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Income Tax Appellate Tribunal, MUMBAI “F” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI JASON P. BOAZ.
ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-22, Mumbai, dated 23.07.2013 for A.Y. 2009-10 on following grounds:
“A) Levy of penalty u/s. 271(1)( c) - Rs. 24,70,459/- A.Y. 09-10 [Vidhi Builders Pvt. Ltd. vs. ACIT) Page 2 1) The learned Commissioner of Income Tax (Appeals) - 22, Mumbai [CIT(A)] erred on facts and in law in confirming the penalty levied by the Assistant Commissioner of Income Tax - 10(2), Mumbai (AO) u/s. 271(1)( c) of Rs. 24,70,459/- by holding that the appellant had not only filed inaccurate particulars of income but also concealed its income.
2) The learned CIT(A) and the AO failed to appreciate that the appellant had not furnished inaccurate particulars of income which would warrant the levy of penalty u/s. 271(1)( c) of Rs. 24,70,459/-.
3) The appellant prays that the penalty of Rs. 24,70,459/- levied by the AO and confirmed by the CIT(A) may be deleted.”
Assessee is engaged in the business of construction/land development property and allied activities. Assessing Officer passed order u/s.143(3) of the Act whereby assessing total income of Rs.1,09,05,480/- instead of declared income of Rs.43,64,100/-. Assessing Officer in quantum proceedings observed that in computation of income, assessee has claimed property tax expenditure of Rs.24,22,731/- under head ‘income from house property’. This amount was debited to P&L account. While computing business income instead of adding the amount of property tax expenditure, same was again deducted for arriving at business income. Thus, the deduction for property tax got claimed twice amounting to Rs.48,45,462/- in arriving at business income.
2.1 Assessing Officer called for evidence of property tax paid. Copies of receipt were filed by asessee. As per these receipts a sum of Rs.14,00,000/- was paid during financial year and the balance amount of Rs.10,22,731/- was paid in subsequent A.Y. 09-10 [Vidhi Builders Pvt. Ltd. vs. ACIT) Page 3 year but before filing of return. Assessing Officer, however, did not allow any deduction for property tax for lack of evidences. Assessing Officer made an addition of property tax which was claimed twice while computing income. He disallowed deduction for lack of evidence while computing income from property. Mistake committed by assessee was accepted at very inception stage. However, in light of above facts, proceedings u/s.271(1)(c) of the Act were initiated. In this regard, stand of assessee has been that Auditor had committed error in computation of income which resulted in double deduction of property tax of Rs.24,22,731/- while computing business income. Assessing Officer, after rejecting the contention of assessee, levied penalty in question. Same was confirmed by CIT(A).
2.2 First plank argument of assessee is that this mistake has been committed by Auditor of assessee and it was depending on him as far as account part is concern. According to assessee, entries regarding Municipal Tax were made in accounts as per amount paid during the year and paid for the year before filing of return. According to assessee, nothing was hidden in this case and there was no cover up. While computing income inadvertent mistake occurred as discussed above. In this background, contention of assessee is that this mistake is attributable to the professionals on which assessee placed its dependence. The moment Assessing Officer noticed that assessee company had committed mistake, assessee accepted the same. Assessing Officer could have suggested for rectification of mistake u/s.154 of the Act because in technical A.Y. 09-10 [Vidhi Builders Pvt. Ltd. vs. ACIT) Page 4 point, Assessing Officer could have advised correct path to be adopted. We find that Hon’ble Supreme Court in case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT reported in 348 ITR 306 (SC) held as under: “In this case the assessee has filed the return of income and claimed the deduction of provision for payment of gratuity. In the tax audit report of the assessee, the auditor had stated that this deduction was not allowable. Still it was deducted while computing the income. The A.O initiated the penalty proceeding for furnishing inaccurate particulars. The CIT (A) confirmed the penalty. The Tribunal also confirmed the penalty on the ground that the assessee has made mistake, which could be described as a silly mistake, but since the assessee was a high-caliber and competent organization, it was not expected to make mistake. The Hon'ble Calcutta High Court also confirmed the penalty on the same ground of tribunal order.
When the matter went before the Hon'ble Supreme Court the assessee company filed an affidavit to explain how the mistake occurred. It was explained in the affidavit that the return was prepared by a person who was not a chartered accountant. The return was signed by the Director who did not notice the discrepancy. The Hon'ble Supreme Court have given the findings on the facts that inspite the assessee being a reputed firm and had great expertise available with it, the assessee could make silly mistake. The above mistake was bona fide and inadvertent error of the assessee while filing its return. This error has been described by the apex court as a human error which all is prone to make. The caliber and expertise can also make inadvertent error and neither there was concealment of income nor furnishing inaccurate particulars. In above the case the apex court cancelled the levy of penalty. The following extract of this judgment in this regards is very relevant; "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 its that all that has happened in the present case is that through a bona fide A.Y. 09-10 [Vidhi Builders Pvt. Ltd. vs. ACIT) Page 5 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.” 2.3 In case before us, assessee has taken services of Chartered Accountant for computing income and filing return. Assessee company is small company which does not have qualified Accountants on its roll. It fully depended upon the service of Chartered Accountant. While computing income Chartered Accountant has done inadvertent bonafide mistake. Chartered Accountant has also filed affidavit inter alia stating that all services provided by him during year. Assessee has filed all details of property tax in question before Assessing Officer. It was a purely bonafide human error.
2.4 We find that Hon’ble Calcutta High Court in case of Udayan Mukherjee vs. CIT reported at 291 ITR 318 (Cal), wherein assessee made mistake in calculation of indexation. Calculation was made on the basis of particulars furnished. On the basis of particulars, Assessing Officer has arrived at correct indexation. In case before us, all particulars have been A.Y. 09-10 [Vidhi Builders Pvt. Ltd. vs. ACIT) Page 6 filed before Assessing Officer. On the basis of particulars, only it was noticed that property tax was claimed twice while computing business income and property tax which was also claimed while computing the property income. As stated above, when the said mistake in question was brought to knowledge, assessee admitted and he did not carry the issue in quantum appeal. This shows that assessee committed bonafide error as discussed above. Error was also perpetuated by Chartered Accountant. Assessee has all along acted in bonafide manner. There is nothing on record to suggest any malafide error on part of assessee. Taking all facts and circumstances into consideration, penalty in question is directed to be deleted.
In the result, the appeal filed by assessee is allowed.
Pronounced in the open Court on this the 2nd day of September, 2016.
Sd/- Sd/- (JASON P. BOAZ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 02/09/2016 S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।