M.TAMILSELVAN,CHENNAI vs. ITO, CHENNAI

Shri T. Vasudevan, the Ld. counsel for the assessee submitted that the assessee has sold a landed property for ₹65 lakhs. However, by oversight, the sale of property was not declared in the return filed by the assessee in the regular course. When the return was taken up for scrutiny, the assessee filed the revised computation including the profit on sale of land at ₹18,48,013/-. The Assessing Officer also accepted the revised computation filed by the assessee. No further addition was made by the Assessing Officer. Therefore according to the Ld. counsel, there was no concealment of any particulars of income. The omission in disclosing profit on sale of land to the extent of ₹18,48,013/- was inadvertent error. Therefore according to the Ld. counsel, there was no concealment of income. Hence, the Assessing Officer is not justified in levying penalty under Section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’). The Ld. counsel placed his reliance on the judgment of the Supreme Court in Price Waterhouse Coopers Pvt. Ltd. v CIT and another in [2012] 348 ITR 306 (SC).

On the contrary, Shri R. Duraipandian, the Ld. Departmental Representative submitted that the profit on sale of land was not declared by the assessee in the return filed by him. The Assessing Officer received Annual Information Report and the same was communicated to the assessee during the course of assessment proceeding. The assessee immediately accepted and filed revised computation including the profit on sale of the land to the extent of ₹18,48,013/-. According to the Ld. D.R., but for the Annual Information Report, the income would not have been brought for taxation. The Ld. D.R., further submitted that the assessee’s admission of profit on sale of the land by way of a revised computation before the Assessing Officer cannot be construed as voluntary disclosure. Therefore, it is obvious that the assessee has concealed part of his income. Therefore, the CIT (Appeals) has rightly confirmed the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act.

We have considered the rival submissions on either side and perused the material available on record. The profit on sale of the land to the extent of ₹18,48,013/- was not disclosed by the assessee in the course of filing the regular return of income. From the order of the lower authorities it appears, the return filed by the assessee was taken up for scrutiny and the Assessing Officer also had the benefit of going through the Annual Information Report said to be filed by the Sub-Registrar of the State Registration Department. The moment it was brought to the notice of the assessee about the non-declaration of the profit on sale of land, the assessee filed the revised computation of income including the profit on sale of the land to the extent of ₹18,48,013/-. The question arises for consideration is whether the assessee concealed any part of his income or furnished any inaccurate particulars of his income. We have carefully gone through the judgment of this Apex Court in the case of Price Waterhouse Coopers Pvt. Ltd. v CIT (supra).

In the case before the Apex Court, the assessee is a practicing Chartered Accountant Firm, claiming deduction under Section 40A(7) of the Act in respect of provision made for payment of gratuity. In fact, originally the assessment was completed under Section 143 (3) of the Act. Subsequently, the Assessing Officer reopened the assessment by issuing notice under Section 148 of the Act. Immediately after receiving notice under Section 148 of the Act, the assessee company realized that there was a mistake in claiming deduction under Section 40A(7) of the Act and informed the Assessing Officer that there was a genuine mistake or omission in claiming deduction under Section 40A(7) of the Act. The Assessing Officer after considering the explanation of the assessee, levied penalty under Section 271(1)(c) of the Act. The Apex Court after considering the explanation of the assessee found that all that happened was a bona fide and inadvertent error while submitting the return of income. The Apex Court further found that this can be described as human error which we all prone to make. The calibre and expertise of the assessee has little or nothing to do with inadvertent error. The absence of due care does not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income. In fact, the Apex Court observed as follows: “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 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. 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”

In the case before us also, during the course of assessment proceeding the Assessing Officer brought to the notice of the assessee about the Annual Information Report received by him. Immediately, the assessee realized the mistake and filed the revised return, admitting the profit on sale of land. Therefore, this Tribunal is of the considered opinion that it is only an inadvertent error on the part of the assessee, as observed by the Apex Court. This kind of error may happen to any. The calibre and expertise of the assessee has nothing to do with an inadvertent error. Therefore, this Tribunal is of the considered opinion that the absence of due care in disclosing the income on sale of land, does not in any way mean that the assessee has concealed its income or furnished any inaccurate particulars of his income. Therefore levying of penalty under Section 271(1)(c) of the Act is not justified. Accordingly, the orders of the lower authorities are set aside and the penalty levied by the Assessing Officer is deleted.

In the result, the appeal of the assessee stands allowed.