Penalty under Income Tax Act deleted for inadvertent error in deferred tax asset treatment

The Tribunal found that the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 on the assessee for failure to add back a deferred tax asset while computing taxable income was deleted. The error was deemed inadvertent and not a deliberate attempt to conceal income, as the financial statements were transparent. The penalty of Rs. 65,64,793/- was consequently deleted, and the appeal was allowed.

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Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Furnishing inaccurate particulars of income.
3. Bona fide error vs. deliberate concealment.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The case revolves around the penalty levied on the assessee under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2012-13. The penalty was imposed due to the assessee's failure to add back a deferred tax asset of Rs. 2,02,33,602/- while computing taxable income, which was considered as furnishing inaccurate particulars of income.

2. Furnishing Inaccurate Particulars of Income:
The Assessing Officer (AO) noticed that the assessee had debited Rs. 2,02,33,602/- as deferred tax asset written off in the profit and loss account but did not disallow it in the computation of taxable income. The AO initiated penalty proceedings, asserting that the assessee had filed inaccurate particulars of income, which could have led to a loss of revenue had the case not been selected for scrutiny.

3. Bona Fide Error vs. Deliberate Concealment:
The assessee argued that the omission was an inadvertent human error, not a deliberate attempt to evade tax. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, stating that the error was not inadvertent but deliberate, as the deferred tax asset was clearly visible in the financial statements and should have been added back in the computation of income. The CIT(A) emphasized that the detailed preparation of the return and computation indicated an intentional act to suppress income.

Tribunal's Findings:
The Tribunal examined the details and noted that the assessee had been incurring losses since AY 2007-08, and the assessed loss for the year under consideration was Rs. 5,68,60,644/- after the addition. The Tribunal found that the deferred tax asset write-off was reported in the financials and included in the profit and loss account. The error was a computation mistake, not an attempt to conceal income, as the financial statements were transparent.

Reference to Precedents:
The Tribunal referred to the Supreme Court's decision in Price Waterhouse Coopers Pvt. Ltd. v. CIT, where it was held that a bona fide and inadvertent error does not justify the imposition of penalty for furnishing inaccurate particulars of income. The Tribunal distinguished this case from Dharmendra Textiles Processors, noting that the latter dealt with mandatory penalties for statutory offenses, whereas the former involved a computation error.

Conclusion:
The Tribunal concluded that the error was inadvertent and bona fide, not a deliberate act to conceal income. The financial statements were clear, and the mistake did not result in any undue benefit to the assessee. Therefore, the penalty of Rs. 65,64,793/- was deleted, and the appeal was allowed.

Order:
The appeal was allowed, and the penalty levied by the AO was deleted. The decision was pronounced in the open Court on 01/02/2021.

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