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2021 (2) TMI 98 - AT - Income TaxPenalty levied u/s 271(1)(c) - deferred tax asset written off debited in the profit and loss account as exceptional item but the same has not been disallowed in the computation of taxable income - inadvertent human error or 'mens rea' - HELD THAT - Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon as held in D.M. Dahanukar v. CIT 1967 (2) TMI 9 - BOMBAY HIGH COURT and M. Hussain Ali Sons v. CIT 1965 (2) TMI 112 - MADRAS HIGH COURT . In the instant case, the assessee had made an inadvertent computation error while filing its return of income and accordingly the same was accepted by them in the course of assessment. The assessee has not in any way taken any benefit by carrying forward a higher loss. It is relevant to mention here that the financial statements of the AY 2012-13 were on record which reflect the deferred tax asset written off in the profit loss account and also a Note to that effect in the Schedule of significant accounting policies. The observation made by the AO that there was no independent evidence and the finding that the same has been revealed in the assessment proceedings only is not correct. We find that the carried forward loss has not been set off subsequently and the assessee has huge carry forward assessed losses of earlier years which were otherwise available for set off Deferred tax asset written off was reported in the financials, however, the same was inadvertently left to be added back to the net loss before tax while making the tax computation. This error is only a computation error made in the return of income which occurred due to overlooking the contents of the profit and loss account. The contents of the financial statements do not conceal any particulars. The error committed by the appellant is a bona fide and inadvertent one. The obtaining factual matrix in the instant case is broadly similar to the decision in Price Waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT , instead of Dharmendra Textiles Processors 2008 (9) TMI 52 - SUPREME COURT . - Penalty deleted - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Furnishing inaccurate particulars of income. 3. Bona fide error vs. deliberate concealment. Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c): The case revolves around the penalty levied on the assessee under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2012-13. The penalty was imposed due to the assessee's failure to add back a deferred tax asset of ?2,02,33,602/- while computing taxable income, which was considered as furnishing inaccurate particulars of income. 2. Furnishing Inaccurate Particulars of Income: The Assessing Officer (AO) noticed that the assessee had debited ?2,02,33,602/- as deferred tax asset written off in the profit and loss account but did not disallow it in the computation of taxable income. The AO initiated penalty proceedings, asserting that the assessee had filed inaccurate particulars of income, which could have led to a loss of revenue had the case not been selected for scrutiny. 3. Bona Fide Error vs. Deliberate Concealment: The assessee argued that the omission was an inadvertent human error, not a deliberate attempt to evade tax. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, stating that the error was not inadvertent but deliberate, as the deferred tax asset was clearly visible in the financial statements and should have been added back in the computation of income. The CIT(A) emphasized that the detailed preparation of the return and computation indicated an intentional act to suppress income. Tribunal's Findings: The Tribunal examined the details and noted that the assessee had been incurring losses since AY 2007-08, and the assessed loss for the year under consideration was ?5,68,60,644/- after the addition. The Tribunal found that the deferred tax asset write-off was reported in the financials and included in the profit and loss account. The error was a computation mistake, not an attempt to conceal income, as the financial statements were transparent. Reference to Precedents: The Tribunal referred to the Supreme Court's decision in Price Waterhouse Coopers Pvt. Ltd. v. CIT, where it was held that a bona fide and inadvertent error does not justify the imposition of penalty for furnishing inaccurate particulars of income. The Tribunal distinguished this case from Dharmendra Textiles Processors, noting that the latter dealt with mandatory penalties for statutory offenses, whereas the former involved a computation error. Conclusion: The Tribunal concluded that the error was inadvertent and bona fide, not a deliberate act to conceal income. The financial statements were clear, and the mistake did not result in any undue benefit to the assessee. Therefore, the penalty of ?65,64,793/- was deleted, and the appeal was allowed. Order: The appeal was allowed, and the penalty levied by the AO was deleted. The decision was pronounced in the open Court on 01/02/2021.
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