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.