2019 (7) TMI 545 - HC - Income Tax

Penalty levied u/s 271(1)(c) - Assessee had claimed the unpaid interest to the schedule bank in its profit and loss account and failed to disallow the same u/s 43B(e) - No Revised Return - whether Assessee has proved that the furnishing of inaccurate particulars leading to incorrect claim of expenditure was inadvertent - HELD THAT - Admittedly the case on hand is not a case of survey but it is a case where the assessee having come to know about the same after the Assessing Officer pointed it out immediately filed petition for rectification u/s 154 along with explanation stating that it is an inadvertent error. The decision in the case of Price Waterhouse Coopers Private Limited 2012 (9) TMI 775 - SUPREME COURT is also identical where in the tax audit report filed by the assessee it was indicated that provision towards payment of gratuity was not allowable but the assessee therein failed to add the said provision to total income. Considering the said fact the Hon ble Supreme Court held that no penalty could be imposed for such mistake. As noted by the CIT(A) as well as the Tribunal the conduct of the assessee clearly establishes that it is an inadvertent error and cannot be stated to be a contumacious conduct on the part of the assessee and cannot be stated to be with an intention to understate his income by furnishing inaccurate particulars. - Decided against revenue

Summary

Issues:
1. Whether penalty under Section 271(1)(c) is attracted if the assessee claimed unpaid interest in its profit and loss account without disallowing it under Section 43B(e) of the Income-tax Act?
2. Whether the assessee can be considered guilty of furnishing inaccurate particulars even if no steps were taken to rectify the error in the return despite being aware of it?

Analysis:
1. The appeal concerned the imposition of a penalty under Section 271(1)(c) of the Income-tax Act for the assessment year 2012-13. The Revenue contended that the penalty was justified as the assessee claimed unpaid interest in its profit and loss account without disallowing it under Section 43B(e) of the Act. The Assessing Officer imposed a penalty of ?50,28,975, considering the furnishing of inaccurate particulars by the assessee, resulting in lesser income returned. However, the CIT(A) and the Tribunal found that the omission to disallow the interest was inadvertent and not with the intention to understate income. The Tribunal upheld the CIT(A)'s decision, emphasizing the absence of deliberate conduct on the part of the assessee.

2. The second issue revolved around whether the assessee could be deemed to have furnished inaccurate particulars despite not rectifying the error in the return, even after being aware of it. The Revenue argued that the assessee's failure to file a revised return justified the penalty imposition. However, the Tribunal, following the decision in Price Waterhouse Coopers Private Limited case, held that the inadvertent error in not adding the interest provision to total income did not amount to furnishing inaccurate particulars or concealing income. The Tribunal and the High Court concurred that the assessee's conduct did not demonstrate contumacious behavior or an intention to understate income, thereby dismissing the appeal.

In conclusion, the High Court dismissed the appeal, stating that the factual findings established the inadvertent nature of the error, ruling out any substantial question of law. The judgment highlighted the importance of intent and deliberate conduct in determining the applicability of penalties under Section 271(1)(c) of the Income-tax Act, emphasizing the need for a careful assessment of circumstances before penalizing taxpayers for inadvertent errors.