The ITAT upheld a ₹2.05 crore penalty on a Zee Group entity for claiming depreciation on non-existent assets, rejecting the argument that disclosures during a survey were involuntary.
ITAT Upholds ₹2.05 Crore Penalty Against Zee Entity
The Income Tax Appellate Tribunal (ITAT) has upheld a penalty of ₹2.05 crore under Section 271(1)(c) for concealment of income after affirming that a Zee Group entity claimed depreciation and amortization on fictitious accommodation entries. The tribunal rejected the claim that the disclosures were made under coercion during a departmental survey.
The Department had detected irregularities during a survey, leading to the discovery of inflated asset values and non-existent accommodations. The assessee argued that entries were disclosed under duress and lacked voluntary intent. The ITAT held that survey disclosures are admissible, and the consistency of the admissions—corroborated by audit trails—indicated mala fide intent to inflate expenses.
The fact that an entry was surrendered during a survey does not absolve the assessee from penalty if it pertains to sham transactions lacking commercial reality.
This decision underscores that technical compliance during surveys does not shield taxpayers from penalties if underlying transactions lack substance. Practitioners must advise clients to maintain documentary integrity and assess the risks of admitting fictitious entries, even under pressure.
Citations
- Section 271(1)(c), Income Tax Act, 1961
