Tribunal Cancels Penalty for Honest Tax Error

The Tribunal ordered the deletion of the penalty of Rs. 5,14,145/- imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2013-14. The Tribunal accepted the assessee's explanation as bonafide and genuine, ruling that there was no intent to furnish inaccurate particulars of income or conceal income. The revised computation of income rectified the initial error made in the return filed, leading to the exemption of the assessee from the penalty under Explanation 1 to the provisions of Section 271(1)(c). The appeal was allowed in favor of the assessee.

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Issues:
Challenge to penalty of Rs. 5,14,145/- levied under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 2013-14.

Detailed Analysis:

Issue 1: Penalty under section 271(1)(c)
The appeal was filed against the penalty order dated 29.07.2016 passed by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, 1961. The penalty of Rs. 5,14,145/- was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The primary contention was the failure of the assessee to declare additional salary and TDS while filing the original return of income for the assessment year 2013-14.

Analysis:
The assessee initially declared income of Rs. 1,26,63,460/- in the return filed on 27.03.2014, including salary income of Rs. 15,00,000/- from Pace Aftermarket Private Limited. The issue arose when a revised Form No. 16 was issued by the employer, Pace, showing additional salary income of Rs. 16,63,897/- and additional TDS of Rs. 5,00,000/-. The assessee, based on the old Form No. 16, filed the return of income without including the revised figures. However, during assessment proceedings, the assessee voluntarily disclosed the additional income and TDS. The Tribunal accepted the explanation provided by the assessee as bonafide and genuine, considering that there was no attempt to furnish inaccurate particulars of income or conceal income. The revised computation of income was filed before the AO, rectifying the initial error made in the return filed in March 2014.

Conclusion:
The Tribunal, after careful consideration of all relevant documents and explanations, ordered the deletion of the penalty of Rs. 5,14,145/- imposed under section 271(1)(c) of the Income-tax Act, 1961. The case of the assessee was deemed to be covered by Explanation 1 to the provisions of Section 271(1)(c), which exempted the assessee from the penalty. The appeal of the assessee was allowed for the assessment year 2013-14.

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