LOTUS TRANSTRAVEL PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

This is an appeal by the assessee against the order dated 12.09.2011 of ld. CIT(A)-VII, New Delhi for the assessment year 2004-05, challenging the sustenance of penalty of Rs.2,72,000/- imposed by the Assessing Officer u/s. 271(1)(c) of the IT Act.

The brief facts of the case are that the original assessment of the assessee was completed under section 143(3) at an income of Rs.77,30,989/-. The assessee was allowed deduction u/s. 80HHD at Rs.18,93,850/- on the profit of Rs.63,12,813/-. However, the tax auditors had certified in the form No. 10CCAD the amount of profit eligible for deduction under section 80HHD as Rs.37,87,700/-, according to which the deduction under section 80HHD was admissible to the assessee at Rs.11,36,318/-. As per AO, this omission, therefore, resulted in under assessment of Rs.7,57,540/- being the difference between the deduction allowed and deduction admissible u/s. 80HHD. On this basis, reassessment of assessee u/s. 147 of the Act was made and the assessee admitting the mistake surrendered the amount and deposited the tax on the amount omitted from being assessed. This led the Assessing Officer to initiate proceedings u/s. 271(1)(c) of the Act. The assessee explained that it was under the bona fide belief that his counsel would have give correct guidance under which the return was filed, but it was due to oversight that the deduction was claimed @ 25% instead of 15%, as the assessee was under the good faith that the deduction under section 80HHD in the immediately preceding assessment year was 25%. It was also submitted that there was no concealment of income attracting penalty. The AO was not convinced with the explanation offered by assessee and imposed a penalty of Rs.2,72,000/- rounded off equivalent to tax sought to be evaded vide penalty order dated 19.04.2011.

The assessee challenged the penalty order in appeal before the ld. CIT(A), who after considering the facts of the case and the submissions of the assessee confirmed the penalty vide the impugned order. Being aggrieved, the assessee has come up in this appeal before us.

The ld. Counsel for the assessee reiterating the arguments raised before the authorities below, relied upon the order dated 26.07.2013 of ITAT, New Delhi in the case of assessee for A.Y. 2008-09 (ITA No. 5159/Del./2011), whereby the penalty imposed on account of inadvertent mistake of claiming higher depreciation, was deleted after following the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) and of Delhi High Court in Karam Raghav Exports )P) Ltd. vs. CIT (2012) Taxman (Del.) and CIT vs. Rajiv Garg (2008) 18 DTR 152 (P&H). It was also submitted that the penalty under section 271(1)(c) is not leviable where the explanation of the assessee is a bona fide and when the assessee has accepted the mistake brought to its notice by the Assessing Authority. It is submitted that the same mistake also escaped the attention of the Assessing Officer who completed the assessment u/s. 143(3). Therefore, mistake which crept while claiming the deduction was a human error and not an intentional one. He also relied on the decision of Hon’ble Supreme Court in Shree Krishna Electricals vs. State of Tamil Nadu (2009 23 VST 249 (SC), where it has been held that the items which were not included in the turnover were found incorporated in the appellant’s account books and the same were included by Assessing authority in dealer’s turnover disallowing the exemption, penalty cannot be imposed. The ld. DR, on the other hand, relied upon the orders of the authorities below.

We have considered the rival submissions and have perused the material on record including the case laws cited. We find that the explanation offered by the assessee before the authorities below is bona fide, inasmuch as the assessee was under the bona fide belief about the admissibility of deduction u/s. 80HHD @ 25% as guided by its counsel, since it was admissible at this rate in the immediately preceding year. Moreover, all the material facts were available before the Assessing Officer to work out correct deduction admissible to the assessee. Therefore, in view of the decisions relied upon by the assessee, such addition, to our mind, does not entail penalty against the assessee. Moreover, the mistake occurred in claiming wrong depreciation has not been taken as a valid ground by this Bench of ITAT in the case of assessee for A.Y. 2008-09 (supra) to hold that the assessee had furnished inaccurate particulars of its income leading to penalty u/s. 271(1)(c) of the Act. No deliberate attempt on the part of the assessee to conceal any material particular is proved. The ld. DR could not be able to counter the decisions relied upon by the assessee in its support. We, therefore, do not find any justification to sustain the penalty imposed by the authorities below, which is directed to be deleted.