2015 (4) TMI 790 - AT - Income Tax

Penalty u/s 271(1)(c) for furnishing of inaccurate particulars of income - Inadvertent and bona fide error - Existence of bona fide reasons and cause for filing the revised return - Held that - As per ratio of the decision of Hon ble Jurisdictional High Court of Delhi in the case of Arvind Nagpal 2015 (4) TMI 706 - DELHI HIGH COURT wherein it has been held that the calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Their lordships further held that the assessee should have been careful. But the absence of due care in a case such as the present does not mean that the assessee is guilty of either furnishing inaccurate particulars of attempting to conceal its income. Following the decision of Hon ble High Court in the case of Arvind Nagpal 2015 (4) TMI 706 - DELHI HIGH COURT , we are inclined to hold that in the present case, the assessee filed its return of income as an individual without any professional assistance. Subsequently, the assessee filed a revised return reclassifying the income and the AO assessed the income of the assessee at the income declared in the revised return filed on 27.2.2007. The detailed explanation submitted by the assessee on 2.4.2008 (Paper Book page 9 to 13) clarify entire facts and circumstances in which original return of income and revised return of income were filed. We further note that during the course of assessment proceedings, the assessee submitted detailed justification and reasons for filing the revised return which were placed on record. We further note that the reasons offered by the assessee during penalty proceedings on the same line cannot be held as an afterthought and these submissions support the existence of bona fide reasons and cause for filing the revised return. We further note that the assessment stood framed on the revised return figure itself which also support the bona fide intention of the assessee. Under the facts and circumstances as noted above, it cannot be validly held that either the assessee furnished inaccurate particulars of its income or the assessee has concealed particulars of its income and thus, penalty u/s 271(1)( c) cannot be imposed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Assessing Officer's jurisdiction and satisfaction regarding inaccurate particulars of income.
3. Bona fide errors and reclassification of income in revised return.
4. Justification and legality of the penalty upheld by the CIT(A).

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee filed a return of income declaring Rs. 95,49,243/- as short-term capital gain and Rs. 38,55,115/- as long-term capital gain. During assessment, the assessee filed a revised return declaring Rs. 1,04,72,423/-. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The AO imposed a penalty of Rs. 16,48,803/- after concluding that the revised return was filed only when details were called, indicating wilful concealment of income.

2. Assessing Officer's Jurisdiction and Satisfaction Regarding Inaccurate Particulars of Income:
The assessee argued that the penalty was imposed without the AO being prima facie satisfied during the assessment proceedings that inaccurate particulars were furnished, as required by law. The assessee cited the Delhi High Court's decision in Madhushree Gupta (317 ITR 107) to support this claim. The Tribunal noted that the AO had accepted the revised return for taxation, which indicated that the revised return was not filed with an intent to conceal income.

3. Bona Fide Errors and Reclassification of Income in Revised Return:
The assessee contended that the errors in the original return were due to a lack of professional assistance and changes in tax provisions from 1st October 2004. The revised return corrected these errors, reclassifying short-term capital gains and adjusting other income details. The Tribunal referred to the Supreme Court's decision in Price Waterhouse Coopers Pvt. Ltd. vs CIT (348 ITR 306) and the Delhi High Court's decision in CIT vs Arvind Nagpal, which held that inadvertent and bona fide errors do not justify penalty imposition.

4. Justification and Legality of the Penalty Upheld by the CIT(A):
The CIT(A) upheld the penalty, stating that the assessee failed to provide a satisfactory explanation for the errors. However, the Tribunal observed that the assessee had provided detailed explanations during the penalty proceedings, which were bona fide and supported by professional advice. The Tribunal concluded that the absence of due care does not imply guilt of furnishing inaccurate particulars or attempting to conceal income.

Conclusion:
The Tribunal held that the assessee's errors were bona fide and the revised return was filed with professional assistance, correcting the original return's mistakes. The penalty imposed by the AO and upheld by the CIT(A) was deemed unsustainable. The Tribunal directed the AO to delete the penalty, allowing the assessee's appeal. The decision emphasized that inadvertent errors corrected through a revised return do not warrant penalty under section 271(1)(c).