Taxpayer Wins Appeal: VRS Payment Claims Cleared as Genuine Oversight, Penalties Deleted Under Section 271(1)(c)

HC dismissed Revenue's appeal against ITAT order, upholding deletion of penalties under Section 271(1)(c) of Income Tax Act. The Court found the assessee's VRS payment claims and income adjustments were due to bona fide mistakes, not deliberate concealment. Relying on precedents, the Court held that withdrawing claims during assessment does not automatically attract penalties, and genuine oversights can justify penalty removal.

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The Bombay High Court addressed an appeal by the Revenue against the Income Tax Appellate Tribunal's order deleting penalties under Section 271(1)(c) of the Income Tax Act, 1961, related to excess VRS payment claims and prior period income/expenses adjustments for AY 2004-05. The key legal issue was whether withdrawal of claims during assessment proceedings immunizes the assessee from penalty for furnishing inaccurate particulars or concealment of income.The Court affirmed the Tribunal and Commissioner (Appeals), holding that penalty under Section 271(1)(c) is not automatic upon withdrawal or surrender of income during assessment. Citing MAK DATA P Ltd v. CIT [2013] 358 ITR 593, the Court stated that "the assessee's contention that the income was offered to tax by peace by itself would not be an immunity from penalty." However, it emphasized that bona fide mistakes or oversights, as found by the lower authorities, are relevant and may justify deletion of penalty, referencing Price Waterhouse Coopers Pvt Ltd v. CIT (2012) 11 SCC 316.The Court concluded that since the claims were found to be due to "pure mistake and oversight," penalty was rightly deleted, and dismissed the Revenue's appeal.

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