2022 (8) TMI 565 - AT - Income Tax

Penalty u/s 271(1)(c) - assessment proceedings were initiated by issue of notice u/s 148 r.w.s. 147 - HELD THAT - There was certain mistakes so committed by the previous counsel while filing the return of income of the assessee and when it came to the knowledge of the assessee through another counsel at the time of furnishing return/ reply for notice u/s 148, at the very first opportunity, the assessee furnished the return declaring correct income. Moreover, AO accepted the return income so now filed and no additions were made while computing the income in the assessment order passed u/s 143(3) r.w.s. 147. Considering that assessee is salaried person, the argument of ld. AR that assessee is not well versed in taxation laws, cannot be brushed aside. Considering the judgment of Hon'ble Apex Court in the case of M/s Price Water House Coopers Pvt. Ltd., 2012 (9) TMI 775 - SUPREME COURT so cited by the ld. AR as above, and judgment of Hon'ble Rajasthan High Court in the case of J.P. Sharma Sons 1984 (1) TMI 25 - RAJASTHAN HIGH COURT we are of the opinion that it is a case where benefit of doubt is to be given to the assessee that it was an inadvertent and bonafide error on the part of assessee without knowing the nittygritty of the taxation laws and it was not a case of assessee trying to conceal its income. Considering the facts and in the circumstances of the case and the case laws so cited penalty order passed by AO is cancelled and appeal of the assessee is allowed for AY 2016-17. It is reiterated that facts and the grounds so taken in AY 2017-18 are also same as that of in AY 2016 17 and accordingly the appeal for AY 2017-18 is also allowed.

Summary

Issues:
1. Penalty orders u/s 271(1)(c) and 270A of the Income Tax Act for assessment years 2016-17 & 2017-18.
2. Confirmation of penalties by the ld. CIT(A) and grounds of appeal by the assessee.
3. Consideration of rectification of mistakes, underreporting of income, and imposition of excessive penalties.
4. Applicability of settled judicial positions in penalty proceedings.

Analysis:
1. The appeals were filed against the penalty orders u/s 271(1)(c) and 270A for the assessment years 2016-17 & 2017-18. The assessee challenged the penalties imposed by the ld. CIT(A) in both cases.

2. The grounds of appeal raised by the assessee in both appeals primarily focused on the alleged errors made by the ld. CIT(A) in confirming the penalties. The appellant argued that penalties were imposed arbitrarily and without considering relevant facts and circumstances.

3. The appellant contended that penalties were confirmed despite rectifying mistakes promptly upon notice u/s 148. It was argued that there was no intention to underreport income, and penalties were excessive, especially considering the rectification made immediately upon identification of errors.

4. The appellant highlighted the settled judicial position that penalty proceedings are distinct from assessment proceedings. The appellant argued that conclusions drawn in assessment proceedings should not solely dictate penalty imposition. The appellant also emphasized the inadvertent nature of the errors and the lack of intent to conceal income.

5. The Tribunal considered the facts, including the inadvertent errors made by the previous counsel, rectification by the assessee upon notice u/s 148, and the acceptance of corrected income by the AO. The Tribunal noted the appellant's lack of expertise in tax matters and cited relevant case laws supporting the appellant's position.

6. Relying on the judgment of the Hon'ble Apex Court and Hon'ble Rajasthan High Court, the Tribunal concluded that the penalties were not justified. The Tribunal granted the benefit of doubt to the assessee, considering the inadvertent and bonafide nature of the errors, and canceled the penalty orders for both assessment years.

7. Ultimately, the Tribunal allowed both appeals of the assessee, emphasizing the inadvertent nature of the errors, lack of intent to conceal income, and the prompt rectification of mistakes upon notice. The penalties imposed were deemed unjustified, and the appeals were allowed in favor of the assessee for both assessment years.

Conclusion:
The Tribunal, after thorough consideration of the facts, legal arguments, and relevant case laws, concluded that the penalties imposed on the assessee for underreporting income were unjustified. The Tribunal granted the benefit of doubt to the assessee, considering the inadvertent nature of the errors and the lack of intent to conceal income. The appeals were allowed, and the penalty orders were canceled for both assessment years 2016-17 & 2017-18.