2022 (6) TMI 87 - HC - Income Tax

Penalty u/s 271(1)(c) - Assessee voluntarily filed the revised return duly disclosing the disallowance of the dividend in terms of Section 94(7) of the Act and revised its returned income - assessee upon receipt of the assessment order issued by the AO deposited the enhanced amount of tax and the Respondent had not challenged the assessment order and at the first instance, admitted its mistake in computation and filed a revised return - HELD THAT - A perusal of the order of the Tribunal reveals that the Tribunal noted that an error had occurred due to the wrong posting of the entry by the book-keeping staff of the Respondent with respect to the relevant dividend entry income to a wrong date. The Tribunal observed that since the Respondent had voluminous transactions, it committed an error while posting the relevant dividend entry, which was covered by one voucher since it was received on the same security. Tribunal has observed that it was a reasonable human error which could have been committed on the part of the Respondent. The Tribunal noted that on the same security, dividends were received at two distinct dates, however, the error crept in since, the book-keeping staff posted both the entries of the dividend to the same date. The Tribunal has accepted that upon a perusal of the record that such an error was possible and therefore has accepted the submission of the Respondent that this was a bonafide error and there was no intention on its part to evade tax. The view taken by the Tribunal is reasonable. It is a view taken after perusing the records in detail. The Tribunal, after appreciating the evidence has found that the Respondent has proven that it was a bonafide mistake and no substantial question of law would arise. It is not possible to accept the submission of learned counsel for the Appellant that the said finding of the Tribunal is perverse and we, therefore, do not find any merits in this appeal.

Summary

Issues involved:
1. Condonation of delay in filing the appeal under Section 5 of the Limitation Act, 1963.
2. Challenge to the order of the Tribunal deleting the penalty imposed on the Respondent under Section 271(1)(c) of the Income Tax Act, 1961.

Issue 1: Condonation of delay in filing the appeal
The appellant filed an application seeking condonation of a 6-day delay in filing the appeal. The delay was condoned by the court based on the reasons mentioned in the application. The court disposed of the application accordingly.

Issue 2: Challenge to the order deleting the penalty imposed on the Respondent
The Respondent had filed its return for Assessment Year 2015-16, disclosing a loss from trading in derivatives and adjusting Short Term Capital Loss with Long Term Capital Gain. During the assessment proceedings, discrepancies were found related to dividend income, leading to a disallowance under Section 94(7) of the Act. The Assessing Officer imposed a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. The Respondent revised its income, paid the tax demanded, and challenged the penalty. The Tribunal allowed the appeal, finding the error to be inadvertent and bonafide. The Appellant challenged this decision, arguing that the error was not voluntarily disclosed and fell under Explanation 1(B) to Section 271(1) of the Act.

The Court noted that the Respondent voluntarily disclosed the error, revised the return promptly, and paid the tax demanded. The Tribunal found the error to be a reasonable human mistake due to clerical errors in recording dividend entries. The Court upheld the Tribunal's decision, stating that no substantial question of law arose. The appeal was dismissed, and the Tribunal's order deleting the penalty was upheld.

In conclusion, the court upheld the Tribunal's decision, emphasizing the bonafide nature of the error and dismissing the appeal challenging the deletion of the penalty imposed on the Respondent.