2017 (3) TMI 1940 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Assessee had filed a belated return of income showing a loss which is not eligible to be carried forward and was not claimed in any subsequent years - HELD THAT - On a careful consideration of the facts it appears that there is no intention on the part of the Assessee to conceal the income or furnish inaccurate particulars of income. The return of loss filed belatedly is not useful to the Assessee since the loss cannot be carried forward and it cannot be set off against the income in subsequent years as the return was filed belatedly. Therefore the Assessee has to forgo whatever loss is shown in the return of income. It appears that the CFO was entrusted with the filing of return and he made a mistake in not properly uploading the return by filling up the return with the disallowances which were already reported by the auditors in the tax audit report. CFO had undoubtedly made an error in filing electronically by uploading incorrect particulars. Therefore for the fault of the professional the Assessee cannot be penalized. There is no intention of furnishing of any inaccurate particulars or concealment of income as the facts undoubtedly suggest in this case. Hon ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT considered a situation where the Assessee by mistake claimed deduction in respect of provision towards payment of gratuity in its return of income even though tax audit report indicated that such provision was not allowable. Hon ble Madras High Court in the case of CIT Vs. Balaji Distelleries Ltd 2012 (10) TMI 514 - MADRAS HIGH COURT following the decision of the Hon ble Supreme Court in the case of Price Waterhouse Coopers pvt. Ltd 2012 (9) TMI 775 - SUPREME COURT held that the absence of due care does not mean that the Assessee was guilty of furnishing inaccurate particulars to conceal his income. We hold that there is no concealment of income or furnishing of inaccurate particulars of income by the Assessee but it is only a mistake in not adding back the expenses disallowable in the computation of income while uploading the return of income in the given facts and circumstances of the Assessee s case. Thus we direct the AO to delete the penalty levied u/s 271(1)(c) of the Act. Appeal of assessee allowed.

Summary

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Alleged concealment of income or furnishing inaccurate particulars of income by the Assessee.
3. Consideration of human error and inadvertent mistakes in filing electronic returns.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied under Section 271(1)(c):
The appeal was filed by the Assessee against the order of the CIT (Appeals)-21, Mumbai, which confirmed the penalty levied under Section 271(1)(c) for the assessment year 2010-11. The Assessee had filed a return electronically declaring a loss of Rs.16,10,43,542/-. The assessment was completed determining the loss at Rs.1,81,57,433/-, with the Assessing Officer (AO) noting that certain expenses were not allowable and were not added back to the total income. Consequently, penalty proceedings were initiated under Section 271(1)(c) for concealing/furnishing inaccurate particulars of income, and a penalty was levied for allegedly suppressing the real income of Rs.13,19,73,099/-.

2. Alleged Concealment of Income or Furnishing Inaccurate Particulars:
The Assessee contended that the expenses were shown as disallowances in the tax audit report by the auditors, but during electronic filing, these disallowances were not entered correctly, resulting in an incorrect loss declaration. The Assessee argued that the mistake was made by the professional engaged for filing the return and that there was no intention to conceal income or furnish inaccurate particulars. The AO, however, maintained that the Assessee should have written back the disallowed expenses in the computation of income, and the failure to do so amounted to furnishing inaccurate particulars or concealment of income. The CIT (Appeals) upheld the penalty, noting that there need not be willful concealment for the imposition of penalty under Section 271(1)(c).

3. Consideration of Human Error and Inadvertent Mistakes:
The Assessee's counsel argued that the error was a result of human mistake while uploading the return electronically and that the disallowances were reported in the tax audit report. The counsel cited several judicial precedents, including Price Waterhouse Coopers Pvt. Ltd. Vs. CIT, where the Supreme Court recognized that inadvertent errors do not necessarily imply concealment or furnishing of inaccurate particulars. The tribunal observed that the return was filed belatedly, making the reported loss ineligible for carry forward, thereby rendering the mistake revenue-neutral. The tribunal concluded that the Assessee had no intention to conceal income or furnish inaccurate particulars, and the error was due to the professional's mistake in filing the return electronically.

Conclusion:
The tribunal, after considering the facts and judicial precedents, held that there was no concealment of income or furnishing of inaccurate particulars by the Assessee. The penalty levied under Section 271(1)(c) was directed to be deleted, and the appeal of the Assessee was allowed. The order emphasized that inadvertent errors, especially those made by professionals, should not attract penalties when there is no intention to deceive or mislead.