Furnishing Inaccurate Claim Of Expenditure Would Not Amount To Giving Inaccurate Particulars Of Income: Mumbai ITAT Quashes Penalty

While quashing the appeal filed by Revenue against the order passed u/s 250 by the National Faceless Appeal Centre, the Mumbai ITAT upheld the order passed by Commissioner of Income Tax (A) to delete the order of penalty issued under section 270A of the Income Tax Act, 1961.

The Member of the ITAT comprising Kavitha Rajagopal (Judicial Member) and Om Prakash Kant (Accountant Member) observed while relying on the judgment of the case CIT vs. Reliance Petro Products Pvt. Ltd that, “furnishing inaccurate claim of expenditure would not amount to giving inaccurate particulars of such income. The assessee has relied on various other decisions which have reiterated the proposition that the claim of higher depreciation would not amount to concealment of income.”

As per the brief facts of the case, the Assessee filed return and its case was selected for complete scrutiny and notice u/s. 143(2) and 142(1) were issued. The assessee while computing the income from business had reduced the amount of profit on disposal of assets as being fixed asset and while computing the depreciation it had erroneously not reduced the amount of insurance claim received from the block of assets, thereby claiming higher depreciation on fixed assets. It is observed that the company had then filed revised working of deprecation during the assessment proceeding after duly reducing the claim of insurance from the block of assets where the reduced claim of depreciation was worked out. The AO disallowed the excess claim of depreciation on fixed assets and determined the total income and book profit u/s. 115JB and added the same to the total income of the assessee. The AO also initiated penalty proceedings u/s. 270A for under reporting of income.

The CIT (A), while relying on the decision of the Apex Court in the case of CIT vs. Reliance Petro Product Ltd. 322 ITR 158 (SC), deleted the impugned penalty for the reason that the assessee's claim of excess depreciation was a bona fide mistake and that there was no mens rea on the part of the assessee to suppress any material fact for the purpose of avoiding tax.

The Bench noted that the penalty u/s. 270A of the Act was levied on the assessee for the under reporting of income by not reducing the insurance claim received by the assessee from the block of assets which has in fact resulted in excess claim of depreciation.

The Bench observed that the Assessing Officer levied a penalty of 50% of the amount of tax payable on underreported income as per clause (7) of section 270A of the Act. The assessee's contention that it was a bona fide mistake was not considered by the Assessing Officer.

The Bench stated that it was not in an advantageous position to claim higher depreciation as it was adverse for the assessee in subsequent years and that there was no question of reducing the tax liability where the assessee's return of income declared a huge loss during the year under consideration.

Therefore, on finding no infirmity in the order of the CIT(A) in deleting the penalty levied by the Assessing Officer, the ITAT dismissed Revenue's appeal.

Counsel for Appellant/ Department: Sujatha P Iyangar

Counsel for Respondent/ Taxpayer: Niraj Seth

Case Title: DCIT verses M/s. Sasan Power Ltd

Case Number: ITA No.1923/Mum/2023

Click here to read/ download the Order