Income Tax Act, 1961 – Sections 271(1)(c), 32(1)(iia), 40(a)(ii), 143(3) and 263 - The assessee filed a return of income declaring a loss, which was accepted in the original assessment under Section 143(3). Subsequently, the Principal Commissioner of Income Tax (PCIT) invoked Section 263, directing reassessment, leading to disallowances of Rs. 32,31,505/- on additional depreciation and Rs. 6,00,000/- on income tax expenditure. The AO then imposed a penalty of Rs. 12,00,000/- under Section 271(1)(c) for alleged furnishing of inaccurate particulars. The first appellate authority upheld the penalty, leading to the present appeal before the ITAT - Whether the disallowance of additional depreciation under Section 32(1)(iia) can attract penalty under Section 271(1)(c) when the same claim was allowed in the preceding assessment year - Whether disallowance of income tax expenditure under Section 40(a)(ii) constitutes furnishing of inaccurate particulars, justifying penalty – HELD - The ITAT ruled partly in favor of the assessee, holding that - Since the same depreciation claim was allowed in the preceding assessment year (AY 2014-15) by the Jurisdictional AO, its disallowance in the current year (AY 2015-16) does not amount to furnishing of inaccurate particulars. The ITAT held that a mere difference in opinion between assessing authorities does not justify a penalty under Section 271(1)(c) - The ITAT upheld the penalty on the disallowance of Rs. 6,00,000/- under Section 40(a)(ii), noting that income tax is expressly non-deductible under the Act. The ITAT relied on N.G. Technologies v. CIT and Hamirpur District Cooperative Bank Ltd. v. CIT, holding that the erroneous claim of a non-deductible expense, if not detected, would have resulted in undue tax benefits, thus attracting penalty under Section 271(1)(c) - The appeal was partly allowed. The penalty related to additional depreciation was deleted, while the penalty on disallowance of income tax expenditure was upheld

2025-VIL-220-ITAT-IND

IN THE INCOME TAX APPELLATE TRIBUNAL

INDORE BENCH INDORE

ITA No. 172/Ind/2024

Assessment Year: 2015-16

Date of Hearing: 20.01.2025

Date of Pronouncement: 22.01.2025

SAIPHIA TECHNOLOGY PRIVATE LIMITED

Vs

NFAC, DELHI

Assessee by: Shri Gagan Tiwari, AR

Revenue by: Shri Ashish Porwal, Sr. DR

BEFORE

SHRI B.M. BIYANI, ACCOUNTANT MEMBER

SHRI UDAYAN DAS GUPTA, JUDICIAL MEMBER

ORDER

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of first appeal dated 23.01.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of penalty-order dated 21.01.2022 passed by learned NFAC, Delhi [“AO”] u/s 271(1)(c) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on the grounds as mentioned in Form No. 36.

2. The background facts leading to present appeal are such that the assessee-company filed return of income declaring a total income of (-) Rs. 63,17,896/-. The case was selected for scrutiny and the AO ultimately completed assessment u/s 143(3) vide order dated 29.12.2017 accepting the returned income. Thereafter, the PCIT-2, Bhopal passed revision-order dated 27.11.2019 directing the AO to make a fresh assessment for certain issues. In pursuance of such revision-order, the AO passed fresh assessment-order u/s 143 r.w.s. 263 after making three additions/disallowances, viz. (i) disallowance of Rs. 32,31,505/- out of depreciation claim, (ii) disallowance of Rs. 6,00,000/- on account of income-tax, and (iii) disallowance of Rs. 2,28,966/- out of various expenses. Accordingly, the AO determined total income at (-) Rs. 22,57,425/-. The AO also initiated penalty proceedings u/s 271(1)(c) for first two items of additions, namely (i) disallowance of Rs. 32,31,505/- out of depreciation claim, and (ii) disallowance of Rs. 6,00,000/- on account of income-tax, treating them as furnishing of inaccurate particulars of income by assessee. Ultimately, the AO passed penalty-order dated 21.01.2022 u/s 271(1)(c) imposing a penalty of Rs. 12,00,000/-. Aggrieved by penalty-order, the assessee filed first-appeal before CIT(A) but did not get any success. Now, the assessee has come in next appeal before us.

3. In so far as the first item of penalty is concerned, Ld. AR made a straightforward submission that the impugned disallowance of Rs. 32,31,505/- is the outcome of non-acceptance of claim of additional depreciation made by assessee in terms of section 32(1)(iia) before PCIT in revision-proceeding and also before AO in the proceeding of fresh assessment. Ld. AR submitted that identical claim was also made by assessee in immediately preceding AY 2014-15 before Jurisdictional AO [DCIT-5(1), Bhopal – “JAO”] which the JAO allowed vide assessment-order dated 31.12.2019 passed u/s 143(3) r.w.s. 263. However, identical claim of additional depreciation has not been allowed by present AO (who is faceless) for AY 2015-16 as involved in present case. Ld. AR submitted that when the assessing authority has allowed the claim of additional depreciation in preceding AY 2014-15, the identical claim even if not allowed in current AY 2015-16, cannot be said to be a case of “furnishing of inaccurate particulars”. We have no hesitation in agreeing with this submission of Ld. AR. The Ld. DR for revenue, though dutifully supported the order of AO, yet could not rebut the pleading of Ld. AR. Being so, we hold that the AO is not justified to impose penalty qua the first item.

4. In so far as the second item of penalty is concerned, the assessee has claimed deduction of income-tax expenditure of Rs. 6,00,000/- which is clearly disallowable in terms of section 40(a)(ii) of the Act. Ld. AR only submitted that it was inadvertently claimed by assessee by way of debit entry in P&L A/c without having any intention to furnish inaccurate particulars. Ld. DR for revenue relied upon N.G. Technologies Vs. CIT (2016) 70 taxmann.com 37 (SC) wherein it was held that if the assessee has made a claim which is contrary to basic principle of accountancy and subsequently filed revised return only after AO confronted assessee, penalty was leviable. Another case relied by Ld. DR is Hamirpur District Cooperative Bank Ltd. Vs. CIT (2020) 113 taxmann.com 447 (SC) wherein it was held that if the assessee has wrongly debited certain amount in P&L A/c which was not an expense but an appropriation of profit, penalty was leviable. Ld. DR contended that in present case, the assessee made a claim which was statutorily not allowable and had the tax authorities not discovered assessee’s wrong claim, the assessee would have taken benefit against law. Therefore, the disallowance made by AO certainly attracts section 271(1)(c). After a careful consideration, we find a strong merit in Ld. DR’s submission. Undisputably, the assessee has made a claim of deduction in the return of income which is disallowed by law. The defense taken by assessee that it was so claimed due to inadvertence cannot help the assessee. In the light of decisions quoted by Ld. DR, we agree that the penalty is sustainable. Accordingly, we uphold penalty qua the second item.

5. Resultantly, this appeal is partly allowed.

Order pronounced in open court on 22/01/2025.

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