Income Tax Appellate Tribunal - Jodhpur
Smt. Beena Kak vs Income Tax Officer on 5 December, 2000
ORDER
S. R. Chauhan, J.M.
1. This appeal by assessee for asst. yr. 1987-88 is directed against the order of CIT(A), Jodhpur dt. 16th August, 1994, whereby he cancelled the penalty levied by AO under s. 271(1)(c) of IT Act, 1961.
2. The learned authorised representative of assessee has contended that the cost of a portion of land was included as part of cost of godown building. He has contended that the depreciation of this cost of land amounted to Rs. 5,446 whereon tax was of Rs. 1,760. He has contended that this is a question of legal error and not of factual error and no inaccurate particulars were furnished. He has contended that the law assigns different meanings to the term "cost of building" at different places. He has contended that under the head "Income from house property." where annual value of "Building" and land appurtenant thereto is charged to tax for the purposes of determining annual value of "Building" the cost of land is included in the cost of building whereas for the purposes of depreciation the cost of land is not to be included in the cost of building. He has contended that the accounts were maintained by the accountant who did not separate the cost of land from cost of construction of building and thus the depreciation was charged on the aggregate cost of land and building. He has contended that it is an unintentional mistake. He has contended that the assessee, who is a lady does not gain by showing cost of land as part of cost of building and that if at all there is any gain to the assessee, the same is going to be compensated in the long run while computing capital gain. He has cited Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC), CIT vs. Anwar Ali (1970) 76 ITR 696 (SC), Colour House vs. Asstt. CIT (1995) 53 TTJ (Coch) 255 : (1995) 53 ITD 245 (Coch), Beerbal Khan Chandan Khan & Party vs. Asstt. CIT (1995) 52 ITD 476 (Jp) in support of his contentions and has also furnished copies thereof on record.
3. As against this, the learned Departmental Representative of Revenue has contended that the assessee has been an MLA and also a Minister of State of Rajasthan. He has referred to p. 2 of the assessment order and contended that the AO has noticed that the assessee made wrong claim in the shape of depreciation on land with a view to defraud the Revenue and that it was only during scrutiny of the case that the wrong claim of assessee came to the notice of the Department. He has also contended that the AO has found that the wrong claim was not accidental but was deliberate. He has also referred to para 2 on p. 2 of the learned CIT(A)'s order and contended that the assessee had not disclosed that the depreciation claimed for Rs. 5,446 was attributed to depreciation on land and so this kind of filing of inaccurate particulars attracted the provisions of s. 271(1)(c).
4. We have considered the rival contentions including the written submissions of authorised representative of assessee, the relevant material on record as also the cited decisions.
5. In (1971) 83 ITR 26 (SC) (supra) that Hon'ble Supreme Court has held that penalty will not be imposed merely because it is lawful to do so or because minimum penalty is prescribed and that the competent authority will be justified to levy penalty when there is a technical or venial breach of law. It has also been held that penalty will not ordinarily be imposed unless the party acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligations.
6. In (1970) 76 ITR 696 (SC) (supra) the Hon'ble Supreme Court while dealing with the provisions of penalty under s. 28(1)(c) of IT Act, 1922 held that the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. It has also been held that if there is no evidence on record except the explanation given by the assessee, which has been found to be false, it does not follow that the receipt constitutes his taxable income. It has also been held that finding in the assessment proceedings is not conclusive though it is a good evidence, and that before imposing penalty the entirety of circumstances must reasonably point to the conclusion that the assessee consciously made concealment.
7. In (1995) 53 TTJ (Coch) 255 : (1995) 53 ITD 245 (Coch) (supra) the assessee had claimed depreciation mistakenly on uninstalled machinery. But on realising the mistake the assessee was content with disallowance. In the circumstances, together with the fact that the income in that year was marginally above non-taxable limit and there was loss in the succeeding years, the Tribunal held that there was no motive to gain undue tax advantage and that mens rea cannot be attributed to the assessee, and in the circumstances, the penalty was cancelled.
8. In (1995) 52 ITD 476 (Jp) (supra) it has been held that whereas an addition on account of honest or bona fide non-disclosure of income can successfully be made in assessment proceedings, such addition cannot be made the basis for levy of penalty on the assessee. It has been held that the penalty under s. 271(1)(c) is to be imposed for wilful and deliberate or grossly negligent or fraudulent acts. It has also been held that keeping a wrong method of accounting which does not result in concealment of income would not amount to "furnishing inaccurate particulars of income".
9. In the instant case, while claiming depreciation the cost of building was taken inclusive of cost of land covered within building whereas the depreciation as allowable on constructed structure of building only, thus excluding the cost of land. The assessee's plea that the accountant maintaining the accounts of the assessee did not segregate the cost of land and construction and opened one single ledger account for the same has not been controverted on record. This fact has also not been controverted that when the assessee came to know that the claim was erroneous she did not pursue the matter further and agreed for the disallowance of the same. The cost of land is undisputedly taken into consideration along with the cost of structure of building for the purposes of determining annual value of the building for the purposes of income from house property. It has also been the plea of the assessee that she being an MLA and also a Minister of State and so being busy in public service at Jaipur, could not devote proper attention to her accounts. In that view of the matter, considering all the facts and circumstances of the case as also the legal position as propounded in the above referred citations, we are of the view that it is a matter of bona fide mistake and not a conscious concealment constituting deliberate defiance of the provisions of law, nor, in view of the pettiness of the amount and other circumstances it can reasonably to treated as establishing assessee's contumacious or guilty conduct. As such, we find the levy of penalty under s. 271(1)(c) to be not justifiable. We, therefore, delete the penalty.
10. In the result, the appeal of the assessee is allowed.