Section 271(1)(c) – Imposition of penalty on account of inadvertent and bona fide error on the part of the assessee would be unwarranted

15. 
Rasai Properties Pvt. Ltd. vs. DCITITAT Mumbai: ShamimYahya (AM) and
Ravish Sood (JM) ITA No. 770/Mum./2018 A.Y.: 2013-14 Date of order: 28^th June, 2019; Counsel for Assessee / Revenue: Nilesh Kumar
Bavaliya / D.G. Pansari

Section 271(1)(c) – Imposition of penalty
on account of inadvertent and bona fide error on the part of the
assessee would be unwarranted

FACTS

For the assessment year under consideration,
the assessee filed its return of income declaring total income of Rs.
80,19,650. In the schedule of Block of Assets, there was a disclosure of a sum
of Rs. 67,00,000 against caption ‘Deductions’ under immovable properties.

On being queried about the nature of the
aforesaid deduction, the assessee submitted that the same pertained to certain
properties which were sold during the year under consideration. The AO called
upon the assessee to explain why it had not offered the income from the sale of
the aforementioned properties under the head income from ‘Long-Term Capital
Gain’ (LTCG). In response, the assessee offered long-term capital gain of Rs.
19,45,176 and also made a disallowance of Rs. 93,453 towards excess claim of
municipal taxes.

In the assessment order, the AO initiated
penalty proceedings u/s 271(1)(c) for furnishing of inaccurate particulars of
income and concealment of income in the context of the aforesaid addition /
disallowance. Subsequently, the AO being of the view that the assessee had
filed inaccurate particulars of income within the meaning of 271(1)(c) r.w.
Explanation 1, imposed a penalty of Rs. 6,29,936.

Aggrieved, the assessee preferred an appeal
to the CIT(A) who deleted the penalty with reference to the disallowance of Rs.
93,453 but confirmed it with reference to addition of long-term capital gain
which was offered for taxation in the course of the assessment proceedings.

Aggrieved, the assessee preferred an appeal
to the Tribunal where it was contended that the LTCG on the sale of three shops
had, on account of a bona fide mistake on the part of the assessee, had
not been shown in the return of income.

The fact that the assessee had never
intended to withhold sale of the property under consideration could safely be
gathered from a perusal of the chart of the tangible fixed assets that formed
part of its balance sheet for the year under consideration, wherein a deduction
of Rs. 67,00,000 was disclosed by the assessee.

Besides, on learning of his mistake, the
assessee had immediately worked out the LTCG on the sale of the aforementioned
properties and had offered the same for tax in the course of the assessment
proceedings.

HELD

The Tribunal noted that while the assessee
had admittedly failed to offer the LTCG on the sale of three shops for tax in
its return of income for the year under consideration, at the same time, the
‘chart’ of the ‘block of assets’ of tangible fixed assets, forming part of the
balance sheet of the assessee as ‘Note No. 6’ to the financial statements for
the year ended 31^st March, 2013 clearly reveals that the assessee
had duly disclosed the deduction of Rs. 67,00,000 from the block of fixed
assets. The Tribunal also found that the assessee in the course of the
assessment proceedings on learning about its aforesaid inadvertent omission and
not offering the LTCG on the sale of the aforesaid shops, had worked out its
income under the said head and offered the same for tax.

The Tribunal held that:

(a) when the assessee had disclosed the
deduction of Rs. 67,00,000 pertaining to sale of the aforesaid three shops from
the ‘block of assets’ in its balance sheet for the year under consideration,
therefore, there is substantial force in its claim that the failure to offer
LTCG on the sale of the said shops had inadvertently been omitted to be shown
in the return of income for the year under consideration;

(b) imposition of penalty u/s 271(1)(c)
would be unwarranted in a case where the assessee had committed an inadvertent
and bona fide error and had not intended or attempted to either conceal
its income or furnish inaccurate particulars;

(c) its aforesaid view is fortified by the
judgement of the Supreme Court in the case of PriceWaterHouse Coopers
Pvt. Ltd. vs. CIT(2012) 348 ITR 306;

(d) imposition of penalty u/s 271(1)(c)
would be unwarranted on account of the aforesaid inadvertent and bona fide
error on the part of the assessee.

The Tribunal set aside the order of the
CIT(A) and deleted the penalty imposed by the AO u/s 271(1)(c). The appeal
filed by the assessee was allowed.