Concealment Penalty cannot be levied on rejection of a bona-fide claim

Concealment Penalty cannot be levied on rejection of a bonafide claim. Even assessee with great expertise could make silly mistake

ABCAUS Case Law Citation:
ABCAUS 3337 (2020) (07) ITAT

Important case law relied upon by the parties:
Price Waterhouse Coopers (P) Ltd vs. CIT [2012] 348 ITR 306 SC
CIT vs. Somany Evergree Knits Ltd. (2013) 352 ITR 592

In the instant case, the appeal was preferred by the assessee against the order of CIT(Appeals) in confirming the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).

The assessee was an individual and was engaged in the proprietor business of running petrol and diesel pump.

During the assessment proceedings, the Assessing Officer made additions on account of non-substantiation of repair and collection charges, excess depreciation claimed and wrong deduction claimed as housing loan interest for under construction house property.

The assessee accepted the addition and did not file appeal. The AO initiated penalty proceedings u/s 271(1)(c) of the Act and held that  had the case not been selected for scrutiny, the income would  have escaped taxation. 

Accordingly, the Assessing Officer, levied penalty u/s 271(1)(c) of the Act on account of additions made. During the First Appellate Proceedings, the CIT(Appeal) confirmed the penalty.

Before the Tribunal, the assessee submitted that the wrong claim for depreciation was due to the inadvertent mistake committed by the Auditor in his Tax Audit Report. He also submitted that claim of  repairs  and collection charges and also the interest on housing loan were  inadvertent and bona fide mistakes.

The Tribunal observed that the Revenue had not questioned the genuineness of the expenditures. However, the grievance of the   Revenue was that the assessee while calculating these expenses inappropriately calculated them.

The Tribunal observed that all the facts were disclosed and the claim was made for deduction on expenditures incurred by the assessee. The claim of the assessee was also supported by various decisions and documentary evidences. The Assessing Officer as well as CIT(A) had not challenged the genuineness /   bona-fides of the expenditures so incurred.

Penalty cannot be levied on rejection of a bona-fide claim

The Tribunal opined that penalty cannot be levied where a bona-fide claim of the assessee is rejected by the tax department.

Even assessee with great expertise could make silly mistake

The Tribunal observed that the Hon’ble Supreme Court had held that despite a reputed firm having great expertise available with it, it is possible that even the assessee could make a silly mistake.

In the said case, the assessee while submitting its return had failed to add the provision for gratuity to its total income. The Hon’ble Supreme Court held that it could 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. That the Assessee should have been careful cannot be doubted, but the absence of due care ….., does not mean that the Assessee is guilty of either furnishing inaccurate  particulars or attempting to conceal its income.

Bonafide and inadvertent mistake of CA while filing return of income not furnishing of inaccurate particulars of income

The Tribunal further observed that the Hon’ble High Court in a case where the assessee in ITR claimed capital loss as revenue and also claimed wrong depreciation, held that bonafide and inadvertent mistake of CA while filing return of income will not amount to furnishing of inaccurate particulars of income. It was held that non-furnishing of revised return not mean that bonafide mistake in  making a wrong claim should be visited with imposition of penalty.

Accordingly, the Tribunal held that it was not a fit case for levy of penalty u/s 271(1)(c) of the Act. Hence, the order of the CIT(Appeal) was set aside with direction to the Assessing Officer to delete the penalty.

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