2015 (10) TMI 72 - AT - Income Tax

Penalty u/s 271(1)(c) - advance tax written off debited to the P&L - assessee did not dispute the addition of the said amount as it was not disallowed by the assessee itself in the computation of income due to oversight and bonafide mistake - CIT(A) has upheld the levy of penalty on the ground that the assessee has made a false claim in the return of income and it was not a bonafide mistake but the assessee has concealed its income - Held that - Hon ble Supreme Court in the case of Price Waterhosue Coopers Pvt. Ltd. (2012 (9) TMI 775 - SUPREME COURT) while dealing with an identical situation and in the case of CIT Vs. Beneettee Coleman 2013 (3) TMI 373 - BOMBAY HIGH COURT to held that the bona fide inadvertent mistake is accepted as reasonable and bona fide explanation for the purpose of section 271(1)(c) and in terms of explanation 1(B) to section 271(1). In view of the above discussion as well as fact and circumstances of the case we are of the view that the case of the assessee falls under the bonafide and inadvertent mistake and therefore the explanation of the assessee is a bona fide explanation in terms of Explanation 1(B) of section 271(1). Accordingly the penalty levied u/s 271(1)(c) is not sustainable hence deleted. - Decided in favour of assessee.

Summary

Issues Involved:
Penalty u/s 271(1)(c) of the Income Tax Act for A.Y. 2007-08 based on concealment of income.

Detailed Analysis:
1. The appeal challenged the penalty order passed u/s 271(1)(c) for the A.Y. 2007-08, specifically disputing the confirmation of penalty by CIT(A) due to inaccurate particulars of income leading to alleged income concealment.

2. The Assessing Officer added a sum to the total income of the assessee due to advance tax written off, leading to penalty proceedings under section 271(1)(c) and imposition of penalty.

3. The CIT(A) upheld the penalty, asserting that the assessee made a false claim in the return of income, not due to a bonafide mistake but as an act of income concealment.

4. The Authorized Representative of the assessee argued that the disallowance oversight was inadvertent, supported by the tax audit report, where various disallowances were made except for the advance tax written off due to a mistake by the auditor.

5. The Departmental Representative contended that a bonafide mistake does not excuse concealment of income, relying on legal precedents to support the position that a false claim cannot be justified as a bonafide error.

6. The Tribunal analyzed the computation of income by the assessee, highlighting the disallowances made as per the tax audit report, with the inadvertent omission of advance tax written off. The Tribunal noted that the non-disallowance did not affect the tax liability significantly due to substantial unabsorbed depreciation and brought forward losses.

7. Citing legal precedents, the Tribunal emphasized that inadvertent errors, as in the present case, do not amount to concealment of income or furnishing inaccurate particulars, especially when the error was not noticed by the assessee or the Assessing Officer.

8. Referring to Supreme Court and High Court decisions, the Tribunal concluded that the inadvertent mistake in claiming advance tax written off did not indicate an intention to conceal income, thus justifying the deletion of the penalty imposed under section 271(1)(c).

9. Relying on legal interpretations and factual analysis, the Tribunal held that the assessee's inadvertent mistake was a bona fide explanation under Explanation 1(B) to section 271(1), leading to the deletion of the penalty.

10. Consequently, the Tribunal allowed the appeal, deeming the penalty unsustainable and deleting the penalty levied under section 271(1)(c) for the A.Y. 2007-08.

This detailed analysis of the legal judgment showcases the intricacies of the case involving penalty under section 271(1)(c) of the Income Tax Act, emphasizing the significance of bonafide mistakes and inadvertent errors in determining income concealment.