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| DATE: | July 26, 2012 (Date of publication) |
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| Click here to download the judgement (societex_271_1_c_penalty.pdf) |
No s. 271(1)(c) penalty if wrong claim caused by “bona fide mistake”
The AO levied s. 271(1)(c) penalty in respect of two issues: (i) claim of depreciation in respect of properties that were assessed under the head “house property” and (ii) claim of deduction in respect of provision for income-tax. The CIT (A) & Tribunal deleted the penalty on the ground that the claim for deduction in respect of income-tax was a “human bonafide clerical mistake” as the assessee was a firm not having expert chartered accountants on its payroll. In appeal before the High Court, the department relied on Zoom Communication 327 ITR 510 and Escorts Finance 328 ITR 44 where it was held that as under no circumstances could an assessee have claimed provision for tax as a deduction, penalty was imposable. HELD by the High Court dismissing the appeal:
As regards depreciation, the property was let out for the first time in the latter part of the AY. As such, the benefit of inadvertence or mechanical or repetitive claim being made can be given to the assessee. As regards the provision for taxation, the assessee made a claim for deduction of the provision for the first time in the year under appeal. There was no history of furnishing such accurate particulars by the assessee for the previous years. Accordingly, s. 271(1)(c) penalty is not leviable.
Lately, there have been any number of ITAT and court decisions reported in which a common issue namely, the validity in law or otherwise of levy of penalty u/s 271 (1) (c) have come to be reported. It is possible that many more cases of this kind are in pipe line.
Whether or not assessee in a given case should be visted with penalty is, if critically analysed, is not a matter amenable to be adjudicated upon strictly based on a truly objective view. In other words, invariably, pragmatically speaking, it is not but possible to be viewed differently, in different cases, even though facts and circumstances might turn out to be on all fours.
As one may recall, earlier there were penal provisions applicable to failure,default such as delayed filing of return, payment of advance tax, TDS, or the like ; but , by way of simplification, those were done away with, rightly so; and came to be replaced by charging interest.
One keeps wondering, is it not high time that the government should think of and come out with a similar simplification of the law sooner tghan later; as, ostensibly, that should go a long way in putting an end to the stream of cases /long drawn litigation, particularly those in which only ‘penalty’ is the issue, not one on ‘quantum.
In these cases, penalty for overlooking particulars submitted by the assessee by the assessing officers is being imposed on the tax payer. Thus the negligent and inept person, who should bear the penalty escapees and the poor taxpayer is taxed. Cannot the taxpayer also afford to be inept and ignorant of all tax provisions.