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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI G. MANJUNATHA
PER VIKAS AWASTHY, JUDICIAL MEMBER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals) - 2, Pune (hereinafter referred to as ‘CIT(A)’) dated 12.07.2018 for assessment year 2011-12, confirming levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Shri Subodh Ratnaparkhi appearing for the assessee/appellant submitted that assessee is engaged in manufacturing of cotton hosiery garments and other related activities. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee has claimed excess depreciation on plant and machinery and thus, disallowed excess depreciation of Rs.8,92,675/-. Penalty proceedings under Section 271(1)(c) of the Act were initiated. The Assessing Officer vide order dated 28.08.2014 levied penalty of Rs.2,67,802/- on the aforesaid addition. The CIT(A) upheld the order confirming levy of penalty. The learned AR submitted that assessee has inadvertently charged depreciation @ 50% instead of 15% on plant and machinery in Block-A. The learned AR referred to working of depreciation in computation of total income at page 8 of the Paper Book and pointed that depreciation on plant and machinery in Block-A is mentioned at 50%, whereas, depreciation on plant and machinery in Block-B is correctly mentioned as 15%. The mistake in mentioning the rate of depreciation @ 50% is a bona fide mistake and hence, no penalty under Section 271(1)(c) of the Act should be levied. To support this contention, the learned AR placed reliance on the following decisions :
(i) Pricewaterhousecoopers (P) Ltd. vs CIT, 348 ITR 306 (SC); (ii) PCIT vs Bunge India (P) Ltd., 407 ITR 225 (Bom.).
Per contra, Smt. Samatha Mullamudi representing the Department vehemently defended the impugned order and prayed for confirming the levy of penalty.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the action of CIT(A) in confirming penalty of Rs.2,67,802/- levied under Section 271(1)(c) of the Act, in respect of disallowance of excess depreciation claimed under Section 32 of the Act. It is an undisputed fact that the assessee is entitled to claim depreciation @ 15% on plant and machinery, whereas, while computing the same, assessee has charged 50% depreciation in respect of plant and machinery in Block-A. So far as depreciation on plant and machinery in Block-B is concerned, the rate of depreciation charged is 15%. The contention of the assessee is that it is a bona fide mistake. After examining the documents on record, we are convinced that the higher depreciation charged by the assessee is on account of inadvertent bona fide mistake. The explanation furnished by the assessee for wrongly claiming higher depreciation appears to be bona fide and hence, accepted. Therefore, we are of the view that it is not a fit case for levy of penalty under Section 271(1)(c) of the Act.
The Hon'ble Bombay High Court in the case of PCIT vs Bunge India (P) Ltd. (supra), in a somewhat similar case, upheld the decision of Tribunal, wherein the penalty levied under Section 271(1)(c) of the Act was deleted for inadvertently claiming higher rate of depreciation.
The Hon’ble Supreme Court of India in the case of Pricewaterhousecoopers (P) Ltd. (supra) has held that in case of bona fide/silly mistakes imposition of penalty is not justified.
Thus, in view of the peculiar facts of the case and the judgements discussed above, we find merit in the appeal of the assessee. The impugned order is set-aside and appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on Friday, the 15th day of November, 2019.