CFO's electronic filing error in belated return showing loss doesn't warrant section 271(1)(c) penalty without concealment intent

ITAT Mumbai allowed the assessee's appeal and directed deletion of penalty under section 271(1)(c). The assessee filed a belated return showing loss that couldn't be carried forward or set off in subsequent years. The CFO made an error while electronically filing by not adding back disallowable expenses already reported in the tax audit report. The tribunal found no intention to conceal income or furnish inaccurate particulars, noting the loss was of no benefit to the assessee. Following SC precedent in Price Waterhouse Coopers case, the tribunal held that professional mistake without intent to conceal income doesn't warrant penalty.

---

---

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Alleged concealment of income or furnishing inaccurate particulars of income by the Assessee.
3. Consideration of human error and inadvertent mistakes in filing electronic returns.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied under Section 271(1)(c):
The appeal was filed by the Assessee against the order of the CIT (Appeals)-21, Mumbai, which confirmed the penalty levied under Section 271(1)(c) for the assessment year 2010-11. The Assessee had filed a return electronically declaring a loss of Rs.16,10,43,542/-. The assessment was completed determining the loss at Rs.1,81,57,433/-, with the Assessing Officer (AO) noting that certain expenses were not allowable and were not added back to the total income. Consequently, penalty proceedings were initiated under Section 271(1)(c) for concealing/furnishing inaccurate particulars of income, and a penalty was levied for allegedly suppressing the real income of Rs.13,19,73,099/-.

2. Alleged Concealment of Income or Furnishing Inaccurate Particulars:
The Assessee contended that the expenses were shown as disallowances in the tax audit report by the auditors, but during electronic filing, these disallowances were not entered correctly, resulting in an incorrect loss declaration. The Assessee argued that the mistake was made by the professional engaged for filing the return and that there was no intention to conceal income or furnish inaccurate particulars. The AO, however, maintained that the Assessee should have written back the disallowed expenses in the computation of income, and the failure to do so amounted to furnishing inaccurate particulars or concealment of income. The CIT (Appeals) upheld the penalty, noting that there need not be willful concealment for the imposition of penalty under Section 271(1)(c).

3. Consideration of Human Error and Inadvertent Mistakes:
The Assessee's counsel argued that the error was a result of human mistake while uploading the return electronically and that the disallowances were reported in the tax audit report. The counsel cited several judicial precedents, including Price Waterhouse Coopers Pvt. Ltd. Vs. CIT, where the Supreme Court recognized that inadvertent errors do not necessarily imply concealment or furnishing of inaccurate particulars. The tribunal observed that the return was filed belatedly, making the reported loss ineligible for carry forward, thereby rendering the mistake revenue-neutral. The tribunal concluded that the Assessee had no intention to conceal income or furnish inaccurate particulars, and the error was due to the professional's mistake in filing the return electronically.

Conclusion:
The tribunal, after considering the facts and judicial precedents, held that there was no concealment of income or furnishing of inaccurate particulars by the Assessee. The penalty levied under Section 271(1)(c) was directed to be deleted, and the appeal of the Assessee was allowed. The order emphasized that inadvertent errors, especially those made by professionals, should not attract penalties when there is no intention to deceive or mislead.

---