RUPAL SUNIL SHAH,MUMBAI vs. MUM-C-(251)(1), CIRCLE 32(1), MUMBAI

The Assessee has raised the following grounds of appeal:

The brief facts of the case are that the assessment for A.Y. 2020-21 was The brief facts of the case are that the assessment for A.Y. 2020 The brief facts of the case are that the assessment for A.Y. 2020 completed under section 147 read with section 144B of the Act vide order dated section 147 read with section 144B of the Act vide order dated section 147 read with section 144B of the Act vide order dated 31.01.2025 assessing the total income at Rs.22,10,345/ 31.01.2025 assessing the total income at Rs.22,10,345/- as against the returned as against the returned income of Rs.7,68,880/-. During the reassessment proceedings, the Assessing . During the reassessment proceedings, the Assessing . During the reassessment proceedings, the Assessing Officer observed that the assessee h Officer observed that the assessee had actually received remuneration from ad actually received remuneration from partnership firms amounting to Rs.30,52,867/ partnership firms amounting to Rs.30,52,867/- and exempt share of profit under and exempt share of profit under section 10(2A) of the Act amounting to Rs.16,11,402/ section 10(2A) of the Act amounting to Rs.16,11,402/-. However, in the original . However, in the original return these figures were inadvertently interchanged and r return these figures were inadvertently interchanged and remuneration was emuneration was shown at Rs.16,11,402/ shown at Rs.16,11,402/- whereas the share of profit was shown at whereas the share of profit was shown at Rs.30,52,867/-. Accordingly, the Assessing Officer was of the view that taxable . Accordingly, the Assessing Officer was of the view that taxable . Accordingly, the Assessing Officer was of the view that taxable remuneration to the extent of Rs.14,41,465/ remuneration to the extent of Rs.14,41,465/- had escaped assessment. During had escaped assessment. During reassessment proceedings, the a dings, the assessee accepted the mistake and ssessee accepted the mistake and the assessee filed a return in response to notice under section 148 of the Act and also paid the filed a return in response to notice under section 148 of the Act and filed a return in response to notice under section 148 of the Act and additional taxes and interest. However, the Assessing Officer treated the return additional taxes and interest. However, the Assessing Officer treated the return additional taxes and interest. However, the Assessing Officer treated the return of income filed in response to se of income filed in response to section 148 of the Act as invalid since it was filed ction 148 of the Act as invalid since it was filed beyond the prescribed time. The Assessing Officer held that the assessee had beyond the prescribed time. The Assessing Officer held that the assessee had beyond the prescribed time. The Assessing Officer held that the assessee had under-reported income in consequence of mi reported income in consequence of misreporting of income and by sreporting of income and by invoking sections 270A(8) and 270A(9) of the Act invoking sections 270A(8) and 270A(9) of the Act, levied penalty at 200% of penalty at 200% of the tax payable on such under under-reported income amounting to Rs.4,84,044/ reported income amounting to Rs.4,84,044/-.

Aggrieved by the penalty order, the assessee preferred an appeal before Aggrieved by the penalty order, the assessee preferred an appeal before Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(Appeals). Before the CIT(A), the assessee submitted that the assessee the CIT(Appeals). Before the CIT(A), the assessee submitted that the assessee the CIT(Appeals). Before the CIT(A), the assessee submitted that the assessee was a senior citizen carrying on share trading business and was also a partner in ior citizen carrying on share trading business and was also a partner in ior citizen carrying on share trading business and was also a partner in three partnership firms. The assessee submitted that the error was purely clerical three partnership firms. The assessee submitted that the error was purely clerical three partnership firms. The assessee submitted that the error was purely clerical and occurred because the previous Chartered Accountant had inadvertently and occurred because the previous Chartered Accountant had inadvertently and occurred because the previous Chartered Accountant had inadvertently interchanged the figures of interchanged the figures of remuneration and exempt share of profit. The remuneration and exempt share of profit. The assessee submitted that immediately upon receiving notice under section 148 of assessee submitted that immediately upon receiving notice under section 148 of assessee submitted that immediately upon receiving notice under section 148 of the Act. of the Act, the assessee realized the mistake and fully cooperated with the Act. of the Act, the assessee realized the mistake and fully cooperated with the Act. of the Act, the assessee realized the mistake and fully cooperated with the Department, accepted the variation without any the Department, accepted the variation without any dispute and paid the taxes dispute and paid the taxes and interest. However, the CIT(A) held that the wrong claim of exemption on and interest. However, the CIT(A) held that the wrong claim of exemption on and interest. However, the CIT(A) held that the wrong claim of exemption on taxable remuneration constituted misreporting of income and the explanation of taxable remuneration constituted misreporting of income and the explanation of taxable remuneration constituted misreporting of income and the explanation of clerical error by the assessee did not satisfy the requirement of section clerical error by the assessee did not satisfy the requirement of section clerical error by the assessee did not satisfy the requirement of section 270A(6)(a) of the Act. The CIT(A) further observed that the decisions relied 270A(6)(a) of the Act. The CIT(A) further observed that the decisions relied 270A(6)(a) of the Act. The CIT(A) further observed that the decisions relied upon by the assessee pertained to section 271(1)(c) of the Act and were not upon by the assessee pertained to section 271(1)(c) of the Act and were not upon by the assessee pertained to section 271(1)(c) of the Act and were not applicable in the context of section 270A. Accordingly, the penalty levied by the applicable in the context of section 270A. Accordingly, the penalty levied by the applicable in the context of section 270A. Accordingly, the penalty levied by the Assessing Officer under section 270A(8) of the Act was confirmed. nder section 270A(8) of the Act was confirmed. nder section 270A(8) of the Act was confirmed.

The assessee is in appeal before us against the order passed by The assessee is in appeal before us against the order passed by The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. We have heard the rival contentions and perused the material on record. We have heard the rival contentions and perused the material on record. We find that the penalty in the present case has been levied merely because We find that the penalty in the present case has been levied merely because We find that the penalty in the present case has been levied merely because while filing the return of income, the figures relating to remuneration from while filing the return of income, the figures relating to remuneration from while filing the return of income, the figures relating to remuneration from partnership firms and share of partnership firms and share of profit exempt under section 10(2A) were profit exempt under section 10(2A) were interchanged. It is an undisputed fact that both amounts interchanged. It is an undisputed fact that both amounts were duly reflected in duly reflected in the books of account of the partnership firms and were available on record. the books of account of the partnership firms and were available on record. the books of account of the partnership firms and were available on record.

At the outset, we find that there is evidently no concealment of income or At the outset, we find that there is evidently no concealment of income At the outset, we find that there is evidently no concealment of income misrepresentation of facts on the part of the assessee. There is also no allegation misrepresentation of facts on the part of the assessee. There is also no allegation misrepresentation of facts on the part of the assessee. There is also no allegation that the assessee created false evidence, recorded fictitious entries, suppressed that the assessee created false evidence, recorded fictitious entries, suppressed that the assessee created false evidence, recorded fictitious entries, suppressed receipts or made any claim which was not supported by documents. On the receipts or made any claim which was not supported by documents. On the receipts or made any claim which was not supported by documents. On the contrary, the facts show a strong probability of human error, particularly when facts show a strong probability of human error, particularly when facts show a strong probability of human error, particularly when both figures had been duly disclosed and only their respective heads were duly disclosed and only their respective heads were duly disclosed and only their respective heads were interchanged. Such a mistake, by itself, cannot automatically lead to an interchanged. Such a mistake, by itself, cannot automatically lead to an interchanged. Such a mistake, by itself, cannot automatically lead to an inference of misreporting of income contemp inference of misreporting of income contemplated under section 270A(9) of the lated under section 270A(9) of the Act. It is relevant to reproduce section 270A(6)(a) of the Act, which reads as It is relevant to reproduce section 270A(6)(a) of the Act, which reads as It is relevant to reproduce section 270A(6)(a) of the Act, which reads as under:-

The above provision recognizes that every addition made in assessment The above provision recognizes that every addition made in assessment The above provision recognizes that every addition made in assessment does not necessarily result in levy of penalty. The Legislature has consciously does not necessarily result in levy of penalty. The Legislature has consciously does not necessarily result in levy of penalty. The Legislature has consciously carved out an exception where the assessee furnishes a bona fide explanation carved out an exception where the assessee furnishes a bona fide explanation carved out an exception where the assessee furnishes a bona fide explanation and has disclosed all material facts. Therefore, before proceeding to invoke as disclosed all material facts. Therefore, before proceeding to invoke as disclosed all material facts. Therefore, before proceeding to invoke section 270A(8) of the Act mechanically and treating the case as one involving section 270A(8) of the Act mechanically and treating the case as one involving section 270A(8) of the Act mechanically and treating the case as one involving misreporting under section 270A(9) of the Act, the Assessing Officer was misreporting under section 270A(9) of the Act, the Assessing Officer was misreporting under section 270A(9) of the Act, the Assessing Officer was expected to examine whether the expected to examine whether the assessee's case was covered by the exception assessee's case was covered by the exception provided under section 270A(6)(a). provided under section 270A(6)(a).

In the instant case, the assessee had consistently explained that the In the instant case, the assessee had consistently explained that the In the instant case, the assessee had consistently explained that the incorrect disclosure arose because of inadvertent interchange of the figures by incorrect disclosure arose because of inadvertent interchange of the figures by incorrect disclosure arose because of inadvertent interchange of the figures by the previous Chartered Accountant. The explanation has remained consistent Accountant. The explanation has remained consistent Accountant. The explanation has remained consistent throughout.

We further find We further find that section 270A(9) of the Act that section 270A(9) of the Act specifies six circumstances constituting misreporting of income, namely misrepresentation or circumstances constituting misreporting of income, namely misrepresentation or circumstances constituting misreporting of income, namely misrepresentation or suppression of facts, failure to record invest suppression of facts, failure to record investments, claim of expenditure ments, claim of expenditure unsupported by evidence, recording of false entries, failure to record receipts unsupported by evidence, recording of false entries, failure to record receipts unsupported by evidence, recording of false entries, failure to record receipts and failure to report international transactions. None of these circumstances are and failure to report international transactions. None of these circumstances are and failure to report international transactions. None of these circumstances are shown to exist in the present case. There is no finding by the Assessing Officer shown to exist in the present case. There is no finding by the Ass shown to exist in the present case. There is no finding by the Ass that the assessee suppressed any material fact or deliberately made a false claim. that the assessee suppressed any material fact or deliberately made a false claim. that the assessee suppressed any material fact or deliberately made a false claim. The Assessing Officer has merely proceeded on the basis that since taxable The Assessing Officer has merely proceeded on the basis that since taxable The Assessing Officer has merely proceeded on the basis that since taxable remuneration was shown under the exempt head, the case automatically falls remuneration was shown under the exempt head, the case automatically falls remuneration was shown under the exempt head, the case automatically falls under section 270A(8) of the Act of the Act. Such an approach, in our considered opinion, . Such an approach, in our considered opinion, is contrary to the scheme of section 270A of the Act. is contrary to the scheme of section 270A of the Act.

The Assessing Officer is expected to adopt a judicious and balanced The Assessing Officer is expected to adopt a judicious and balanced The Assessing Officer is expected to adopt a judicious and balanced approach while exercising the power to levy penalty and no approach while exercising the power to levy penalty and not proceed on the t proceed on the assumption that every addition necessarily warrants penal consequences. The assumption that every addition necessarily warrants penal consequences. The assumption that every addition necessarily warrants penal consequences. The objective of section 270A of the Act is to penalize deliberate and culpable objective of section 270A of the Act is to penalize deliberate and culpable objective of section 270A of the Act is to penalize deliberate and culpable conduct and not to punish genuine human errors. Tax administration cannot be conduct and not to punish genuine human errors. Tax administration cannot be conduct and not to punish genuine human errors. Tax administration cannot be reduced to a mechanical exercise where bona fide mistakes are equated with acts a mechanical exercise where bona fide mistakes are equated with acts a mechanical exercise where bona fide mistakes are equated with acts of concealment or misrepresentation. of concealment or misrepresentation.

In Price Waterhouse Coopers (P.) Ltd. v. CIT (2012) 25 taxmann.com Price Waterhouse Coopers (P.) Ltd. v. CIT (2012) 25 taxmann.com Price Waterhouse Coopers (P.) Ltd. v. CIT (2012) 25 taxmann.com 400 (SC) : 348 ITR 306 (SC) 400 (SC) : 348 ITR 306 (SC), the Hon'ble Supreme Court held that where the , the Hon'ble Supreme Court held that where the assessee had filed the tax audit report along with the return and the report itself sessee had filed the tax audit report along with the return and the report itself sessee had filed the tax audit report along with the return and the report itself specifically disclosed that the provision for gratuity was not allowable under specifically disclosed that the provision for gratuity was not allowable under specifically disclosed that the provision for gratuity was not allowable under section 40A(7) of the Act, but due to an inadvertent and bona fide error the said section 40A(7) of the Act, but due to an inadvertent and bona fide error the said section 40A(7) of the Act, but due to an inadvertent and bona fide error the said amount was not added back while computing total income, no penalty could be t added back while computing total income, no penalty could be t added back while computing total income, no penalty could be levied under section 271(1)(c). The Court observed that the contents of the tax levied under section 271(1)(c). The Court observed that the contents of the tax levied under section 271(1)(c). The Court observed that the contents of the tax audit report clearly demonstrated that there was neither concealment of income audit report clearly demonstrated that there was neither concealment of income audit report clearly demonstrated that there was neither concealment of income nor furnishing of inaccurate parti nor furnishing of inaccurate particulars and that the omission was merely a culars and that the omission was merely a human error to which everyone is prone. It was further held that the calibre and human error to which everyone is prone. It was further held that the calibre and human error to which everyone is prone. It was further held that the calibre and expertise of the assessee have little relevance in determining whether an expertise of the assessee have little relevance in determining whether an expertise of the assessee have little relevance in determining whether an inadvertent mistake has occurred and, in the absence of any inadvertent mistake has occurred and, in the absence of any intention to conceal intention to conceal income or furnish inaccurate particulars, imposition of penalty was not justified.. income or furnish inaccurate particulars, imposition of penalty was not justified.. income or furnish inaccurate particulars, imposition of penalty was not justified.. Similarly, in CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158) CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158), the CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158) Hon'ble Supreme Court held that merely because a claim made by the assessee Hon'ble Supreme Court held that merely because a claim made by the assessee Hon'ble Supreme Court held that merely because a claim made by the assessee is not accepted, it cannot ipso facto lead to levy of penalty. These principles, s not accepted, it cannot ipso facto lead to levy of penalty. These principles, s not accepted, it cannot ipso facto lead to levy of penalty. These principles, though laid down in the context of section 271(1)(c), continue to have though laid down in the context of section 271(1)(c), continue to have though laid down in the context of section 271(1)(c), continue to have persuasive value while interpreting section 270A(6)(a), which itself embodies persuasive value while interpreting section 270A(6)(a), which itself embodies persuasive value while interpreting section 270A(6)(a), which itself embodies the concept of a bona fide the concept of a bona fide explanation.

In our considered view, the Assessing Officer ought to have adopted a In our considered view, the Assessing Officer ought to have adopted a In our considered view, the Assessing Officer ought to have adopted a more judicious approach and examined the explanation furnished by the more judicious approach and examined the explanation furnished by the more judicious approach and examined the explanation furnished by the assessee in the light of section 270A(6)(a) of the Act, instead of mechanically assessee in the light of section 270A(6)(a) of the Act, instead of mechanically assessee in the light of section 270A(6)(a) of the Act, instead of mechanically invoking sections 270A(8) and 270A(9). On the facts of the present case, where 270A(8) and 270A(9). On the facts of the present case, where 270A(8) and 270A(9). On the facts of the present case, where both figures were duly disclosed and the error was only one of interchange in both figures were duly disclosed and the error was only one of interchange in both figures were duly disclosed and the error was only one of interchange in classification, there is evidently a probability of human error rather than any classification, there is evidently a probability of human error rather than any classification, there is evidently a probability of human error rather than any intention to conceal or misrepresent intention to conceal or misrepresent income. Consequently, we are of the income. Consequently, we are of the considered view that the conditions prescribed under section 270A(9) of the Act considered view that the conditions prescribed under section 270A(9) of the Act considered view that the conditions prescribed under section 270A(9) of the Act are not satisfied and the case falls within the exception provided under section are not satisfied and the case falls within the exception provided under section are not satisfied and the case falls within the exception provided under section 270A(6)(a) of the Act.

Accordingly, we hold that the Accordingly, we hold that the Assessing Officer was not justified in Assessing Officer was not justified in invoking section 270A(8) of the Act and levying penalty at 200% of the tax invoking section 270A(8) of the Act and levying penalty at 200% of the tax invoking section 270A(8) of the Act and levying penalty at 200% of the tax payable on under-reported income. Accordingly, the penalty is directed to be reported income. Accordingly, the penalty is directed to be reported income. Accordingly, the penalty is directed to be deleted.

In the result the appeal filed by the assessee In the result the appeal filed by the assessee is allowed.