St. Peters School Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has allowed the appeal of St. Peters School—a charitable institution operating under Section 10(23C)(vi)—setting aside the penalty of Rs.15,64,436/- imposed under Section 270A for alleged misreporting of income for the Assessment Year 2018-19. The penalty arose from the Assessing Officer’s (AO) disallowance of depreciation amounting to Rs.31,56,450/-. The AO cited Section 11(6), which prohibits claiming depreciation on assets whose cost has already been allowed as an application of income for charitable purposes in prior years. The AO deemed this claim an under-reporting and misreporting of income, leading to a 200% penalty, which the Ld. CIT(A), NFAC, upheld.
The ITAT found the penalty imposition unjustified, agreeing with the assessee that the depreciation claim was a bona fide clerical error rather than a deliberate attempt to misreport income or evade tax. The Tribunal noted that the assessee is a tax-exempt entity and accepted the disallowance once pointed out, demonstrating a lack of mens rea. Critically, the ITAT relied on key judicial precedents from the Supreme Court. Specifically, the Tribunal cited CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) and Price Water House Corporation P. Ltd. Vs. CIT (2012), which established that merely making an incorrect claim, particularly one due to a clerical mistake, does not automatically amount to furnishing inaccurate particulars or misreporting income under the penalty provisions. Since the error was acknowledged and did not result in any tax advantage—as the assessee’s income would remain exempt even after the disallowance—the ITAT concluded that the provisions of Section 270A(9), which target deliberate misreporting, were not applicable. Consequently, the penalty order was quashed.
