Income Tax - No Penalty for wrong claim due to a bona fide mistake/wrong advice of CA - HC
THE assessee had in its return of income claimed depreciation at Rs.1.70 crores. During the assessment proceedings, the respondent-assessee realised that it had wrongly claimed Rs.1.70 crores of depreciation instead of Rs.1.05 crores. This excess claim for depreciation had happened due to a mistake in calculation i.e. instead of reducing the amount of Rs.32.51 lakhs from Rs.1.38 crores, the amount of Rs.32.51 lakhs was added to Rs.1.38 lakhs resulting in claim for depreciation at Rs.1.70 crores. The Assessing Officer did not accept that it was a mistake and levied penalty under Section 271(1)(c) of the Income Tax Act, 1961 (the Act).
Tribunal held that excess depreciation originally claimed was on account of bona fide and inadvertent mistake on the part of the assessee. In any case, during the course of the assessment proceedings, the assessee realised its mistake and pointed out the same. The Tribunal held that mistake should not be visited with penalty.
The assessee had during the assessment year sold its garment manufacturing machine and claimed a loss of Rs.21.68 lakhs thereon as a revenue expenditure in its return of income. In the course of the assessment proceedings, the assessee realised its mistake and withdrew the above loss shown as revenue expenditure in its profit and loss account and in the consequent return of income. The Assessing Officer accepted the above withdrawal and completed the assessment. However, he imposed penalty under Section 271(1)(c) of the Act.
The Tribunal found that the above loss was claimed by the assessee as a revenue expenditure as the Chartered Accountant did not advise them correctly as to the legal position. On the above facts, the Tribunal concluded the claim for deduction made by the respondent-assessee was on account of a bona fide mistake and in such circumstances, the levying of penalty was not justified.
Revenue was not happy and took the matter to the High Court which dismissed it.