TMI Blog2018 (8) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... est of justice to saddle penalty against the assessee in the peculiar facts and circumstances of the case and the circumstantial evidences available to prove the bonafide mistake with no ulterior motive on the part of assessee, as assessment proceedings and penalty proceedings are two separate and distinct proceedings. Accordingly, the penalty imposed by the assessee and confirmed by ld. CIT(A) deserve to be cancelled. - Decided in favour of assessee - ITA No. 6140/Del./2015 - - - Dated:- 30-7-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For The Revenue : Shri Baljit Singh, CA For The Assessee : Shri S.R. Senapati, Sr DR ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-I, New Delhi dated 07.09.2015 for the assessment year 2006-07 on the following effective ground: 1. On the facts and circumstances of the case, Ld. CIT(A) has erred in confirming the action of the ld. A.O. in imposing a penalty of ₹ 1,77,000/- u/s.271(1)(c) of the Act on account of failure to voluntarily add back provision of gratuity in the computation of income, holding this mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed. 5.3 Except Assessment Year 2006-07 where the Gratuity was not added by mistake the Assessee has in the past year 2005-06 and 2007-08, 2008-09 and 2009-10 i.e. all future years added the amount of Gratuity to the taxable income. A copy of the computations is attached herein at Page 15 to 20 of the Paper Book. This clearly shows that it was only in the Assessment Year 2006-07 that the Assessee by a mistake of the Chartered Accountant, did not add the provision for Gratuity to the taxable income. Loss in Computation of Income Further there was a loss in the Assessment Year 2006-07 and adding back the Gratuity amount to the taxable income would not have entailed any additional tax burden on the assessee and therefore the assessee could not have any mal intention. 5.4 Further it may be stated that it was only from Financial Year 2004-05 (AY 2005- 06) that Gratuity was to be provided compulsorily as AS-15 was introduced. Note on Gratuity The Accounting Standard 15: Employee Benefit (earlier called as accounting for retirement benefits before revision in 2005) was made mandatory from financial year 2006-07. Before that it was recommendatory. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be visited on the assessee.- Where the assessee had claimed relief under section 80-1 on a certificate filed by a Chartered Accountant and the Chartered Accountant disowned the certificate and even had stated that he was not competent to certify, the bona fide claim of the assessee based upon such certificate, penalty could not be levied, if such certificate was wrong. It was pointed out that the Assessing Officer could not have acted on it without putting the communication from the Chartered Accountant to the assessee. Deletion of penalty by the Tribunal in such circumstances on the ground of alleged wrong claim was upheld in CIT v Rice Mills (S.D.). (2005) 275ITR 206 (P H) 6.3 S. 271 - Erroneous deduction u/s. SOL did not amount to concealment of income - Where deduction u/s 80L was erroneously claimed and granted to the partner of a firm, it was held that the assessee had honestly disclosed the income and had not concealed anything deliberately and his action did not suffer from any mens rea. Therefore, the penalty proceedings u/s 271(1)(c) were not warranted. The proposal in the assessment order for initiating penalty proceedings against the assessee afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncealment of income - Assessment year 1997-98 - Assessee was engaged inter alia in rendering consultancy services - It had, for assessment year 1997-98, claimed depreciation in respect of properties one at Bangalore and other at Delhi - In first round when matter came for determination before Commissioner (Appeals), he concluded that depreciation was allowable only to extent of 2/3rd claim in respect of Bangalore property and that for Delhi property such deduction could not be claimed at all - He made addition - Assessing Officer levied penalty - Assessee contended that it was evident that Commissioner (Appeals) had partially accepted assessee's claims for depreciation - It was further submitted that Delhi property was let out for first time in latter part of concerned assessment year i.e., in August, 1996 and, thus, only an inadvertent claim was made - Similarly, with regard to provision of taxation, -assessee submitted that it was inadvertent error as such a claim had been made for first time during assessment year - This was clear from relevant record -Tribunal upheld said submission and concluded that there was no history of furnishing of inaccurate particulars by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For concealment of income - Assessment year 2004-05 Where penalty was levied on assessee on ground that assessee had wrongly claimed deduction under section 10(36) but Tribunal found that assessee had acted upon advice of his counsel, who was dealing with his tax matters for last so many years, as it was a case of bona fide mistake, levy of penalty on assessee was not justified [In favour of assessee] Further it needs to be appreciated that this was disclosed and not concealed. A mere error or mistake would not create inaccurate particulars. 7.1 Legal submission: The assessee had submitted all the required details and nothing was concealed. It is not that the Ld A.O had blown out any undisclosed income. All facts were available on record. Section 271 (1)(c). U/s 271(1)(c), penalty is imposed if the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income . Extracts: Explanation 1. - Extract Where in respect of any facts material to the computation of the total income of any person under this Act (A) Such person fails to offer an explanation or offers an explanation which is found by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Latin word 'con celare' which implies to hide Websters Dictionary equates its meaning 'to hide' or withdraw from observation, to cover or keep from sight, to prevent the discovery of, to withhold knowledge of. Therefore, there must be an intention to conceal. Merely making a mistake, such as nonaddition of gratuity, does not lead to concealment. 7.1.4 A mistake or error - Does not attract penal provisions. 7.1.5 Penalty on Concealment Penalty can be levied only if it is proved beyond doubt that the assessee has concealed income or furnished inaccurate particulars of his income. It is necessary for the authority levying penalty to prove that, a) there was a concealment of income. b) the assessee was conscious of having concealed or furnished inaccurate particulars of his income. A mere mistake will not be sufficient to hold that there is a concealment of income which merits levy of penalty. Even if the amount omitted was large and substantial, it will not be sufficient to draw an inference that the mistake was deliberate and due to lack of bona fides on the part of the assessee. The following case laws prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, where there is a technical or venial breach of the provisions of the Act or were the breach flows from a bona fide belief that the -offender is not liable to act in the manner prescribed in the statue. The Patna High Court in Jagannath Singh v. CWT [1980] 122 ITR 114, after quoting the observations of the Supreme Court (supra) in the case of Hindustan Steel v. State ofOrissa [1972] 83 ITR 26 observed. From what I have quoted above it follows a) that a proceeding for imposing a penalty for failure to carry out a statutory obligation is a quasi-criminal proceeding; b) penalty will not ordinarily be imposed unless a party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation; and c) when there is a technical or venial breach of the previsions of the Act or where the breach flows from a bona fide belief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the case was originally assessed u/s. 143(3) of the IT Act and all the information including the provision for gratuity were available with the Assessing Officer, as the provision for gratuity stood added back as income of the assessee in the balance sheet filed with the return of income. The disclosure of provision for gratuity as income in the balance sheet of the current year filed with the return of income and offering such provision for gratuity as income in preceding year s computation of income, inspire confidence on the submission of the assessee that it was due to the mistake of Chartered Accountant not to add back such provision in the computation of income of the year under consideration. Therefore, in view of the decision of Hon ble Punjab Haryana High Court in the case of CIT vs. Rice Mills (SD) (2205) 275 ITR 206, where it has been held that the fault of Chartered Accountant cannot be visited on the assessee, in our considered opinion, no adverse inference can be drawn against the assessee. Various decisions relied by the assessee also make out the case of the assessee. This being a bona fide mistake, the assessee did not challenge the quantum addition made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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