Tribunal cancels penalty under Income Tax Act citing inadvertent error, emphasizes natural justice principles.

The tribunal allowed the appeal, set aside the appellate order sustaining the assessment, and canceled the penalty of Rs. 51,993/- imposed under Section 271(1)(c) of the Income Tax Act. The tribunal held that the penalty was not justified as the computational error was due to inadvertent mistake, not an attempt to conceal income. The tribunal emphasized adherence to principles of natural justice and cited a Supreme Court judgment to support its decision.

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Issues Involved:
1. Legality of the order sustaining the assessment.
2. Justification of the penalty levied under Section 271(1)(c) of the Income Tax Act.
3. Adherence to principles of natural justice.

Detailed Analysis:

1. Legality of the Order Sustaining the Assessment:
The appeal was filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, New Delhi, dated 30/07/2020, for the Assessment Year 2016-17. The assessee contended that the order sustaining the assessment was "bad in law and on facts" and should be set aside. The initial assessment order dated 19/12/2018 determined the assessee's total loss at Rs. (48,71,176)/- against the returned loss of Rs. (50,39,439)/-, with an addition of Rs. 1,68,263/- on account of personal expenses of the Directors. The assessee accepted the addition during the assessment proceedings and did not appeal against it.

2. Justification of the Penalty Levied under Section 271(1)(c):
The penalty of Rs. 51,993/- was levied by the Assessing Officer under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee argued that the disallowance was due to a bonafide and inadvertent mistake, not a deliberate act to conceal income. The assessee had already disallowed similar expenses in its computation of income and filed a revised computation during the assessment proceedings. The tribunal noted that the addition was based on an ad hoc estimation of personal use of the car by the Directors and accepted the assessee's claim that the computational error was due to oversight and inadvertent mistake. The tribunal relied on the Supreme Court judgment in the case of Price Waterhouse Coopers (P.) Ltd. v. CIT, which held that a bonafide and inadvertent error does not amount to furnishing inaccurate particulars or concealment of income. Consequently, the tribunal set aside the appellate order dated 30/07/2020 and canceled the penalty.

3. Adherence to Principles of Natural Justice:
The assessee contended that the orders passed by the CIT(A) and the Assessing Officer were against the principles of natural justice. The tribunal found that the assessee had disclosed all particulars of expenses in the audited financial statements and provided details during the assessment proceedings. The tribunal concluded that there was no concealment or furnishing of inaccurate particulars by the assessee, and the penalty was not warranted.

Conclusion:
The tribunal allowed the appeal filed by the assessee, set aside the appellate order, and canceled the penalty of Rs. 51,993/- levied under Section 271(1)(c). The tribunal emphasized that the error was bonafide and inadvertent, and there was no intention to conceal income or furnish inaccurate particulars. The order was pronounced on 25/08/2022.

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