Sahajanand Medical Technologies Ltd. Vs DCIT (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat, has ruled in favor of Sahajanand Medical Technologies Ltd., quashing the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. This penalty was initially imposed and subsequently upheld by the Commissioner of Income Tax (Appeals) concerning the assessment year 2006-07. The core issue revolved around two partial disallowances made by the Assessing Officer regarding depreciation claims. The first disallowance pertained to additional depreciation claimed on plant and machinery. Sahajanand Medical had added machinery in both halves of the financial year and mistakenly claimed 20% additional depreciation on the total addition, instead of 10% for machinery used for less than 180 days and the remaining 10% in the subsequent year. The assessee admitted this error during assessment and requested the disallowance in the current year with allowance in the next, resulting in the same tax liability over both years. The second disallowance was on depreciation claimed for improvements to leasehold property at 20% instead of the department’s view of 15%.
The ITAT, after hearing both parties and reviewing the records, sided with Sahajanand Medical. The Tribunal noted that both disallowances were based on details fully disclosed by the assessee in their records. The mistake in calculating additional depreciation was deemed an unintentional error without any intention to evade tax (‘mens rea’). The ITAT emphasized that the assessee had shown a substantial income and the alleged excess depreciation was a small fraction, further indicating a lack of deliberate concealment. Regarding the leasehold improvement depreciation, the Tribunal considered it a debatable issue. Citing the Supreme Court’s decision in CIT vs. Reliance Petro Products Ltd., the ITAT reiterated that merely making an incorrect claim in law does not equate to furnishing inaccurate particulars of income, which is a prerequisite for imposing a penalty under Section 271(1)(c). The Tribunal concluded that since all relevant facts were disclosed and the disallowances arose from a mistake in calculation and a debatable interpretation of depreciation rates, the penalty was unwarranted. Consequently, the ITAT allowed Sahajanand Medical’s appeal and directed the Assessing Officer to delete the imposed penalty.
FULL TEXT OF THE ORDER OF ITAT SURAT
