2019 (1) TMI 480 - HC - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80IA - Held that - Tribunal accepted the assessee s contention that certain direct expenses were reduced from CFS income inadvertently. As pointed out that the expenses pertaining to indirect expenditure, interest on term loan and depreciation were missed out while claiming original deduction under Section 80IA of the Act. Similarly, inadvertent errors were also made by the auditors who were issued the audit report in prescribed format. However, upon realizing the error, the assessee issued suo motu revised computation of income before the assessing officer during the course of the assessment proceedings. The Tribunal accepted the assessee s contention of bonafide and referred to the decision of the Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd (2012 (9) TMI 775 - SUPREME COURT) and held that the penalty was wrongly imposed - the Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt Ltd 2010 (3) TMI 80 - SUPREME COURT has held that every case of rejection of claim would not give rise to penalty proceedings. - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Analysis:
The judgment dealt with the issue of penalty imposed by the assessing officer under Section 271(1)(c) of the Income Tax Act, 1961, which was subsequently deleted by the Tribunal. The Tribunal accepted the assessee's contention that certain direct expenses were inadvertently reduced from CFS income, leading to errors in claiming the original deduction under Section 80IA of the Act. The assessee also pointed out inadvertent errors made by auditors in the prescribed format of the audit report. Upon realizing the mistake, the assessee voluntarily submitted a revised computation of income before the assessing officer during the assessment proceedings. Additionally, the assessee relied on various High Court judgments and the decision of the Supreme Court in Price Waterhouse Coopers Pvt Ltd Vs. CIT & Anr. [2012] 348 ITR 306 (SC) to support their case.

The Tribunal, considering the assessee's actions as bonafide, referred to the Supreme Court decision in Price Waterhouse Coopers Pvt Ltd (supra) and concluded that the penalty was wrongly imposed. Furthermore, the judgment noted the Supreme Court's ruling in CIT Vs. Reliance Petroproducts Pvt Ltd [2010] 322 ITR 158 (SC), emphasizing that the rejection of a claim does not automatically lead to penalty proceedings. Ultimately, the High Court found no error in the Tribunal's view and dismissed the tax appeals.

In summary, the judgment focused on the penalty under Section 271(1)(c) of the Income Tax Act, 1961, highlighting the importance of bonafide actions by the assessee in rectifying inadvertent errors and the relevance of legal precedents in supporting the decision to delete the penalty imposed by the assessing officer. The court's decision aligned with the principle that not every rejection of a claim warrants penalty proceedings, emphasizing the need for a bonafide approach in tax matters.