2020 (2) TMI 1426 - AT - Income Tax

Levy of penalty u/s.271(1)(c) - disallowance made towards loss of sale of motor car - assessee has debited a sum towards loss on sale of motor car in its profit and loss account but omitted to disallow the same while computing the total income from business - HELD THAT - Referring to assessee s submission that it was a genuine omission on the part of the assessee and the entire details for making the addition / disallowance was very much available in the return of income filed by the assessee together with the audited statement of accounts wherein this sum was clearly and separately mentioned in the P L Account as loss on sale of fixed assets. Also the entire tax payment pursuant to the said disallowance made in the assessment had been duly paid by it and the genuine omission made by it should not be penalised. As relying on PRICE WATERHOUSE COOPERS (P.) LTD. 2012 (9) TMI 775 - SUPREME COURT wherei held assessee should have been careful cannot be doubted but the absence of due care in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income we hold that this is not a fit case for levy of penalty u/s.271(1)(c). - Decided in favour of assessee.

Summary

Issues involved: Validity of levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 for disallowance made towards loss on sale of motor car.

Detailed Analysis:

1. Issue of Penalty under Section 271(1)(c):
The appeal before the ITAT Mumbai concerned the validity of the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, amounting to ?1,07,262, in relation to the disallowance of a loss on the sale of a motor car totaling ?3,57,541. The Assessing Officer (AO) observed that the motor car formed part of the block of assets under plant and machinery, and the assessee failed to disallow the loss while computing the total income from business. The assessee acknowledged the omission during the assessment proceedings and agreed to the disallowance. The AO disallowed the sum and initiated penalty proceedings, which were upheld by the ld. CIT(A) despite the assessee's submission that it was a genuine omission and the necessary details were available in the return of income and audited accounts.

2. Judicial Precedent and Decision:
The ITAT referred to a decision by the Hon'ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd., where it was held that inadvertent errors made in the return of income, even if overlooked by both the assessee and the Assessing Officer, do not amount to concealment of income or furnishing inaccurate particulars. The Supreme Court emphasized that such errors, due to bona fide and inadvertent reasons, do not justify the imposition of penalties under section 271(1)(c). The ITAT, following this precedent, concluded that the penalty in the present case was not justified, as it was a result of a genuine mistake and not an attempt to conceal income or provide inaccurate information.

3. Final Decision and Outcome:
Based on the Supreme Court's decision and the facts of the case, the ITAT allowed the appeal of the assessee and directed the AO to delete the penalty imposed under section 271(1)(c) of the Act. The ITAT emphasized that the inadvertent error made by the assessee, which was promptly rectified upon identification, did not warrant the imposition of a penalty. Consequently, the appeal was allowed in favor of the assessee, and the penalty was set aside.

In conclusion, the ITAT Mumbai, following the legal precedent and considering the circumstances of the case, ruled that the penalty under section 271(1)(c) was not justified and directed the deletion of the penalty imposed on the assessee.