2019 (3) TMI 552 - AT - Income Tax

Penalty u/s 271(1)(c) - inadvertent and bona fide mistake while filing the return - non disclosure of capital gain - HELD THAT - In the case of Price Waterhouse Coopers Pvt. Ltd vs. CIT 2012 (9) TMI 775 - SUPREME COURT a provision for gratuity etc. was made for the regular and adhoc employees. In the audit report it was pointed by the auditor that provision for adhoc employees was required to be written back. But somehow while filing the return accountant failed to add back that amount. An affidavit of the concerned person was filed and it was pointed out that more than thousands of employees were working in that concern. As construed as bona fide human error i.e. failure to add back a particular provision. In the present case no such circumstances have been pointed out by the assessee either before the AO or before CIT(A). The only statement made is that it was a bona fide human error. This is a very general and sweeping statement. It should be demonstrated with circumstantial evidence as to how this error has happened; what is operating force in the mind of person who has prepared the return and how he failed to comprehend a particular item. Even the affidavit of that person has not been filed. Therefore we are of the view that this statement is just being made for giving an explanation - Decided against assessee.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.

Detailed Analysis:
1. The appellant contested the penalty imposed by the ld.CIT(A) under section 271(1)(c) of the Income Tax Act, arguing that there was no intention to evade taxes and that the omission of disclosing capital gains was an inadvertent mistake. The appellant highlighted the audited nature of their accounts and relied on a Supreme Court judgment to support their case. The Revenue authorities, on the other hand, contended that the omission was a deliberate attempt to evade taxes.

2. The key provision in question, section 271(1)(c) of the Income Tax Act, allows for the imposition of penalties if the Assessing Officer or the Commissioner finds that the assessee has concealed income or furnished inaccurate particulars. The penalty can range from 100% to 300% of the tax sought to be evaded. The section also includes deeming provisions regarding concealment of income, where failure to offer a valid explanation or substantiate it can lead to penalties.

3. The ld.CIT(A) found that the appellant's claim of inadvertent error was not acceptable, as the short-term capital gain was not disclosed correctly in the return. The appellant's argument that the gain was set off against past losses was deemed incorrect, leading to a taxable income that was not declared. The ld.CIT(A) concluded that the penalty under section 271(1)(c) was rightly imposed by the AO.

4. The Tribunal analyzed the contentions of the appellant and found no merit in their argument of inadvertent mistake. Drawing a parallel to a previous case, the Tribunal emphasized the need for circumstantial evidence to support claims of inadvertent errors. As no such evidence was presented by the appellant, the Tribunal upheld the decision of the Revenue authorities and dismissed the appeal.

5. The Tribunal pronounced the judgment on 31st August 2018, dismissing the appeal of the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act.