HARSHAD SEVANTILAL SHAH,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 25(2), MUMBAI

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ITA 6473/MUM/2017Status: DisposedITAT Mumbai25 April 2019AY 2013-144 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee acted under a bona fide belief due to the auditor's certification and that the assessee's conduct was not contumacious. Therefore, the levy of penalty was not justified.

What were the facts?

The assessee booked a loss on the sale of a car in its profit and loss account, which was disallowed by the Assessing Officer as a capital item. The assessee argued that they relied on the auditor's report, which certified the entry without pointing out any error. The authorities below did not accept this plea.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee relied on the auditor's report for a disputed entry, and whether such reliance constitutes a bona fide belief.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI

Before: Shri Shamim Yahya & Shri Ravish Soodand

For Appellant: Shri Manoj Kumar Singh
Hearing: 23/04/2019

"नधा"रती क" ओर से / Assessee by NONE Shri Manoj Kumar Singh राज"व क" ओर से / Revenue by सुनवाई क" तार"ख / Date of Hearing : 23/04/2019 25/04/2019 आदेश क" तार"ख /Date of Order: आदेश / O R D E R

Per Shamim Yahya, Accountant Member

1.

This appeal by the assessee is directed against order of learned CIT(A)-37, dated 21/08/2017 and pertains to Assessment Year 2013-14. The assessee in this case is aggrieved by the Ld. CIT(A), sustaining the levy of penalty u/s 271(1)(c) of the Act amounting to Rs.1,74,730/-. The grounds raised

are as under:- “1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal)-37 Mumbai erred in confirming the penalty order u/s.271(i)(c) dated 29.09.2016 and failed to appreciate that there is no evasion of tax on sale of car as the appellant has neither concealed the income nor furnished inaccurate particulars of income in respect of sale of car.

2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal)-37 Mumbai failed to appreciate the judgments of the Apex Court in the case of Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 in which the Apex Court has held that "by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income".

3. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal)-37 Mumbai failed to appreciate the judgments of the Apex Court in the case of Price Waterhouse Coopers Pvt. Ltd. 348 ITR 306 Supreme Court, in which the Apex Court unambiguously held that the assessee had committed an inadvertent and bonafide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars and hence the imposition of penalty is not justified.

2.

The brief facts of the case leading to the levy of penalty is that assessee is an individual. The assessee had booked the loss on sale of car in the profit and loss account. This was disallowed by the Assessing Officer on the ground that the item was capital and hence should not have been booked in the profit & loss account. Penalty was also initiated. In this regard, the assessee submission was that he had relied upon the audit report of the auditor. It was submitted that in the tax audit report the auditor has duly certified the same and had not pointed out that error to the assessee. The assessee submission is that he shall not be visited with the rigours of penalty as he was under a bona-fide belief of the correctness of the entry as no defect was pointed out by his auditor. The submissions were not accepted by the authorities below.

3.

Up on careful consideration of the facts in this regard we note that the penalty in this regard has been levied with reference to booking of loss on sale of car to the profit and loss account. The assessee's plea is that he was under the bona-fide belief that it's treatment is correct inasmuch as the auditor has duly certified the same and has not pointed out any defect. In our considered opinion, the submissions of the assessee have considerable cogency. The conduct of the assessee cannot be said to be contumacious so as to warrant levy of penalty under section 271(1)(c) of the Act.

4.

In the order, Assessing Officer himself has noted that the auditor has not pointed out anything about the wrong entry of booking of loss of car sale in the profit and loss account. Hence in our considered opinion, the assessee should not be subjected to the levy of penalty for fault of the consultant/auditor.

Accordingly, we set aside the order's of authorities below and delete the levy of penalty.

5.

In the result appeal filed by the assessee stands allowed

Order pronounced in the Open Court on 25/04/2019. (Ravish Sood) (Shamim Yahya) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER मुंबई Mumbai; "दनांक Dated : 25/04/2019 f{x~{tÜ? P.S/."न.स.

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