2020 (10) TMI 939 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice - non strike down inapplicable portion - incorrect computation of book profit u/s 115JB - HELD THAT - Incorrect computation of book profit has happened due to erroneous filling up of data in the return of income. The same is a bonafide and inadvertent error. In the case of Price waterhouse coopers P Ltd 2012 (9) TMI 775 - SUPREME COURT considered the validity of penalty levied on bona fide mistakes imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. In our view, the decision of Hon ble Supreme Court would come to the help of the assessee in the facts and circumstances of the case. Accordingly, we hold that the imposition of penalty on the assessee is not justified. Appeal of the assessee is allowed.

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2011-12.

Detailed Analysis:

1. Background and Assessment Order:
The appellant, engaged in property development, contested the penalty imposed by the Assessing Officer under section 271(1)(c) for the A.Y. 2011-12. The AO determined the total income at a higher amount based on discrepancies in the book profit computation under section 115JB compared to the return filed by the assessee.

2. Assessee's Submission and AO's View:
The appellant claimed the error in reporting the book profit was inadvertent and due to clerical mistakes. However, the AO deemed it intentional, citing the availability of an audit report before filing the return and the subsequent scrutiny revealing the discrepancy.

3. Appellant's Arguments:
The appellant's representative argued that the mistake arose from incorrectly entering business income details in the Profit and Loss account section of the return, leading to the erroneous book profit computation under section 115JB. They emphasized the inadvertent nature of the error and referenced a Supreme Court decision regarding penalties for bona fide mistakes.

4. Department's Position:
The Department contended that the appellant failed to rectify the reported book profit despite having the audit report, suggesting a deliberate attempt to underreport income. They supported the penalty imposition upheld by the CIT(A).

5. Tribunal's Decision:
Upon review, the Tribunal found merit in the appellant's explanation, attributing the incorrect book profit computation to a bona fide and inadvertent error. Citing the Supreme Court precedent, the Tribunal concluded that the penalty was unwarranted in this case, overturning the CIT(A)'s decision and directing the AO to delete the penalty under section 271(1)(c) for the relevant year.

6. Outcome:
The Tribunal allowed the appeal, setting aside the penalty and emphasizing the inadvertent nature of the error in the book profit computation. The decision was based on the principle that penalties should not be imposed for genuine mistakes, aligning with the legal precedent cited by the appellant's representative.

This detailed analysis highlights the key arguments, findings, and legal principles considered in the judgment regarding the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the specified assessment year.