2014 (1) TMI 1073 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - It is apparent that the assessee s counsel (Chartered Accountant Firm) has failed to get the record dates and accordingly failed to calculate correct disallowance - The above addition in this regard arose neither because of concealment or furnishing of inaccurate particulars by the assessee, but due to mistake on the part of the assessee s counsel - Following Price Waterhouse Coopers Pvt. Ltd. vs. C.I.T. and Anr. 2012 (9) TMI 775 - SUPREME COURT - The counsel should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income - Mensrea was a essential requirement of penalty u/s 271(1)(c) - The imposition of penalty on the assessee was not justified - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under section 271(1)(c) of the Income Tax Act by the Ld. CIT(A).

Analysis:
The appeal was against the penalty of Rs. 66,444 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act. The issue arose from the declaration of Short Term Capital Gains (STCGs) in the return of income. The Assessing Officer noticed discrepancies in the calculation of net STCGs due to the failure to consider the provisions of section 94(7) regarding losses on mutual fund transactions. The Assessing Officer initiated penalty proceedings, and the penalty was imposed despite the assessee's explanation that the required information under section 94(7) was not available at the time of filing the return. The Ld. CIT(A) confirmed the penalty, leading to the appeal before the ITAT.

The ITAT considered the arguments presented by both parties. The counsel for the assessee contended that the addition leading to the penalty was due to a mistake by the counsel, and thus, the penalty should not be imposed. On the other hand, the Departmental Representative argued that the professional assistance provided to the assessee by a Chartered Accountant negated the claim of a mistake. The ITAT examined the records and found merit in the assessee's argument that the addition arose due to the counsel's error. The Chartered Accountant Firm admitted the mistake in failing to obtain record dates for correct calculation, leading to the erroneous addition. The ITAT referenced a Supreme Court decision highlighting that even reputable firms could make inadvertent mistakes, and the absence of due care did not imply concealment or furnishing inaccurate particulars. Additionally, the ITAT relied on another Supreme Court decision emphasizing that not every disallowed claim should attract a penalty under section 271(1)(c).

Based on the precedents and the specific circumstances of the case, the ITAT concluded that the penalty was not justified. Therefore, the ITAT allowed the appeal and deleted the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was pronounced in open court on 11/12/2013.