2024 (2) TMI 115 - HC - Income Tax

Levy of Penalty u/s 271 - certain expenses which were not allowable expenses under the Act were not added back to the total income in the computation of income and disallowance of such expenses has been mentioned by the auditors in the tax audit report - error on the part of the assessee was detected during the course of assessment proceeding u/s. 143(3) of the Act on scrutiny by the AO - before ITAT affidavit of Managing Director of the assessee was filed stating that return was filed by the then CFO, who since left the company and migrated to United Kingdom, who made an inadvertent error of not considering the disallowances which were mentioned in the tax audit report while uploading the return of income HELD THAT - ITAT in its order pronounced 2017 (3) TMI 1940 - ITAT MUMBAI as impugned in this appeal, has come to a factual finding that there is no intention on the part of assessee to conceal the income or furnish inaccurate particulars of income. It has also accepted the explanation that the CFO was entrusted with the filing of return and the CFO made a mistake in not properly uploading the return by filling up the return with the disallowances which were already reported by the auditors in the tax audit report. ITAT has come to a factual finding that there was no intention of furnishing any inaccurate particulars or concealment of income as the facts undoubtedly suggest so. In a case that was before the Apex Court in the matter of Price Waterhouse Coopers Pvt Ltd. 2012 (9) TMI 775 - SUPREME COURT Apex Court set aside the penalty proceedings in view of the findings of fact that the tax audit report was filed a/w return which would indicate that assessee had made a computation error in its return of income. In the case at hand also, the tax report has been filed along with the return of income. Therefore, we would agree with the ITAT that it was only a mistake while uploading the return of income in the given facts and circumstances of the case. Decided against revenue.

Summary

Issues:
The issues involved in the judgment are whether the error detected during assessment proceedings justifies the levy of penalty, and whether the appellant intentionally concealed income or furnished inaccurate particulars.

Issue 1: Error detected during assessment proceedings
The respondent filed the return of income for A.Y. 2010-2011, declaring a loss. The Assessing Officer (AO) observed certain expenses not allowable under the Act were not added back to the total income, resulting in disallowance of Rs. 13,11,45,849. During scrutiny assessment u/s. 143(3), a loss of Rs. 1,81,57,433 was determined. Penalty proceedings were initiated for concealing/furnishing inaccurate particulars of income. The appellant claimed that the error in not considering disallowances was due to the CFO's inadvertent mistake while filing the return electronically. The ITAT found no intention to conceal income, considering the factual findings and the tax audit report filed along with the return. The ITAT concluded that it was a mistake in uploading the return, not intentional concealment.

Issue 2: Intentional concealment of income
The appellant argued that the mistake was not intentional or deliberate, as the CFO made an error in not including disallowances reported in the tax audit report while uploading the return. The ITAT concurred, finding no intention to furnish inaccurate particulars or conceal income. Citing the Price Waterhouse Coopers Pvt Ltd. case, where penalty proceedings were set aside due to computation errors in the return of income, the ITAT emphasized that the tax audit report was filed along with the return, indicating a mistake in uploading the return. The High Court agreed with the ITAT's factual findings and dismissed the appeal, as the order was based on findings of fact.

Judgment Conclusion:
The High Court dismissed the appeal, upholding the ITAT's decision that the error in uploading the return was not intentional concealment of income. The factual findings supported the conclusion that there was no deliberate attempt to furnish inaccurate particulars, as the mistake was attributed to the CFO's oversight while filing the return electronically.