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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ NEW DELHI
Before: SMT. DIVA SINGH & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This is an appeal filed by the assessee against the order of ld. CIT(A)XVI, New Delhi dated 07.12.2015 for the assessment year 2007-08 on the following grounds : “1. That the Commissioner of Income Tax (Appeals) [CIT(A)] erred in confirming the action of the assessing Officer in levying penalty of Rs.2,64,810 under section 271(1)(c) of the Income Tax Act, 1961 (‘the Act’) in respect of addition of Rs.7,86,721 made under section 68 in the reassessment order dated 07.02.2014 passed under section 147 of the Act. 1.1 That the CIT(A) erred on facts and in law in not appreciating that the penalty under section 271(1)(c) of the Act was not leviable qua the impugned addition made in the reassessment order inasmuch as (i) the reassessment order was illegal and beyond jurisdiction; (ii) addition made in the quantum proceedings was on account of inadvertent error in the return of income; (iii) all the facts material to the aforesaid claim were duly disclosed by the appellant during the course of assessment as well as reassessment proceedings. 1.2 That the CIT(A) erred on facts and in law in not appreciating that the penalty proceedings are independent of quantum proceedings and mere non-filing of appeal against the addition made in quantum proceedings cannot be the basis for levy of penalty under section 271(1)(c) of the Act.”
The above grounds of appeal are related to penalty of Rs.2,64,810/- confirmed by ld. CIT(A) u/s. 271(1)(c) in respect of addition of Rs.7,86,721/- made u/s. 68 of the Act in re-assessment order of the assessee.
3. The brief facts of the case are that the assessee filed its return of income electronically on 26.10.2007 declaring an income of Rs.3,87,506/-. The case was selected for scrutiny and assessment was completed u/s. 143(3) at an income of Rs.4,96,250/-. Subsequently, after recording reasons on 06.06.2012, notice u/s. 148 of the Act was issued to the assessee, in response to which the assessee stated that the return filed u/s. 139(1) may be treated as return filed in compliance to the notice u/s. 148 of the Act. The objections raised by assessee on validity of re-assessment proceedings were disposed of by the A.O. During the re-assessment proceedings, the AO noticed that at Sl. No. 43, page No. 8 of ITR-V -profit before tax (40-41-42) has been shown at Rs.3,87,506/- and at Sl. No. 47, profit after tax (43-44-45-46) has been shown at Rs.3,87,506/-, which is tallied with the gross total income shown in acknowledgement of IT Return generated through computer system. Similarly, at page No. 13 of the IT return, Part-B-TI-Computation of total income-Sl. No. 13, the aggregate income (11+12) is shown at Rs.3,87,506/- as income from profit and gains from business or profession. Same amount has been shown at page No. 16 – Schedule BP-computation of income from business or profession. At page No. 21, Schedule CYLA - Details of income after set off of current years losses- at Sl. No. ii-Business (including speculation profit), Rs.11,74,227/- is shown in column No. (1) as Income of current year. Similarly, at page 22, Schedule BFLA – Details of income after set off of brought forward losses of earlier years, in Sl. No. ii - Business (including speculation profit), Rs.11,74,227/- is shown in column No. (1), whereas the acknowledgement has been generated with gross total income of Rs.3,87,506/-. The Assessing Officer found the difference of Rs.7,86,721/- between the above schedule BFLA and the business income shown in the return of income. He, therefore, added the same back to the total income of the assessee u/s. 68 of the Act. The assessee instead of carrying the matter in appeal before the ld. CIT(A), surrendered the amount to buy peace of mind. The AO thereafter initiated penalty proceedings and imposed penalty u/s. 271(1)(c) of the IT Act for filing inaccurate particulars of income. Aggrieved by penalty order, the appellant preferred an appeal before the ld. CIT(A), who confirmed the order of the Assessing Officer observing as under : 4. Findings:- I have considered the submission of the assessee and the assessment order as well as the order imposing penalty u/s 271(1)(c). The Ld AR very vehemently argued that no satisfaction has been recorded by the Assessing Officer while initiating the penalty proceedings and then he went to Court in various judgments on the issue. However, on perusal of the order u/s 147/143(3) for Assessment year 2007-08 dated 28/08/2014, it It is seen on the last page the Assessing Officer has given a categorical finding as under:- "hence I am making addition of Rs. 7,86,721/- on agreed basis as undisclosed income u/s 1961 in the hands of the assessee for the year under consideration. As assessee has furnished inaccurate particulars of income. I am initiating penalty proceedings u/s 271(1)(c) of the Act 1961 separately" . From the observation above it can be gathered that the Assessing Officer was very clear in his mind while initiating the penalty proceedings. He has given a categorically finding that he was initiating penalty proceeding as the assessee has furnished inaccurate particulars of its income. The main thrust of argument of the assessee before Assessing Officer was that due to some inadvertent software error an income of Rs.7,86,721/- had remained untaxed. Now the task of the assessee was to establish that it was in an inadvertent error and not intentional effort to reduce its tax liability. The assessee has failed to establish that before me during appellate proceeding also, the Ld AR has filed a plethora of citations which are not, to my mind, relevant considering facts of this case. The Ld AR has raised hypothetical issues in his submission and then went on to answer them that the penalty and assessment proceedings are separate, that it was an-inadvertent error which had crept in the software that the additions made in the re-assessment order were not warranted (i.e. in spite of the fact that assessee admitted that an error occurred on his part while filing the income tax return, I have carefully considered of these issues. They make for a good presentation, however are not relevant in the present case. Since the Ld AR has failed to furnish the satisfactory explanation for furnishing inaccurate particulars of his income before Assessing Officer as well as before me, the penalty imposed by the AO u/s 271(1 )(c) is confirmed.”
4. Against the order of ld. CIT(A), the assessee is in appeal before the ITAT.
The ld. AR submitted that the assessee has correctly calculated its income and filed the return of income. It was submitted that due to introduction of new method of filing the return, i.e., electronically, the mistake as pointed out by the authorities below crept due to software error. However, the assessee has shown correct income in the return of income. The return has been filed after getting the account books audited by the Chartered Accountant and correct profit has been shown in the prescribed columns of the return. The computation part of the return is showing correct income as shown by the assessee. Schedule CYLA and BFLA are regarding set off of losses. It is not the income part. The assessee had no intention to file inaccurate particulars of income, but due to software error, a sum of Rs.11,74,227/- was wrongly taken in the above schedules by the software. The business of the assessee was closed and therefore, in order to purchase peace of mind, the amount was surrendered by the assessee. Such an admission should not be used for imposition of penalty.
On the other hand, the ld. DR relied on the orders of the lower authorities.
We have heard both the parties and perused the material available on record. The ld. AR submitted copy of ITR-V, which is a prescribed return form for the partnership firm. After careful examination of the return form, we find that the assessee has shown correct income in the operative part of the return of income. At page 7 of the Return-Part A-P&L: Profit and Loss account for the previous year 2006-07, at Sl. No. 43, profit before tax (40-41-42), and also at Sl. No. 47-profit after tax (43-44-45-46), amount of Rs.3,87,506/- has been shown which tallies with the income declared by the assessee. Page No. 13 of the return of income – Part-B-TI Computation of total income – Sl. No. 2(i) – Profit & gains from business other than speculative business, is also showing the amount of Rs.3,87,506 and Sl. No. 11-Total income (9-10) is also showing Rs.3,87,506/-. Schedule BP: Computation of income from business or profession at the end of page No. 17 of return of income, income chargeable under the head profit and gains (A37+B41) is also showing Rs.3,87,506/-.
The appellant has shown correct business income in their return of income. He has not filed any inaccurate particulars of income because in the computation part, the income has been shown correctly and no such ambiguity is pointed out therein. Schedule CYLA and BFLA is with respect to the adjustment of income as per provisions of the IT Act. The assessee has also filed return for the assessment year 2008-09 in which also, the assessee has not taken any benefit of the above amount of difference of Rs.7,86,721/-. In presence of these facts, in our considered opinion, the contention of the assessee cannot be straightway rejected that such error may occur due to software problem. We, therefore, find that the assessee is not liable for penalty for furnishing inaccurate particulars of income in the peculiar facts and circumstances of the present case. As a result, the appeal of the assessee is found to have merit and is to be allowed.