PRICEWATERHOUSECOOPERS PVT.LTD. vs. C.I.T-KOLKATA-I

C.A. No.-006924-006924 - 2012Supreme Court25 September 2012Bench: S.H. KAPADIA MADAN B. LOKUR9 pages
For Petitioner: B. VIJAYALAKSHMI MENONFor Respondent: B. V. BALARAM DAS
AI SummaryAllowed

What were the facts?

The assessee, Price Waterhouse Coopers Pvt. Ltd., is challenging a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2000-2001. The assessee filed its return of income and a tax audit report under Section 44AB. The tax audit report, in Form 3CD, explicitly stated that a provision for gratuity of Rs. 23,70,306 was not allowable under Section 40A(7). However, the assessee claimed a deduction for this amount in its return. The Assessing Officer completed the assessment under Section 143(3) without noticing this discrepancy. Subsequently, the Assessing Officer reopened the assessment under Section 148, citing income escapement due to the unadded provision. The assessee admitted a genuine mistake and filed a revised return, paid the tax and interest. Despite this, penalty proceedings under Section 271(1)(c) were initiated, leading to a penalty of Rs. 27,37,689. The Commissioner (Appeals) and the Income Tax Appellate Tribunal (Tribunal) upheld the penalty, though the Tribunal reduced it to 100% and acknowledged it as a 'silly mistake'. The Calcutta High Court upheld the penalty, finding that the assessee furnished inaccurate particulars.

What did the Supreme Court hold?

The Supreme Court allowed the appeal and set aside the order of the Calcutta High Court, holding that the imposition of penalty under Section 271(1)(c) was not justified. The Court found that the facts of the case were peculiar and unique. The assessee, a reputed firm, had indeed made a 'silly' mistake, as acknowledged by the Tribunal and the High Court. The fact that the Tax Audit Report, filed along with the return, unequivocally stated that the provision for gratuity was not allowable under Section 40A(7) indicated a computation error in the return, not concealment or furnishing of inaccurate particulars. The Court noted that this error was not only made by the assessee but also overlooked by the Assessing Officer. The Court concluded that there was no question of the assessee concealing its income or furnishing inaccurate particulars. It was a bona fide and inadvertent error, a human error, which did not warrant the imposition of penalty. The Court was satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. Therefore, the appeal was allowed, and the order of the Calcutta High Court was set aside.

What were the issues?

1. Whether the imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961, is justified when the assessee made a bona fide and inadvertent error in claiming a deduction for a provision for gratuity, which was clearly stated as not allowable in the accompanying tax audit report, and this error was also overlooked by the Assessing Officer during the initial assessment. Assessee's contentions: The assessee argued that the mistake was genuine and inadvertent, not a willful concealment or furnishing of inaccurate particulars. They relied on the fact that the tax audit report itself highlighted the non-allowability of the provision, indicating no intention to deceive. The assessee also pointed out that the Assessing Officer overlooked the discrepancy during the initial assessment. The assessee emphasized that the penalty under Section 271(1)(c) should not be levied for a human error, especially when the intention was not to evade tax. Revenue's contentions: The revenue contended that the assessee, being a reputed tax consultant, was expected to exercise a higher degree of diligence. The furnishing of inaccurate particulars, even if inadvertent, attracts the penalty under Section 271(1)(c). The High Court noted that Section 271(1)(c) uses 'either-or' and that wilful concealment is not essential for attracting civil liability, citing Supreme Court judgments on the matter.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40A(7),Section 143(3),Section 147,Section 148,Section 260-A,Section 139(6),Section 139(6A),Section 44AB

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6924 2012 [Arising out of S.L.P.(C) No.10700 of 2009] Price Waterhouse Coopers Pvt. Ltd. …..Appellant Versus Commissioner of Income Tax, Kolkata-I ....Respondents and Anr.

J U D G M E N T Madan

B. Lokur,

J.

1.

Leave granted.

2.

The assessee is aggrieved by a judgment and order dated 18.12.2008 passed by the High Court of Calcutta in ITA No.120 of 2006. By the impugned judgment, a penalty imposed on the assessee under Section 271(1)(c) of the Income Tax Act, 1961 was upheld, though the quantum was reduced. We are of the view that on the facts of the case the imposition was not justified.

3.

We are concerned with the assessment year 2000-2001. The assessee provides multi-disciplinary management consultancy services and has a worldwide reputation. It filed its return of income on 30.11.2000 under Section 139(6) read with 1

Page 2 JUDGMENT Section 139(6A) of the Income Tax Act (for short, ‘the Act’). As statutorily required by Section 139(6A) of the Act, the assessee also filed its tax audit rep

The order continues below.

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