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Income Tax Appellate Tribunal, : ‘D’ BENCH, KOLKATA
Before: Shri M. Balaganesh & Shri S.S.Viswanethra Ravi
Shri S.S.Viswanethra Ravi, JM:
The above appeal by the Assessee is against the order dt. 05- 07-2016 of the CIT-A, 13, Kolkata for the A.Y 2009-10, wherein he confirmed the impugned penalty of Rs.33,79,927/- imposed u/s. 271(1) ( c) of the Act by the AO.
The only issue is to be decided as to whether the CIT-A justified in confirmed the impugned penalty imposed u/s. 271(1)( c ) of the Act in the facts and circumstances of the case.
Brief facts of the case are that the assessee is an individual and engaged in partnership firm under the name and style M/s. Golden Trust Financial Services. The assessee derives his income from salary ( pension annuity from LIC and gratuity), from house property and from other sources. According to AO, the assessee disclosed ‘short term capital loss (Rs.7,01,46,528/-)’ instead of ‘long term capital loss (Rs. 2,85,67,594/-)’ and ‘long term capital loss’ instead of ‘short term capital loss’. In explanation before the AO, the assessee stated in penalty proceedings that due to an inadvertent mistake by his accountant long term capital loss has been reduced and short term
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capital loss has been inflated. The same were rectified by true figures of long term capital loss and short capital loss in the revised return of income and submitted that there is no concealment of income in furnishing inaccurate particulars of income and prayed to drop the penalty proceedings initiated u/s. 271(1) (c ) of the Act. According to AO, the assessee failed to furnish satisfactory explanation regarding the above, the AO decided to impose penalty @ 100% i.e. at Rs.33,79,927/-.
The assessee preferred an appeal before the CIT-A. The CIT-A did not consider the submissions of assessee that there was bonafide mistake which committed by the accountant at the time of computing the long term capital gain and short term capital gain. Before him in support of his contention and claim the assessee referred to the judgment of the Hon’ble Supreme Court in the Price Waterhouse Coopers P.Ltd Vs. CIT reported in (2012) 348 ITR 306(SC). CIT-A as such confirmed the impugned penalty by relying on various case laws.
Before us the ld. AR submits that details of short term capital loss and long term capital loss were filed during original assessment proceedings, which was accepted by the AO u/s. 143(3) of the Act. The mistake regarding short term capital loss/gain in place of long term capital loss/gain and long term capital loss/gain in place of short term capital loss/gain committed by the accountant was detected by the AO during re-assessment proceedings u/s. 147 of the Act. The ld. AR argued that there was a bonafide mistake committed by the accountant, which was rectified during the re-assessment proceedings u/s. 147 of the Act and AO accepted the same u/s. 147 of the Act proceedings. By placing his reliance on the decision of Hon’ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd Vs. CIT reported in (2012) 348 ITR 306(SC), the ld.AR of the assessee argued that in similar facts and circumstances the Hon’ble
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Supreme Court in the case of supra held that an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars and that can be described as human error and referred to page-45 of the paper book and prayed to allow the grounds of appeal raised by the assessee. He further placed his reliance on an order of Co-ordinate Bench of ITAT, Lucknow in the case of Pankaj Kr. Gupta and referred to para 9 of the said order and submited the decision of the Hon’ble Supreme Court in the case of supra was considered.
On the other hand, the ld. DR has relied on the orders of the AO & CIT-A.
Heard the rival parties and perused the record. We find that the facts and circumstances of the present case are identical to the facts and circumstances of the case in the case of supra of the Hon’ble Supreme Court, wherein it was contended that there was a bonafide inadvertent error was occurred during the submission of its return in adding the provision of gratuity to its total income and the same was rectified by an affidavit stating that due to some confusion because the person, who prepares return of income was unaware of the fact that the services of some employees had been taken over upon acquisition of a business, but they are not members of an approved gratuity fund unlike other employees of the assessee. We find that considering the submissions made through an affidavit of the Hon’ble Supreme Court has rightly pointed out by the ld. AR that it was a mistake, which can be prescribed as an human error, but does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. In the present case, we find that the AO has accepted the claim of assessee in the original assessment proceeding u/s. 143(3) of the Act. Thereafter, the said mistake stated to have been occurred due to error committed by the accountant found detected during the course of preparation of
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revised return of income filed in response to notice issued u/s. 148 of the Act. We find that the assessee admitted the fact of committing the said mistake by his accountant and immediately rectified the same and which was accepted by the AO u/s. 147 re-assessment proceedings. We further find that the Co-ordinate Bench ITAT Lucknow in the case of supra has also considered the said decision of the Hon’ble Supreme Court and held that mistake in filing return of income, which was rectified thereafter in the re-assessment proceedings cannot be brought to the ambit of provisions of section 271(1) ( c) of the Act. We find force in the submissions of assessee. The case laws as relied on by the assessee before us are relevant to the present facts of the case. We further find that the facts and circumstances of the present case are similar and identical to that of the case supra of the Hon’ble Supreme Court. The Hon’ble Supreme Court and the Co-ordinate Bench in the cases of supra discussed the issue analyzing facts and circumstances. Relevant portion of the Hon’ble Supreme Court is reproduced herein below:- 14. During the course of hearing this appeal against the judgment and order of the Calcutta High Court, we had required the assessee to explain to us how and why the mistake was committed. 15. The assessee has filed an affidavit dated 14th September, 2012 in which it is stated that the assessee is engaged in Multidisciplinary Management Consulting Services and in the relevant year it employed around 1000 employees. It has a separate accounts department which maintains day to day accounts, pay rolls etc. It is stated in the affidavit that perhaps there was some confusion because the person preparing the return was unaware of the fact that the services of some employees had been taken over upon acquisition of a business, but they were not members of an approved gratuity fund unlike other employees of the assessee. Under these circumstances, the tax return was finalized and filled in by a named person who was not a Chartered Accountant and was a common resource. 16. It is further stated in the affidavit that the return was signed by a director of the assessee who proceeded on the basis that the return was correctly drawn up and so did not notice the discrepancy between the Tax Audit Report and the return of income. 17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court. 18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any
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inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can 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, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are 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. “
Respectfully following the above, we are of the view that the CIT-A was not justified in confirming the penalty imposed by the AO u/s. 271(1)(c) of the Act and, therefore, Rs. 33,79,927/- is cancelled. The ground raised by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 19-06-2018
Sd/- Sd/- M. Balaganesh S.S. Viswanethra Ravi Accountant Member Judicial Member
Dated :19-06-2018
**PP(Sr.P.S.): Copy of the order forwarded to: 1. Appellant/Assessee: Shri Bhabesh Majumdar 41 Ballygunge Circular Road, Kolkata-700 019. 2 Respondent/Department: Assistant Commissioner of Income, Circle- 45, Kolkata. 3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order Sr.P.S,H.O.O, ITAT.Kol