No concealment penalty for bonafide error of chartered accountant in claiming wrong deduction u/s 80IC by choosing incorrect initial assessment year
ABCAUS Case Law Citation:
ABCAUS 2864 (2019) (04) ITAT
Important Case Laws Cited/relied upon by the parties
Price Water Coopers reported in 348 ITR 306
Zoom Communication Private Limited 327 ITR 510
Dharmendra Textiles Processors 295 ITR 244
Deep Tools Pvt. Ltd. reported in 274 ITR 603
In this case, appeal was filed by the assesee against the order of the CIT(A) in confirming the action of the Assessing Officer (AO)in imposing penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).
The appellant was a proprietor of an under taking which was eligible for deduction u/s 80 IC of the Act on the basis of the audit report.
For the relevant assessment year, as per the audit report, the auditors have shown initial assessment years from when deduction is being claimed and date of commencement of operation / activity by the undertaking / enterprises. The deduction u/s 80 IC had been shown at 100% of the profits and gains.
However, during the course of the scrutiny assessment proceedings, the assessee realized that the mistake had been crept in counting the eligible years of the claim of deduction u/s 80 IC of the Act.
The assessee realized that for the year under consideration he was eligible for deduction @ 25% and not 100%. Since the period of limitation for filing the revised return of income had expired, therefore, the revised computation of income was filed claiming the deduction u/s 80 IC of the Act @ 25%.
Since earlier the assessee had paid tax on taxable income as per section 115 JC of the Act and since after correction the taxable income under the normal provision of the Act was higher, the assessee paid the tax difference alognwith interest immediately.
The assessment order framed u/s 143(3) of the Act was completed by the Assessing Officer as per the revised computation of income allowing deduction u/s 80 IC of the Act @25%.
However, the AO observed that it was a deliberate attempt on the part of the assessee to conceal income and accordingly penalty proceedings u/s 271 (1) (c ) of the Act were separately initiated.
After issuing a show cause notice and after considering the submissions of the assessee the Assessing Officer observed that the assessee was taking shelter behind bona fides and inadvertent error whereas the intention was to conceal the taxable income and proceeded by levying penalty.
The assessee contested the levy of penalty before the CIT(A) but without any success.
Before the Tribunal, the assessee reiterated that due to the bona fides mistake of the Chartered Accountant and due to the inadvertent error the assessee had claimed deduction @ 100% and as soon as the mistake was realized, the assessee immediately corrected the claim and the taxes alongwith interest was also paid before the completion of the assessment proceedings.
The Tribunal observed that facts clearly showed that on the basis of the audit report the assessee claimed the deduction u/s 80 IC of the Act. There was no dispute that the undertaking of the assessee was eligible for deduction u/s 80 IC of the Act and therefore, it could be safely concluded that the claim was not a false claim.
The Tribunal noted that in the audit report itself the auditors had mentioned the correct initial assessment year u/s 80 IC of the Act the assessee was eligible for 100% deduction for first five assessment years starting from the initial assessment year. However, the Chartered Accountant had included the assessment year under consideration as the 5th assessment year since no deduction was claimed in first AY and therefore the chartered accountant counted the eligible assessment years from next AY.
The Tribunal was of the view that this clearly showed the human error and could not partake the colour of intentional or willful claim.
The Tribunal noted that the Hon’ble Supreme Court had held that imposing of penalty would be unwarranted in a case where the assessee had considered an inadvertent and bonafide error and had not intended to or attempted to either conceal its claim or furnish inaccurate particulars.
Considering the facts of the case in totality the Tribunal opined that it was not a fit case for the levy of penalty u/s 271 (1) (c) of the Act. Accordingly, it set aside the findings of the CIT(A) and directed the Assessing Officer to delete the penalty.