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2014 (5) TMI 928 - AT - Income TaxPenalty u/s 271(1)(c) of the Act Disallowance of deferred revenue expenses - Bonafide inadvertent omission in not adding the book amount in the computation of income No concealment of income Held that - The assessee is a public section undertaking who on being called forth to explain its claim after offering its explanation accepted that a mistake had crept into its claim which was duly accepted leading to the addition being made Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - making incorrect claim per se does not constitute furnishing of inaccurate particulars of income - all the necessary facts are disclosed merely because an incorrect claim has been made, the action of the CIT(A) in upholding the action of the AO cannot be upheld - the explanation offered by the assessee is a bona fide explanation which in the absence of anything to the contrary ought to have been accepted thus, the penalty imposed is set aside Decided in favour of Assessee.
Issues Involved:
1. Confirmation of penalty under section 271(1)(c) by CIT(A). 2. Legitimacy of the penalty amounting to Rs.1,02,51,384/- under section 271(1)(c) for disallowance of deferred revenue expenditure. 3. Rejection of the appellant's contention of a bona fide inadvertent omission. 4. Allegation of no concealment of income by the assessee, a Public Sector Undertaking. 5. Submission of explanation by the assessee regarding no concealment or furnishing of inaccurate particulars. 6. Absence of merit-based finding on concealment in the AO's order. Detailed Analysis: 1. Confirmation of Penalty Under Section 271(1)(c) by CIT(A): The assessee appealed against the order of CIT(A) confirming the penalty under section 271(1)(c). The Tribunal noted that the assessee, a public sector undertaking, had made an incorrect claim in its return due to an inadvertent error. The assessee had fully disclosed all relevant facts and accepted the mistake when pointed out by the AO. 2. Legitimacy of the Penalty Amounting to Rs.1,02,51,384/-: The penalty was levied for the disallowance of Rs.3,01,60,000/- on account of deferred revenue expenditure. The AO observed that the assessee did not add back this amount to the taxable income due to an omission. The CIT(A) upheld the penalty, but the Tribunal found that the mistake was bona fide and not an attempt to conceal income. 3. Rejection of Bona Fide Inadvertent Omission: The assessee argued that the omission was bona fide and unintentional. The Tribunal agreed, noting that the full disclosure was made in the accounts and the mistake was corrected as soon as it was identified. The Tribunal emphasized that making an incorrect claim does not automatically mean furnishing inaccurate particulars of income. 4. Allegation of No Concealment of Income: The assessee contended that as a public sector undertaking, it had no motive to conceal income. The Tribunal supported this view, referencing the Mumbai Bench of the Tribunal's decision in Dena Bank vs IAC, which held that public sector companies should be treated differently due to the absence of personal interest. 5. Submission of Explanation by the Assessee: The assessee submitted an explanation that the error was due to an inadvertent omission and not an attempt to hide facts. The Tribunal found the explanation to be bona fide and consistent with the principle laid down by the Supreme Court in Price Waterhouse Coopers (P.) Ltd. vs CIT, where inadvertent errors were accepted as human errors. 6. Absence of Merit-Based Finding on Concealment: The Tribunal noted that the AO did not provide a merit-based finding on concealment. The penalty was based on the incorrect claim, which was fully disclosed and corrected. The Tribunal concluded that the penalty should be quashed as the explanation offered by the assessee was bona fide. Conclusion: The Tribunal quashed the penalty order, setting aside the impugned order, and allowed the appeal of the assessee. The judgment emphasized that making an incorrect claim does not constitute furnishing inaccurate particulars of income when full disclosure is made and the mistake is bona fide. The Tribunal's decision was pronounced in the open court on 4.4.2014.
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