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Income Tax Appellate Tribunal, “ SMC ” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI, MANISH BORAD
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad, dated 15/04/2016, for confirming levy of penalty under section 271(1)(c) of the Income tax Act, 1961 (‘the Act hereinafter’) for the Assessment Year (AY) 2012-13. The learned CIT(A)-2, Ahemdabad has erred in law and on facts of the case by confirming levy of penalty of Rs.2,35,000/- u/s.271(1)(c) by Assessing Officer.
ITA No.1250/Ahd/2016 Emparco Chemicals Private Ltd. vs.ITO Asst.Year –2012-13 - 2 - 2. The relevant facts as culled out from the materials on record are as under:- In this case, assessee is a private limited company which was dealing in various industrial fuels like Furnace Oil and has also received commission income from Sale of Coal.
2.2 During the assessment proceedings, on verification of the Audit report it was noticed that the assessee has not utilized its fixed assets during the year under consideration and had not claimed any depreciation in the profit and loss account. However, in the computation of income for Income Tax purpose, it was noticed that the assessee had claimed depreciation of Rs.7,56,256/-.
2.3 Therefore, a show-cause notice was served to the assessee as to why the depreciation should not be disallowed as no manufacturing activity had been carried out during the year.
2.4 The assessee filed his reply and same is reproduced as under: “During the F.Y.2011-12, the assessee company had not carried out any manufacturing activity but the machinery which was previously used for the manufacturing activity were lying in the factory and due to passage of time if gets obsolete. Hence, the assessee company has claimed the depreciation. The assessee has already used the plant and machinery in the preceding previous years. As held by various courts when the term “use “includes” ready for use”. In other words, the word “used” in the section may give a wider meaning and embrace passive as well as active use as held by court judgements in Vishwanath Bhaskar Sathe vs. CIT 10 ITC 386(Bom) and CIT vs. Vidhyachal Distillaries Pvt. Ltd. Taxmann 127 [MP][2015].”
ITA No.1250/Ahd/2016 Emparco Chemicals Private Ltd. vs.ITO Asst.Year –2012-13 - 3 - 3. Against the said order assessee preferred first statutory appeal before the learned CIT(A), who dismissed the appeal of the assessee.
We have heard both the counsels and gone through the impugned order. Learned AR cited a judgment of Price Waterhouse Coopers Pvt. Ltd. vs. CIT and another [2012] 348 ITR 306 (SC), in which it was held that: “The facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a “silly” mistake. The fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. All that had happened was that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. On the peculiar facts of this case, the imposition of penalty on the assessee was not justified.”
4.2 Assessee also cited a judgment of Nayan C Shah vs. ITO, [2016] 386 ITR 304 (Gujarat) in which it has been held that: “furnishing of inaccurate particulars of income - incorrect claim for expenditure do not amount to furnishing inaccurate particulars of income. It is well settled that while issuing a notice under section 271(1)(c) of the Income Tax Act, 1961, the Assessing Officer is required to specify the default on the part of the assessee, whether the case is one of furnishing inaccurate particulars, or whether it is a case of concealment of income, or both. But in this case authorities below have been failed to do so.”
ITA No.1250/Ahd/2016 Emparco Chemicals Private Ltd. vs.ITO Asst.Year –2012-13 - 4 - 4.3 We are of the view that in order to impose penalty the authorities must see the conduct and deliberate intention on the part of the assessee in concealment his true income. In the instant case, there was a bona fide mistake rather than a deliberate mistake on the part of the assessee while calculating depreciation on the assets of the assessee.
Respectfully, following the above said judgments, we delete the penalty against the assessee.
In the result, appeal filed by the assessee is allowed. This Order pronounced in Open Court on 08/09/2017
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Ahmedabad; Dated 08/09/2017 Priti Yadav, sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-2, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad