Tribunal cancels penalty for mistaken tax claim, citing bonafide error and legal precedents

The Tribunal canceled the penalty imposed under Section 271(1)(c) of the Income Tax Act, ruling in favor of the appellant. The appellant, a company, had mistakenly claimed exemption under Section 115JB for Long Term Capital Gain, which was not actually exempt. Despite the erroneous claim, the Tribunal considered it a bonafide mistake due to reliance on incorrect advice and cited legal precedents, including the Supreme Court's decision in CIT Vs Reliance Petroproducts Limited, to support its decision that such incorrect claims do not warrant a penalty for furnishing inaccurate particulars.

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Issues:
Levy of penalty u/s. 271(1)(c) of the Income Tax Act.

Analysis:
1. The appellant, a company, filed its return of income declaring NIL taxable income, having earned Long Term Capital Gain and dividend exempt from taxation. However, during scrutiny assessment, it was found that the Long Term Capital Gain was not exempt under Section 115JB. The Assessing Officer (AO) assessed the income under Section 115JB and initiated penalty proceedings u/s. 271(1)(c).

2. The appellant contended that they were wrongly advised by their counsel regarding the exemption of Long Term Capital Gain under MAT provisions. They voluntarily filed revised computations and paid taxes. The AO, however, levied the penalty stating that the appellant made a wrong claim and did not rectify it despite similar instances in previous assessment years.

3. The Ld.CIT(A) upheld the penalty, distinguishing case laws cited by the appellant. The appellant further argued that the mistake was due to the counsel's advice and relied on relevant judgments. The Ld.DR argued that penalty was warranted as the appellant filed a NIL return despite the 115JB liability.

4. The Tribunal noted that the AO did not find concealment or furnishing of inaccurate particulars but stated that the appellant made a wrong claim. Considering the bonafide mistake due to wrong advice, the Tribunal referred to the Supreme Court's decision in CIT Vs Reliance Petroproducts Limited, emphasizing that a mere incorrect claim does not attract penalty u/s. 271(1)(c).

5. Consequently, the Tribunal canceled the penalty, stating that the claim of exemption, though incorrect under Section 115JB, did not amount to furnishing inaccurate particulars. The Tribunal relied on legal precedents to support the decision, emphasizing that penalty provisions were not applicable in this case.

6. Therefore, the appeal of the assessee was allowed, and the penalty u/s. 271(1)(c) was canceled based on the bonafide mistake in claiming exemption under Section 115JB.

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