Headmaster Saloon Pvt. Ltd. Vs DCIT (ITAT Chandigarh)
ITAT Chandigarh held that claiming of wrong depreciation on the advice of auditor is bona fide claim and hence penalty under section 271(1)(c) of the Income Tax Act not leviable.
Facts- AO, by virtue of the assessment order, made addition of Rs. 15,31,989/- on account of wrong claim of depreciation and that of Rs. 2,09,559/-, on account of claim of depreciation on purchase of machinery of Rs. 27,94,120/-. The assessee did not prefer any appeal against the said order.
In the penalty proceedings, the assessee was asked to show cause as to why penalty be not imposed u/s 271(1)(c) of the Act, for furnishing of inaccurate particulars of income. AO imposed penalty of Rs. 6,00,000/- being 111.5% of the tax sought to be evaded. CIT(A) upheld the same.
Conclusion- In ‘Pawan Garg Vs. ACIT’, the assessee had wrongly claimed long-term capital loss in respect of a property which had been gifted by him to his son. Since the amount of capital loss had been duly disclosed in the computation of income and the assessee had also accepted at the time of assessment proceedings, that by mistake, he had considered the gift made to his son as a transfer, the assessee was held not to have concealed any material fact, and levy of penalty u/s 271(1)(c) of the Act was held not justified. In the case at hand, similarly, the assessee had claimed depreciation on the advice of its auditors. This was a bona fide claim, may be a wrong claim. Otherwise too, the assessee earning profits year to year, reduction of depreciation in one year would have had the impact of higher depreciation in the subsequent year.
In view of the above, on the first issue, i.e., wrong claim of depreciation of Rs. 15,31,989/-, the penalty levied is deleted.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is assess ee’s appeal for assessment year 2012-13 against the CIT(A) order dated 19.12.2019 confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) .
2. The following grounds have been raised :-
1. That the Learned Commissioner of Income Tax(A) has failed to appreciate the facts and circumstances of the case and has thereby erred in upholding penalty u/s 271(l)(c) of the Income Tax Act, 1961 on merits as well as in law. The direction of the Hon’ble ITAT had been brushed aside without appreciating the facts and legality of the case.
2. That there was no concealment of income or furnishing of any inaccurate particulars of income and also the Assessing Officer had erred in failing to mention whether notice u/s 271(l)(c) of the Income Tax Act, 1961 was issued for concealment of income or furnishing of any inaccurate particulars of income.
3. At the outset, the ld. counsel for the assessee has contended that he does not wish to press ground No.2. Rejected, as not pressed.
4. Apropos ground No.1, in the assessment proceedings, the Assessing Officer (AO) noticed that during the F.Y. 2011-12, relevant to the assessment year under consideration, i.e., assessment year 2012-13, there was an increase of Rs. 2,68,12,425/- worth of fixed assets of the assessee. As per the tax Audit Report, major capital expenditure had been incurred on three items, as under:-
