2023 (9) TMI 261 - HC - Income Tax

Tribunal Upholds CIT(A) Decision on Penalty, Citing Chartered Accountant Oversight

The Tribunal dismissed the Department's appeal, affirming the CIT(A)'s findings that the assessee's mistake was inadvertent and bona fide. The CIT(A) and ... Penalty u/s 271(1)(c) - Error in computing LTCG - CIT(A) while deleting the penalty, found that on perusal of the original working of long-term capital gain, the entire sale consideration of five properties was considered and from that 95% was treated as cost of acquisition resulting into loss - as share of the assessee was only 5% but by mistake in the absence of purchase and sale deeds, the entire sale consideration was taken into computation of long term capital gains - ITAT confirmed the order of CIT(A) - HELD THAT:- Perusal of the orders indicate that the CIT(A) and the Tribunal concurrently held that apparently there was a bona fide mistake made by the assessee owing to lack of documents at the time of filing of return of income. We find that the AO as rightly held by the CIT(A) and ITAT ought to have accepted the claim of the assessee that the claim of loss was not intentional. Moreover, as observed by the CIT(A) reduction in capital loss cannot be considered for imposition of penalty. What was also noted by the CIT(A) that the return of income was filed belatedly and hence capital loss could not be allowed to be carried forward and set off against income of subsequent year under this head. There was no incentive for returning capital loss and therefore deserved to be ignored while imposing penalty. No substantial question of law arises. Issues involved:The judgment involves the following substantial questions of law for consideration:(A) Whether penalty is imposable for an inadvertent mistake in the return of income filed by a renowned Chartered AccountantRs.(B) Whether the decision of the Ld. CIT(A) based on the case of Price Waterhouse Coopers Pvt. Ltd. is justifiedRs.(C) Whether reduction in capital loss can be considered for imposition of penalty under section 271(1)(c) after the amendment by Finance Act, 2002Rs.Issue (A) - Penalty for inadvertent mistake:The assessee filed a return of income showing a long-term loss, which was revised during assessment proceedings. The Assessing Officer found that the revised computation was not the assessee's own but was filed after a notice was issued. The AO held the claim of a bona fide mistake as baseless, considering the involvement of a Chartered Accountant in filing the return without proper verification. The AO imposed a penalty under section 271(1)(c) of the Income Tax Act, 1961. The CIT(A) considered the appellant's explanation and held that the mistake was inadvertent, similar to cases where penalties were not imposed for CA oversight. The appeal was partly allowed by the CIT(A).Issue (B) - Justification of CIT(A) based on Price Waterhouse Coopers Pvt. Ltd.:The CIT(A) relied on the case of Price Waterhouse Coopers Pvt. Ltd. in holding that no penalty is imposable for inadvertent and silly mistakes. The appellant's case was deemed to fall under this category, as the mistake was unintentional due to incorrect computation without purchase and sale deeds. The CIT(A) found no grounds for imposing a penalty based on the legal precedent.Issue (C) - Reduction in capital loss for penalty imposition:The AO imposed a penalty considering the reduction in capital loss as income, leading to inaccurate particulars. The CIT(A) found that the reduction in capital loss cannot be considered for penalty imposition, especially since the return of income was belated and did not allow for carrying forward the loss. The Tribunal concurred with the CIT(A) that the reduction in capital loss deserved to be ignored for penalty purposes.Conclusion:The Tribunal dismissed the appeal by the Department, upholding the findings of the CIT(A) that the mistake made by the assessee was bona fide due to lack of documents during the filing of the return. The concurrent decisions of the CIT(A) and the Tribunal concluded that no substantial question of law was involved, leading to the dismissal of the appeal without costs.