying the penalty u/s 271(1)(c) on the addition of interest of Rs. 77,7271- on Income Tax Refund by treating it as concealment of income. The Appellant submits that the interest on IT Refund which was not offered for tax by oversight be not treated as concealed income as the same was credited in the Tax Expense head appearing after Profit Before Tax in the Profit and Loss Statement. The Applicant submits that the penalty levied u/s 271(1)(c) on the same be deleted.
3. On the facts and in the circumstances, the Appellant submits that the Hon'ble Commissioner of Income Tax Appeals erred in upholding the action of the Assessing Officer of levying the penalty u/s 271(1)(c) when the income is assessed on book profit uls 115JB, tax on which is more than the tax on income determined in normal computation of tax. The Appellant submits that the penalty u/s 271(1)(c) cannot be levied when the tax is computed as per the provisions of Section 115JB and therefore, the same should be deleted 4. The Appellant craves leave to reserve to itself the right to add, after, amend or annul any of the grounds of appeal
at or Brief facts of the case are as follows:
2. Assessee is a company and its engaged in business of transport during the year under consideration it filed its return of income on 29/09/2016 declaring total income at Rs. Nil and current year loss at Rs. 20,79,780. The case was selected for scrutiny to examine following issue :-
1. 1. Whether sales turnover/receipt have been correctly offered to tax.
2. Whether deduction claim on account of depreciation is admissible. 2.1. The Ld.AO accordingly issued notice u/s. 143(2) alongwith the notice u/s 142(1). In response to the statutory notices, the assessee filed details as called for. The Ld. AO while considering the issues during the assessment proceedings observed and held as under: “One of the issues regarding mismatch in sales turnover reported in Audit Report and ITR, the authorized representative of the assessee-company has submitted explanation with reconciliation which has been examined. The other issue regarding depreciation claim, It is seen from return of income that the assessee-company has claimed depreciation wrongly of Rs.49,32,031/- instead of correct amount of Rs. 21,27,783/- thereby showing loss of Rs.(-) 20,79,780/-. The authorized representative of the assessee- company has submitted that "they have wrongly claimed depreciation on the amount of Rs.93,47,494, however they have rectified the error in the subsequent assessment year. It is further submitted that they have filed income-tax return for the year under review u/s 115JB so there will impact of tax liability and there is no revenue loss to government. We are enclosing herewith copy of income tax return and income tax A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. computation for A.Y.2015-16, A.Y.2016-17 and A.Y.2017-18 for your kind perusal". After considering the submission of the assesee-company, the correct depreciation claim as per IT rule is allowable at Rs.21,27,783/-, as against the depreciation claimed of Rs. 49,32,031/-. Thus, the excess claim of depreciation to the extent of Rs.28,04,248/- is inadmissible and is hereby disallowed. Penalty proceedings u/s 271(1)(c) are initiated separately for furnishing inaccurate particulars of income.” 2.2 The assessment order was completed by determining the gross total income of Rs.8,02,195/- in the hands of the assessee. Against the assessment order the assessee did not file any appeal before the Ld. CIT(A).
The Ld. AO subsequently issued penalty notice u/s 271(1)(c) r.w.s.271 of the Act on 27.11.2018 for filing inaccurate particular of income. A show cause notice u/s 271(1)(C) dated 05.04.2019 was issued to the assessee by the Ld.AO. After examination considering the submission of the assessee, the excess claim of depreciation of Rs.28,04,248/- was disallowed. The interest on refund of Rs.77,727/- was also added to the total income of the assessee. For these defaults, notice u/s 274 r.w.s. 271(1)(c) of the 1.T. Act was issued to assessee on 27/11/2018. 3.1. Show cause notice dated was issued on 12/03/2019 calling upon the assessee to comply on or before 12/04/2019. In response to the show caused notice, the assessee submitted as under: i). Depreciation Claim: The assessee company is engaged in the business of Transport. The issue here is regarding depreciation claim. It is seen from return of income that the assessee-company has claimed depreciation wrongly of Rs.49,32,031/- instead of correct amount of Rs. 21,27,783/- thereby showing loss of Rs.(-) 20,79,780/-.
A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. The authorized representative of the assessee-company has submitted that "they have wrongly claimed depreciation on the amount of Rs.93,47,494, however they have rectified the error in the subsequent assessment year. It is further submitted that they have filed income-tax return for the year under review u/s 115JB so there will impact of tax liability and there is no revenue loss to government. We are enclosing herewith copy of income tax return and income tax computation for A.Y.2015-16, A.Y.2016-17 and A.Y.2017-18 for your kind perusal". ii) Interest on Income Tax Refund:- "The assessee had accepted that "they have wrongly claimed depreciation on the amount of Rs.93,47,494/-, however they have rectified the error in the subsequent assessment year and they have filed income-tax return for the year under review u/s 115JB so there will impact of tax liability and there is no revenue loss to government." 3.2. The Ld. AO after considering the submission of the assessee was of the opinion that, it is a fit case of the levy penalty u/s 271(1)(C) at 100% of the total tax to be edited. Aggrieved by the order of the Ld. AO the assessee preferred appeal before the Ld. CIT(A).
Before the Ld. CIT(A), 3 notices were issued on 29.01.2021, 20.09.2021 and 01.10.2024. The Ld. CIT(A) dismissed the appeal as assessee failed to respond to the notices. Aggrieved by the order of the Ld. CIT(A) assessee in his appeal before this Tribunal.
The Ld.AR Submitted that, claim of excess depreciation by the assessee was a bonafide mistake and there was no men rea on the part of the assessee to suppress any material fact. He placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT v/s Reliance Petroproducts (P) Ltd Reported in 322 A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. ITR 158. The Ld. AR further submits that the assessee has filed its income tax returns u/s 115 JB and therefore there is no loss to the revenue as tax has been paid u/s 115 JB on the book profits. It is submitted that assessee therefore did not revise the return of income as there was no liability to pay taxes under the normal provision of the Act. 5.1. The Ld. AR drew our attention to tax audit reports for assessment year 2015-16 placed at pg. No. 19, assessment year 2016-17 placed at pg. No. 09 and assessment year 2017-18 placed at pg. No. 34 of the paper book. It is submitted that, closing WDV is the opening WDV for immediately succeeding assessment year. He submitted that, mistake that crept in stood corrected while preparing the audit report for the assessment year 2017-18 being the subsequent assessment year. Referring to page No. 32 of the paper book, the depreciation was claimed only in the 15% block which is after the rectification the mistake in the year under consideration. The Ld. AR placed reliance on the ratio of the Hon’ble Supreme Court in the case CIT v/s Reliance Petroproducts (P) Ltd (Supra) and submitted that, it was a bonafide and inadvertent mistake on the part of the assessee that resulted in higher claim of depreciation. He just prayed for the penalty to be deleted on discount. 5.2. In respect of interest on refund the Ld. AR submitted that the entry was wrongly made under different head and therefore went unnoticed. The Ld.AR submitted that the assessee made out reasonable cause as per section 273B and there was no malafide intention on behalf of the assessee to evade any tax as there is no A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. loss to the revenue since the assessee has paid taxes u/s115JB of the Act. 5.3. On the contrary, the Ld. DR submitted that the order passed by the authorities below is an ex-parte order. The assessee has failed to appear before the Ld.CIT(A). He submitted that excess claim of depreciation amounts to filing of inaccurate particulars and therefore penalty is the also rightly levied. The Ld. DR thus supported the order passed by the authorities below. We have perused the submission advance by the both the side in the light of the records placed before us.
It is noted that before the Ld. CIT(A) the notices were assessee during the COVID period. Thereafter only one notice was issued during 2024 which went unnoticed by the assessee due to which none could appear. No representation could be made. 6.1. However, as submitted by the Ld. DR we don’t find it necessary to remand this issue to the Ld. CIT(A) for re- adjudication, since the levy of penalty is to be decided based on the assessment order passed and the reply furnished by the assessee in response to the notice issue by the Ld. AO. 6.2. In present fact of the case, it is noted that, the assessee furnished reply before the Ld.AO during the assessment proceedings as well as penalty proceeding to that excess claim of depreciation was a bonafide mistake that was inadvertently not notice. In respect of the interest of refund the assessee had accepted that the same was not offered to tax by mistake since the entry was made in the wrong held. It is noted that the assessee has not contested against two disallowance made by the A.Y. 2016-17 Shree Yadvesh Transport Co. Pvt. Ltd. Ld. AO which shows that bonafide of the assessee. The assessee had relied on the decision of the Hon’ble Bombay High Court in the case of the CIT V/s Somany Evergree Knits Ltd reported in 2013 wherein in identical situation of excess claim of depreciation was accepted to be bonafide mistake leading to furnishing of inaccurate particulars or concealment. 6.3. In case of interest on refund that inadvertently not offered to tax, will not lead to levy of penalty as all the details were available on record. Assessee wrongly considered the amount under wrong head due to which the amount could not be offered to tax. This was a bonafide mistake on the part of the assessee and needs to be considered liberally. Respectfully following ratio laid down by the Hon’ble Bombay High Court as well as the decision of the Hon’ble Supreme Court in the case CIT v/s Reliance Petroproducts (P) Ltd. We don’t find the reason to confirm the penalty levy u/s 271(1)(C) of the Act. Ld. AO is directed to delete the penalty so levied. Accordingly, the grounds raised by the assessee stands allowed. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 22/04/2025 Sd/- Sd/- (RENU JAUHRI) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 22/04/2025 Disha Raut, Stenographer