Quant Transactional Services Private Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai: Penalty Not Automatic on Disallowances – Major Relief in Depreciation Expense Claims
In this case, the ITAT Mumbai dealt with penalties levied under Section 271(1)(c) and Section 270A on disallowance of depreciation and expenses where the assessee had no active business operations.
The Tribunal held a clear distinction between “unsustainable claim” and “false claim”. It observed that mere disallowance of depreciation or expenses does not automatically lead to penalty, especially where all details were disclosed in books and returns.
For depreciation, the Tribunal accepted that claims were made on disclosed block of assets, and even if disallowed, they cannot be treated as furnishing inaccurate particulars. Similarly, routine expenses such as audit fees, ROC filing fees, legal and administrative expenses were held to be genuine claims for maintaining corporate existence, and not cases of misreporting.
However, an exception was made for foreign travel expenses, where no business nexus was established—penalty was upheld only to that limited extent.
The Tribunal also criticised mechanical levy of penalty, noting inconsistencies in computation and absence of independent findings of concealment or misreporting.
Final Outcome:
- A.Y. 2015–16: Penalty partly sustained (only for foreign travel)
- A.Y. 2016–17, 2017–18 & 2018–19: Penalty fully deleted
The ruling reinforces that penalty provisions require a higher threshold-clear evidence of concealment or misreporting, not just disallowance in assessment
FULL TEXT OF THE ORDER OF ITAT MUMBAI
