No Penalty u/s 271(1)(c) upon Assessee for Duplication of Assets happening due to Mistakes at the Chartered Accountant Office: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ) , Chennai, has recently, in an appeal filed before it by an assessee, held that penalty u/s 271 (1)( c ) should not be imposed upon the assessee for the duplication of assets happening due to mistakes at the chartered accountant’s office.

The aforesaid observation was made by the Tribunal when an appeal was preferred before it by anassessee, as against the order of the Commissioner of Income Tax (Appeals)-3, Chennai, in ITA No.20/CIT(A)-3/2019-20 dated 22.08.2020, with regard to the penalty levied by Income Tax Officer, Corporate Ward-5(3), Chennai for the Assessment Year 2016-17 vide order dated 16.11.2018 under section 143(3) of the Income Tax Act, 1961.

The only issue in the appeal being the order of CIT(A) confirming the action of the A.O in levying penalty u/s. 271(1)(c) of the Act on differential amount of opening WDV of assets as on 01.04.2015 and the closing WDV of assets as on 31.03.2015, the claim of the appellant was that the error inviting the said penalty has happened at the auditor’s office, and that it has failed to provide any affidavit or any communication with the auditor which could substantiate the said claim.

Hearing the rival contentions and going through the facts and circumstances of the case, the Tribunal observed:

“Before us, the Chartered Accountant Shri B. Jeevarathinam categorically admitted in writing that the duplication of assets has happened while calculating the depreciation as per Income Tax Act while computing the tax computation sheet by his staff. He admitted that while doing so, the staff has wrongly computed the deprecation value filed 15% block of assets with respect to the said assessment year and accordingly, excess depreciation claimed was made to the extent of Rs. 17,86,187.”

“We noted that this mistake has occurred at the office of the Chartered Accountant and there is no intention of the assessee to evade the tax. Moreover, the assessee has already accepted assessment and paid taxes.”, the Bench added.

Thus, allowing the assessee’s appeal while subsequently deleting the disputed penalty ,the Tribunal concluded:

“In view of the facts and circumstances narrated above and the cumulative effect of the facts, if we analyze, it clearly shows that the assessee was under bona fide belief in claiming this depreciation. Hence, we delete the penalty and allow the appeal of the assessee.”

To Read the full text of the Order CLICK HERE

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