Commissioner of Income Tax vs Sri Saradha Textile Processors P. Ltd.

P.D. Dinakaran, J.—The above tax case appeals are directed against the order of the Income Tax Appellate Tribunal dated 15.5.2002

made in ITA. No. 307/94, CO. No. 28/94 respectively.

The Revenue is the appellant. The assessment year involved in the present appeals is 1990-1991.

The short facts of the case are that the assessee Company, for the assessment year 1990-91, had claimed depreciation and investment

allowance on the machinery, which was received on 4.4.1990, i.e, after the previous year ended on 31.3.1990. When this was pointed out by the

assessing officer, the assessee withdrew the claims. But the assessing Officer by the assessment order dated 18.2.1992, levied penalty u/s 271(1)

(c) for falsely claiming depreciation and allowances with an intention to evade taxes. Aggrieved by the imposition of penalty, the assessee preferred

appeals before the Commissioner of Income Tax (Appeals), who had deleted the levy of penalty by his order dated 30.11.1993. The revenue, not

satisfied with the reversal of the assessment order, approached the Tribunal. The Tribunal by its order dated 15.5.2002 dismissed the appeal

holding that the fact that the assessee had filed revised returns withdrawing the claim, when it was pointed out, shows their bona fides and no

penalty was leviable. It is against this order, the revenue preferred the present appeals raising the following substantial questions of law,

Whether in the facts and circumstances of the case, the Tribunal had enough material to hold that the claim for depreciation and investment

allowance on machinery was due to the bona fide mistake ?

Whether in the facts and circumstances of the case, the Tribunal was right in quashing the penalty u/s 271(1)(c) for the assessment year in

question ?

Though two questions have been framed, the learned counsel appearing for the revenue submits that both the questions go together.

While considering a similar question, of course under Wealth Tax Act, the Gujarat High Court in the decision Commissioner of Wealth Tax Vs.

Hasmukhlal Gandalal, , held that the penalty can be imposed only when the Revenue comes to the conclusion that the assessee had a mala fide

intention and that as to whether the assessee had mala fide intention, is a question of fact. That is the case, where the concurrent findings of the

authorities below were challenged before the High Court and the High Court held as under,

The Deputy Commissioner (Appeals) had come to a conclusion that the assessee had no intention to furnish inaccurate particulars and the said

finding had been confirmed by the Tribunal. Therefore, it could not be presumed that the assessee had a mala fide intention to furnish inaccurate

particulars. Since the assessee had revealed the correct valuation of the property before the assessment proceedings had been completed, it could

not be said that the assessee had furnished inaccurate particulars of the property.

In the present case also the authorities below have concurrently held that when the mistake was pointed out, the assessee had withdrawn his

claim for depreciation and investment allowance on the machinery and filed a revised return and this action of the assessee shows their bona fides.

It is also not the case of the revenue that the assessee had the mala fide intention of furnishing inaccurate particulars with a view to falsely claiming

depreciation and allowances to evade taxes. The above finding of the Tribunal was based on the facts, with which we are not inclined to interfere.

In this view of the matter, we answer the questions in the affirmative against the revenue and in favour of the assessee, holding that the Tribunal

had enough materials to hold that the claim for depreciation and investment allowance on machinery was only due to the bona fide mistake and that

the Tribunal was right in quashing the penalty u/s 271(1)(c) of the Income Tax Act. Accordingly, the appeals are dismissed. No costs.