2014 (12) TMI 477 - HC - Income Tax

Deletion of penalty u/s 271(1)(c) Onus discharged by assessee or not Misinterpretation of section 115JB by assessee - Held that - The Tribunal was rightly of the view that the assessee had discharged the onus and established their bona fides for the purpose of Explanation 1 to Section 271(1)(c) assessee through Affidavit accepting his fault that he had misunderstood and misinterpreted the provisions of Section 115JB of the Act - computation made by the Chartered Accountant in this case in Form No. 29B was erroneous and he had owned his fault and mistake - This was the first year when Section 115JB was made applicable to companies covered by Section 10A of the Act - the explanation and conduct of assessee did not reflect any attempt to propound an excuse which was sham or a ruse - The reason given was not a device to cover an ulterior purpose - The mistake made by the Chartered Accountant was a result of a human error in correctly interpreting and applying the complex interconnect between two sections. The error was bona fide relying upon Price Waterhouse Coopers Private Limited versus CIT 2012 (9) TMI 775 - SUPREME COURT the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Challenge to deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2009-10.

Analysis:
The judgment deals with an appeal challenging the order of the Income Tax Appellate Tribunal (Tribunal) that deleted the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal found that the assessee had established their bona fides for the purpose of Explanation 1 to Section 271(1)(c) of the Act. The Chartered Accountant of the respondent-assessee admitted fault in misunderstanding and misinterpreting the provisions of Section 115JB of the Act. The computation of book profits under Section 115JB requires expertise in accounts, and the Chartered Accountant had filed an erroneous Form No. 29B. This was the first year when Section 115JB was applicable to companies under Section 10A of the Act, leading to complexity due to the interaction of these sections.

The Tribunal observed that the explanation and conduct of the assessee did not seem to be an attempt to provide a false excuse. The mistake made by the Chartered Accountant was considered a human error in interpreting the complex relationship between the two sections. The Tribunal noted that the error was bona fide, and the assessee rectified the mistake by filing revised returns for subsequent years. The judgment also mentioned the relevance of the Price Waterhouse Coopers Private Limited case versus CIT, where the Tribunal's reasoning was considered plausible and objective.

Ultimately, the High Court dismissed the appeal, stating that based on the findings and reasoning of the Tribunal, no substantial question of law arose for consideration. The Court agreed with the Tribunal's decision regarding the deletion of the penalty under Section 271(1)(c) for the Assessment Year 2009-10.