Bona fide computation error defeats penalty where there is no deliberate concealment or inaccurate particulars

Penalty under section 271(1)(c) was found unwarranted where the assessee had disclosed the transaction and the addition arose from a mistaken application of the tax rate and an error in computing the cost of acquisition. The Tribunal accepted that the wrong claim was inadvertent and bona fide, and held that penalty is not justified in the absence of deliberate concealment or furnishing of inaccurate particulars. On that basis, the penalty was deleted.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was exigible where the addition arose from a mistaken application of the tax rate and an error in computing the cost of acquisition, and the assessee claimed the mistake was bona fide.

Analysis: The assessee had disclosed the relevant transaction and the dispute turned on the nature of the mistake in the return and computation. The material on record showed that the claim of tax at a lower rate and the treatment of cost of acquisition were erroneous, but the Tribunal accepted the explanation that the mistake was inadvertent and bona fide. Relying on the principle that penalty is not justified for a bona fide and inadvertent error without deliberate concealment or furnishing of inaccurate particulars, the Tribunal held that the case did not warrant penalty.

Conclusion: Penalty under section 271(1)(c) was deleted and the appeal succeeded.

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