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Income Tax Appellate Tribunal, RAJKOT BENCH (SMC
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
आदेश / O R D E R PER DINESH MOHAN SINHA, JM:
Captioned appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre [(in short “NFAC/Ld. CIT(A)”] vide order dated 05.07.2024, which in turn assessment order passed by Assessment Unit, Income Tax Department / Assessing Officer u/s. 271(1)(c), vide order dated 05.02.2022 of the Income Tax Act, 1961 (in short “the Act”).
Grounds of appeal raised by the assessee are as followed: 1) The Learned Assessing Officer (NFAC) has erred in law as well as on facts in levying the penalty of Rs. 40,250/- u/s. 271(1)(c) of the Act.
Brief facts of the case are that the appellant is a Private Limited Company has ITA 502/Rjt/2024 (AY 2012-13) Konark Overseas v. ACIT actively engaged in the business of import and trading of timbers during the year under appeal. The return of income of the appellant company for A.Y. 2012-13 was e-fled on 27.08.2012 declaring total income at Rs.62,12,930/-. The original assessment proceedings were completed u/ s. 143(3) of the Act vide assessment order dated 08.01.2015 assessing total income of the appellant at Rs.65,78,330/- Thereafter, the Honorable PCIT-1, Rajkot passed a revision order u/s. 263 of the Act on 21.03.2017 and set-aside the original assessment order passed u/s. 143(3) for de-novo assessment in respect of few specific issues.
Consequently, the de-novo assessment order u/s. 143(3) r.w.s. 263 of the Act was passed on 12.09.2017 determining total income at Rs.85,55,290/-which included addition of Rs. 15,36,533/- on account of interest income and disallowance of Rs. 1,22,429/- on account of claim of depreciation on which the penalty proceedings were also initiated u/s. 271(1)(c) of the Act.
On appeal, the Honorable CIT(A)-3, Rajkot vide appellate order dated 27.11.2019 partly allowed the appeal of the appellant and restricted the addition on account of interest income to the extent of Rs.7,821/- and confirmed the disallowance of Rs.1,22,429/- on account of claim of depreciation.
After the decision by the Honorable CIT(A) 27/11/2019, The Ld. AO re- initiated the penalty proceedings u/s. 271(1)(c) of the Act in respect of the aforesaid issues of interest and disallowance. During the course of penalty proceedings, the appellant sought an adjournment for submitting its reply for the proposed penalty due to pre-occupation in finalization of audits and filing of time- baring returns.
However, the Ld. AO has levied the penalty of Rs.40,250/- u/s. 271(1)(c) of the Act on the addition of Rs.7,821/- on account of interest income and ITA 502/Rjt/2024 (AY 2012-13) Konark Overseas v. ACIT disallowance of Rs.1,22,429/- on account of claim of depreciation on the ground that the appellant had furnished inaccurate particulars of income.
The assessee filed an appeal against the order of Ld. CIT(A). The Ld. CIT(A) has dismissed the appeal of the assessee on 05.07.2024.
The assessee filed an appeal before us against the impugned order dated 05.07.2024 of Ld. CIT(A).
During the course of hearing, Ld. AR of the assessee has submitted that, total interest detail was not supplied to the assessee by the HDFC Bank, only detail was available to the assessee was interest income of Rs. 2871/- and the same shown as income. The assessee has claimed the depreciation at a rate of 30% on a Tempo. The assessee claimed 30% on Tempo in Bonafide belief. That it is eligible for depreciation of 30%. The Ld. AR of the assessee prayed for deletion of penalty, since the assessee has not committed the default in to disclosing the income.
On the contrary, Ld. DR has relied on the order of the Ld. lower Authority. And further submitted that the assessee has not disclosed interest of Rs. 7,821/- and excess depreciation charge.
We have heard both the parties and perused the material available on record. We note that out of total interest income of Rs. 10,692/-, the interest income of Rs. 2,871/- was offered for tax and the remaining amount of Rs. 7,821/- was remained to be offered for tax in the return of income as the details thereof were not received from the concerned Bank. Thus, there was no concealment of income ITA 502/Rjt/2024 (AY 2012-13) Konark Overseas v. ACIT or furnishing of inaccurate particulars and the failure to offer such income in the return of income was on account of Bonafide inadvertent omission in the absence of requisite particulars. It is a matter of where the assessee offering returned income in excess of Rs. 62 lakhs show the a small the amount of Rs, 7,821/-. In view of the above, penalty on this amount levied by the Ld. AO was not justified.
We note that the appellant had the Bonafide belief that they are eligible to claim the depreciation @ 30% on their Tempo.
9.1 Apex Court Judgement in case of Reliance Petro-products P. Ltd. (322 ITR 158) that the merely making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars and therefore, for a Bonafide legal claim which has not been accepted by the Revenue, the penalty u/s. 271(1)(c) is not attracted. CIT v. Reliance Petroproducts P. Ltd. (Ahd) (Supreme Court) Section 271(1)(c) of the Income Tax Act, 1961 – Penalty – For concealment of income – Assessment year 2001-01 – Whether merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty under section 271(1)(c)
9.2 We note that the Reliance is also placed on the decision of Hon’ble Delhi ITAT in case of Lala Harbhagwan Dass Memorial & Dr. Prem Hospital P. LTd. v. ITO (23 taxmann.com 32) wherein the AO leived the penalty u/s. 271(1)(c) of the Act on the excess claim of depreciation made by the assessee. The Hon’ble Delhi ITAT deleted the penalty on the reasoning that mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty.
ITA 502/Rjt/2024 (AY 2012-13) Konark Overseas v. ACIT In view of the foregoing, we are of the opinion that mere erroneous claim in the absence of any concealment or furnishing or inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not Bonafide or any material particulars were concealed or furnished inaccurate. In these circumstances, we have no hesitation in observing that no penalty is eligible in relation to claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete. Therefore, we hold that penalty u/s. 271(1)(c) of the Act is neither proper not justified. As such, we direct to delete the penalty levied by the Ld. AO, and duly confirmed by the Ld. CIT(A).
Therefore, we are of the view that an opportunity should be given to the assessee to present his case before the Ld. AO. We set aside the order of Ld. AO and remit the matter back to the file of Ld. AO for fresh adjudication after giving assessee due opportunity to be heard.
In the result, this appeal of the assessee is allowed for statistical purposes, in above terms.
Order is pronounced on 04/02/2025 in the open court.