2022 (6) TMI 1298 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee debited to its Profit loss account - Education cess on TDS, Income tax paid, Penalty on TDS and TDS paid - Scope of bonafide mistake - assessee admitted the proposed disallowances by submitting that due to inadvertent mistake, the add back could not be made and even the Auditor also did not alert the assessee on this point - HELD THAT - It is clear from the nature of the amounts and the way of their depiction thereof in the Profit loss account that the assessee inadvertently committed a mistake in not adding back the amount of income tax, etc paid by it in the computation of total income. On being pointed out, the assessee accepted the disallowance and paid due tax thereon. It is not a case where the assessee tried to mislead the Revenue by intentionally claiming higher amount of deduction. Rather it is a case of inadvertent mistake in the computation of income. Hon ble Supreme Court in Price Waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT has held that no penalty u/s.271(1)(c) can be imposed in respect of inadvertent and bona fide mistake committed by the assessee. The Hon ble jurisdictional High Court in CIT Vs. Somany Evergreen Knits 2013 (4) TMI 154 - BOMBAY HIGH COURT also deleted the penalty which occurred due to bona fide and inadvertent mistake of the Chartered Accountant while filing the return. Since the facts and circumstances of the instant case amply show that the excess claim of deduction was due to bona fide and unintentional mistake, respectfully following the precedents, we order to delete the penalty. Appeal of assessee allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for inadvertent mistake in computation of total income.

Analysis:
The appeal was against the order confirming a penalty imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. The assessee had debited certain amounts to its Profit & Loss account but failed to add them back to the total income during assessment. The Assessing Officer imposed a penalty, which was upheld by the CIT(A).

During the proceedings, the assessee admitted the inadvertent mistake of not adding back the amounts totaling to Rs. 78.26 lacs in the computation of total income. The nature of the amounts and their depiction in the Profit & Loss account indicated an unintentional error. The assessee acknowledged the mistake when pointed out by the AO and paid the due tax. It was not a case of intentional misleading but a genuine error in income computation.

Citing legal precedents, including the decision in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT, the Tribunal noted that penalties cannot be imposed for inadvertent and bona fide mistakes. Referring to the case law of CIT Vs. Somany Evergreen Knits, the Tribunal highlighted that penalties were deleted for mistakes made unintentionally. Given the circumstances of the case and the unintentional nature of the error, the Tribunal ordered the deletion of the penalty.

In conclusion, the Tribunal allowed the appeal, emphasizing that the excess claim of deduction was due to a bona fide and unintentional mistake. The penalty under section 271(1)(c) was deleted, following the legal precedents and the nature of the error as inadvertent. The order was pronounced in the Open Court on 13th June 2022.