2004 (6) TMI 629 - AT - Income Tax

Summary

Issues:
Appeal against cancellation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1996-97.

Analysis:
1. Assessment and Penalty Imposition:
The assessment was completed with an income of Rs. 1,35,58,475 against the returned income of Rs. 1,12,24,312, leading to initiation of penalty proceedings under section 271(1)(c). The Assessing Officer imposed a penalty of Rs. 1,20,800 based on the claim of depreciation on a building not used for business purposes, which was later withdrawn by the assessee. The Assessing Officer found the revised return to be false, leading to the penalty imposition.

2. CIT(A) Decision:
The CIT(A) held that the withdrawal of depreciation claim voluntarily should be considered in the same light as a revised return. The CIT(A) found no justification for the penalty, stating that the assessee was entitled to depreciation as the building was fit for business use, supported by evidence like electricity bill payments and business correspondence. Thus, the CIT(A) deleted the penalty of Rs. 12,00,000.

3. Tribunal Decision:
The Revenue appealed before the Tribunal, arguing that the assessee had concealed income by falsely claiming depreciation. The assessee contended that the claim was withdrawn in good faith to avoid litigation, with no mens rea for concealment. The Tribunal noted that the Assessing Officer did not record satisfaction for initiating penalty proceedings under section 271(1)(c). Relying on precedents, the Tribunal canceled the penalty, emphasizing the absence of wilful neglect or fraud by the assessee.

4. Legal Precedents and Final Decision:
The Tribunal referred to legal precedents highlighting the importance of subsequent conduct in determining penalty imposition. It also emphasized the necessity for the Assessing Officer to record satisfaction before initiating penalty proceedings. Citing relevant case laws, the Tribunal dismissed the Revenue's appeal and directed the cancellation of the penalty imposed under section 271(1)(c) for the assessment year 1996-97.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing the lack of mens rea for concealment and the absence of recorded satisfaction by the Assessing Officer for initiating penalty proceedings.