Penalty 271(1)(c) for interchanging opening wdv of fixed assets with assets of higher depreciation rate

Penalty 271(1)(c) for mistakenly interchanged opening wdv of fixed assets with block of assets admissible a higher rate of depreciation

ABCAUS Case Law Citation:
ABCAUS 2089 (2017) (10) ITAT

The Challenge/Grievance:
The appellant assesseeschallenged the order passed by the CIT(A) confirming action of Assessing Officer  (AO) in imposing penalty in proceedings u/s. 271(1)(c) of the Income Tax Act, 1961(“the Act”).

Assessment Year :  2010-11

Brief Facts of the Case:
During the course of the scrutiny assessment it was noticed that the assessee had claimed excessive depreciation which inter alia was added to the income. The assessee did not prefer any appeal against the Quantum proceedings which attained finality. The AO initiated the impugned penalty proceedings u/s 271(1)(c) of the Act for claiming excessive depreciation.

The assessee by its reply submitted that  it had mistakenly interchanged written down value (WDV) of various blocks of assets resulting in the abovestated quantum disallowance of depreciation. It was clarified that the same was not either an act of concealment or furnishing inaccurate particulars thereof. The Assessing Officer did not agree. He observed in the assessment order that the assessee had although filed the requisite particular pertaining to written down value of assets in the course of scrutiny but same were not sufficient to discharge it from consequential penalty as there was no revised return filed u/s 139(5) of the Act. He was therefore of the view that the assessee’s above alleged conduct in submitting wrong particulars of block of assets/WDV amounted to both concealment as well as furnishing of inaccurate particulars of income. The Assessing Officer therefore imposed the impugned penalty.

Observations made by the Tribunal:

It was observed that the assessee’s case throughout had been that it had inadvertently interchanged relevant written down value of the corresponding block of assets. The assessee had pleaded before the CIT(A) that the opening written down value of furniture on which depreciation is allowable @ 10% was mistakenly taken as computers block corresponding to depreciation rate @ 60%.

It was noted that the assessee’s case therefore due to this inadvertent interchange, it had resulted in excess depreciation claim being raised for depreciation purpose. It was also not in dispute that the assessee had admitted its arithmetic mistakes during the course of scrutiny itself.

It was noted that the Revenue failed to rebut this crucial fact. His only plea was that the assessee had not filed its revised return of income.

The ITAT opined that there was no merit in the instant plea of the Revenue as the fact remained that it was purely a case of computation error which stood corrected at assessee’s behest itself.

Decision/Held:
The penalty was deleted.

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