2018 (8) TMI 1785 - HC - Income Tax

Penalty u/s 271(1)(c) - error of the Chartered Accountant led to the assessee not complying with the law - Chartered Accountant ignorance of Section 40(ii) - Assessee s malafide intention - inadmissible expenditure from the profits of the business - HELD THAT - The tax paid is undisputedly an inadmissible expenditure from the profits of the business. Hence this amount should have been statutorily added back. Further from the computation of income the assessee added back certain inadmissible expenditure. However he excluded the amount of income tax paid to the extent of 48, 90, 114/-. Thus the addition was only partial and not full. Unless and until the legal provision then in force permitted exclusion of the amount of income tax already paid the Chartered Accountant could not have done this. The Chartered Accountant cannot feign ignorance of Section 40(ii) as he is well trained and well versed in law representing not only the assessee but various other clients. As far as the assessee s malafide intention is concerned the burden was entirely on the assessee to then show in terms of Explanation-I to the provision permitting imposition of penalty that such intention never existed when the above act was committed. For that there was no material either in the form of evidence of the assessee or the affidavit of the Chartered Accountant. Hence the Commissioner was right according to the Tribunal in imposing this penalty. The attempt to blame the Chartered Accountant cannot result in the assessee s exoneration and claimed in absolute terms. In the circumstances the penalty was rightly imposed. - Decided against assessee

Summary

Issues:
Imposition of penalty under Section 271(1)(c) of the Income Tax Act 1961 based on the error of the Chartered Accountant and the assessee's claim for exoneration.

Analysis:
The judgment deals with an appeal regarding the imposition of a penalty on the assessee under Section 271(1)(c) of the Income Tax Act 1961. The appellant's representative argued that the penalty should be deleted as the error leading to non-compliance with the law was due to the Chartered Accountant's mistake, without any malafides. The representative contended that the legal provision allows for the deletion of penalty by a higher forum in such cases. However, the court disagreed with this argument for several reasons. Firstly, the court noted that the Chartered Accountant, being a professional, is deemed to be aware of the law and its intricacies. Therefore, the mistake attributed to the Chartered Accountant was not acceptable, especially regarding the inadmissible expenditure of income tax paid by the assessee. The court emphasized that the Chartered Accountant cannot feign ignorance of the relevant legal provisions, such as Section 40(ii) of the Income Tax Act, given their training and expertise in the field. The burden was on the assessee to prove the absence of malafide intention, which was not supported by any evidence or affidavit from the Chartered Accountant. Consequently, the Tribunal's decision to uphold the penalty imposition was deemed appropriate by the court.

Furthermore, the court highlighted that the Tribunal's view was not perverse or based on any error of law apparent on the face of the record. The court considered the Tribunal's decision as a possible view that could have been taken considering the facts and circumstances of the case. Therefore, the court concluded that the appeal lacked merit and dismissed it without any order as to costs. The judgment underscores the importance of accountability and knowledge of legal provisions, especially for professionals like Chartered Accountants representing clients in financial matters, and upholds the principle that errors or negligence on their part cannot absolve the assessee of penalties for non-compliance with tax laws.