Tribunal deletes penalty under section 271(1)(c) due to assessee's genuine mistake and voluntary rectification.

The Tribunal allowed the appeal, deleting the penalty under section 271(1)(c) as the assessee's conduct was deemed bona fide, and the error in the original return was considered a genuine mistake, rectified voluntarily before any detection by the Assessing Officer. The penalty order was found to be within the permissible time frame, and the explanation offered by the assessee was accepted as genuine and bona fide. Consequently, the penalty of Rs. 1,29,880/- was deleted, and the appeal was allowed.

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Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Furnishing inaccurate particulars of income and concealing income.
3. Validity of penalty order under section 271(1)(c) being time-barred.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The assessee appealed against the penalty of Rs. 1,29,880/- under section 271(1)(c) confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) held that the appellant furnished inaccurate particulars of income by claiming a set-off of long-term capital loss which was later offered as long-term capital gain in the return filed in response to notice under section 148. The assessee argued that the error in the original return was a bona fide human error, rectified suo-moto before receiving any communication from the Assessing Officer (AO). The CIT(A) rejected this explanation, inferring contumacious conduct and mens rea, leading to the confirmation of the penalty.

2. Furnishing Inaccurate Particulars of Income and Concealing Income:
The assessee, engaged in software development and consultancy, filed its original return for AY 2005-06 declaring an income of Rs. 5,76,54,770/-. The assessment was completed under section 143(3) with an assessed income of Rs. 8,22,78,960/-. The case was reopened under section 147, and the assessee filed a revised return withdrawing the set-off of long-term capital gain of Rs. 5,13,908/- against the long-term capital loss of Rs. 6,47,13,206/- on the sale of shares to its holding company, NSE, which was not considered a transfer under section 47(v). The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee contended that the revised return was filed voluntarily and before any detection by the AO, arguing no concealment or inaccurate particulars were furnished. The AO, however, imposed the penalty, citing precedents where penalties were upheld despite revised returns being filed.

3. Validity of Penalty Order under Section 271(1)(c) Being Time-Barred:
The assessee argued that the penalty order was time-barred under section 275, as it was not completed within the stipulated time frame. The CIT(A) dismissed this argument, stating that the penalty proceedings were initiated within the permissible period, considering the appeal against the order under section 147 read with section 143(3) was still pending.

Tribunal's Decision:
The Tribunal noted that the assessee withdrew the claim of set-off of long-term capital gain against long-term capital loss in the revised return filed in response to the notice under section 148, before the reasons for reopening were communicated. The Tribunal found that the assessee's conduct was bona fide, and the error in the original return was a genuine mistake. Citing the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., the Tribunal held that every disallowed claim does not attract penalty under section 271(1)(c). The Tribunal concluded that no penalty was exigible as the explanation offered by the assessee was genuine and bona fide. Consequently, the penalty of Rs. 1,29,880/- was deleted, and the appeal was allowed.

Conclusion:
The Tribunal allowed the appeal, deleting the penalty under section 271(1)(c) on the grounds of the assessee's bona fide conduct and genuine mistake in the original return, which was rectified voluntarily before any detection by the AO. The penalty order was also found to be within the permissible time frame, dismissing the argument of it being time-barred.

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