2015 (10) TMI 1393 - AT - Income Tax

Penalty u/s. 271(1)(c) - brought forward business loss can be set off against business income of the current year and the same cannot be set off against income of the current year which is chargeable under the head income from other sources - advice given by the professional person - Held that - Assessee claimed set off of brought forward business loss on his bonafide belief that the advice given by the professional person who is actively engaged in the profession of tax consultancy was correct. In the above circumstances, when the assessee makes a claim on the advice of a tax expert, though erroneous, and when complete particulars relating to the claim were truly and completely furnished by the assessee before the Assessing Officer, in our considered view, the assessee cannot be visited with penalty u/s. 271(1)(c) of the Act on the ground of furnishing of inaccurate particulars of income. We, therefore, delete the penalty - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming a penalty of Rs. 3,91,041 levied under section 271(1)(c) of the Act. The penalty was imposed on the assessee for furnishing inaccurate particulars of income amounting to Rs. 11,50,459. The issue revolved around the set off of brought forward business loss against income from other sources, which was deemed incorrect by the assessing authorities. The case was remanded back to the Tribunal for reconsideration after the assessee submitted an affidavit from a Chartered Accountant, stating that the mistake was inadvertent and not deliberate.

The Authorized Representative of the assessee argued that the set off was based on the advice of a qualified professional, and all relevant details were disclosed in the income tax return. The Departmental Representative contended that a qualified professional should not have made such an error, justifying the penalty under section 271(1)(c) of the Act. The Tribunal found the affidavit submitted by the Chartered Accountant to be genuine, confirming that the mistake was unintentional due to work pressure and not a deliberate act.

It was established that the assessee relied on the advice of a qualified professional in claiming the set off of the brought forward business loss. The Tribunal noted that the Chartered Accountant was actively engaged in tax consultancy, and the assessee's reliance on his advice could not be considered as gross negligence. The Tribunal concluded that the assessee acted on a bona fide belief in the advice given by the tax expert, even though it was erroneous. Since all details were accurately disclosed to the Assessing Officer, the penalty under section 271(1)(c) for furnishing inaccurate particulars of income was deleted, and the appeal of the assessee was allowed.