2013 (10) TMI 781 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee providing multi-disciplinary management consultancy services and having worldwide reputation - claimed deduction of provision towards payment of gratuity in its return of income, when the same was not allowable as provision towards payment of gratuity was not allowable as per Statement of Particulars filed by the assessee in Form 3CD - assessee contended it to be genuine mistake - Held that - Contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. Absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Imposition of penalty on the assessee is not justified - Following decision of PricewaterhouseCoopers Pvt.Ltd. Vs. CIT and Another 2012 (9) TMI 775 - SUPREME COURT - Decided in favor of assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of reassessment proceedings under Section 147 read with Section 148.
3. Jurisdiction of the income tax authorities post-admission of the application by the Settlement Commission under Section 245D(1).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue in ITA No.6256/Del/2012 was the levy of penalty of Rs. 1,25,000/- under Section 271(1)(c) for non-disclosure of book profit chargeable to tax under Section 115JB. The assessee argued that the omission was inadvertent, as the profit and loss account and balance sheet showing the book profit were submitted with the return. The counsel cited several judgments, including CIT Vs. Escorts Finance Ltd. and PricewaterhouseCoopers Pvt. Ltd. Vs. CIT, to support the claim that the omission was a bona fide error and not concealment of income. The Revenue countered, citing CIT Vs. Zoom Communication Pvt. Ltd., arguing that the omission could not be considered inadvertent given the professional assistance available to the assessee. However, the Tribunal found the assessee's case identical to the PricewaterhouseCoopers Pvt. Ltd. case, where the Supreme Court held that a bona fide and inadvertent error does not justify the imposition of penalty. Therefore, the penalty under Section 271(1)(c) was cancelled.

2. Validity of Reassessment Proceedings:
In ITA No.6257/Del/2012, the assessee challenged the reassessment proceedings initiated under Section 147 read with Section 148. The grounds included the claim that the reassessment was invalid as it was initiated after four years from the end of the relevant assessment year without any failure on the part of the assessee to disclose material facts. The assessee also argued that the reassessment was bad in law as the reasons recorded for issuing the notice under Section 148 were contrary to the facts. However, the Tribunal did not provide a detailed analysis or conclusion on this issue within the provided text, focusing instead on the jurisdictional argument related to the Settlement Commission.

3. Jurisdiction Post-Admission by Settlement Commission:
In ITA Nos.6257/Del/2012 and 6258/Del/2012, the assessee contended that the orders passed by the Assessing Officer (AO) under Section 143(3) read with Section 147 and under Section 271(1)(c) were invalid as the Settlement Commission had admitted the assessee's application for AY 2003-04 under Section 245D(1). The Tribunal examined the order of the Settlement Commission and confirmed that AY 2003-04 was covered by the application admitted on 18th September 2006. According to Section 245F(2), once the Settlement Commission admits an application, it has exclusive jurisdiction over the case until a final order is passed under Section 245D(4). Consequently, the AO had no jurisdiction to pass the orders dated 31st December 2009 and 30th June 2010. Therefore, the Tribunal quashed these orders.

Conclusion:
The Tribunal allowed all three appeals of the assessee, cancelling the penalty under Section 271(1)(c) and quashing the orders passed by the AO due to the exclusive jurisdiction of the Settlement Commission over the relevant assessment year. The decision was pronounced in the open Court on 11th October 2013.