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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMIT SHUKLA
आदेश ORDER अिमत शु�ला, �या. स.: PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the revenue against impugned order dated 03.01.2011 passed by CIT(A)-20, Mumbai, in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2004-05 on the following grounds :- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that penalty u/s 271(1)(c) should not be imposed in relation to the addition of Rs. 32,50,460/- which represents prior period income (and not prior period expenditure as noted in the order of the CIT(A)) not credited to P&L Account and, therefore, not 2 M/s Win Cable and Datacom Pvt be excluded from the total income as claimed by the assessee during the assessment proceedings.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in cancelling the penalty u/s 271(1)(c) in relation to the addition of Rs. 32,60,460/- which represents prior period income not to be excluded in the computation of total income, as conceded by the assessee himself who had not offered any explanation in this regard during the assessment proceedings despite sufficient opportunities given, thereby distinguishing this case from the facts in the case of Atul Mohan Bindal [317 ITR 1(SC)] and the case of Reliance Petro Products Pvt Ltd [322 ITR 158 (SC)] relied on by the CIT(A)”.
2. The brief facts qua the issue involved is that, the AO on perusal of para 22(b) of Tax Audit Report noted that the assessee had shown ‘prior period income’ of Rs. 32,60,460/- and after adjusting prior period expenses of Rs. 2,77,293/-, net prior period income was shown at Rs. 29,83,168/-. However, the assessee in the profit and loss account has taken the figure of ‘net loss’ before the adjustment, that is, adding up of prior period income of Rs. 29,83,168/- and thereby assessee has enhanced the loss by the said amount, which is not correct. Accordingly, the AO proceeded to disallow prior period income of Rs. 32,60,460/-. Against the said action of the AO, no appeal was preferred as the assessee realized that it was arithmetical/clerical mistake. The AO has levied the penalty on the ground that no appeal has been filed by the assessee and if the case had not been selected for scrutiny, then assessee would have benefitted by such a claim.
The Ld. CIT(A) deleted the penalty mainly on the ground that, only the deduction was inadmissible and the expenses in respect of which deduction was claimed were not found to be inaccurate or false.
3 M/s Win Cable and Datacom Pvt
Before us, the Ld. DR submitted that the finding of the CIT(A) cannot be upheld as the issue here is, whether the assessee should have added/credited the prior period income to the profit and loss account and then should have reduced from computation of total income; and in this manner, the assessee has enhanced the ‘net loss’ in the computation of income, which amounts to furnishing of inaccurate particulars and, therefore, penalty has rightly been levied by the AO.
On the other hand, Ld. Counsel, submitted that it was purely an arithmetical mistake, because assessee in the profit and loss account and in the Audited Report has duly reported the prior period income and prior period expenses. The net loss, as per profit and loss account was Rs. 13,45,62,226/-. The assessee had showed prior period adjustment on net basis at Rs. 29,83,168/- in the P&L Account. While computing the total income, the assessee has deducted the reversal of income of earlier years of Rs. 29,83,167/- which should have been first credited to the P&L Account and then should have been reduced from the income, instead the assessee had straight away claimed in the computation of income. This was purely an arithmetical mistake and not furnishing of any inaccurate particulars.
After considering the aforesaid submissions and also the relevant material placed on record, we find that in the Audit Report, the assessee has duly reported the prior period income on account of reversal of expenses credited to the Profit & Loss Account of Rs. 32,60,460/-. After reducing the expenses of earlier years of Rs. 2,77,293/-, the net prior period income was shown at Rs. 29,83,168/-. In the profit and loss account, the assessee had shown net loss as per profit and loss account at Rs. 13,45,62,226/-. Thereafter, the assessee has credited Rs. 29,83,168/- as net of prior period adjustment. However, in the computation of income, the assessee has taken the figure of net
4 M/s Win Cable and Datacom Pvt Rs. 13,44,62,226/- and from there he had deducted Rs. 29,83,167/-, instead the assessee should have taken the net loss figure as per the final Profit & Loss Account which also included the sum of Rs. 29,83,168/-. Thus, there was some kind of arithmetical mistake and it is not a case of furnishing of any inaccurate particulars so as to levy penalty for concealment of income u/s 271(1)(c). Thus, we agree with the conclusion of the CIT(A) that no penalty is warranted on such a mistake in computation of income and not in Profit & Loss Account. Accordingly, ground raised by the revenue is treated as dismissed.