Bona fide computational errors with full disclosure do not trigger penalty merely because assessment reduces a returned loss.

Penalty for reduction of a returned loss under section 270A does not arise merely because exempt partnership profit was deducted again in Schedule BP. Section 270A(2)(g) covers loss-reduction assessments, but section 270A(6) excludes cases where the taxpayer gives a bona fide explanation and fully discloses material facts. Disclosure of the exempt profit in the return and balance sheet, explanation during assessment, and supporting Chartered Accountant affidavit indicated a computational error rather than under-reporting or misreporting. Repetition in a revised return alone did not disprove bona fides. The penalty was therefore not sustainable.

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Issues: Whether penalty under section 270A of the Income-tax Act, 1961 was sustainable where the returned loss was reduced in assessment because exempt partnership profit was inadvertently deducted again in Schedule BP.

Analysis: Section 270A(2)(g) covers cases where assessment has the effect of reducing a returned loss, but section 270A(6) excludes cases where the assessee offers a bona fide explanation and discloses all material facts. The exempt share of partnership profit was disclosed in the return and reflected in the balance sheet. The error was confined to the computation in Schedule BP, was explained during assessment proceedings, and was supported by the Chartered Accountant's affidavit. Repetition of the error in the revised return, without more, did not establish misreporting or negate the bona fide explanation. The Revenue did not establish that the explanation was false or that the assessee had suppressed the relevant income.

Conclusion: Penalty under section 270A was not sustainable and the penalty sustained by the appellate authority was directed to be deleted.

Ratio Decidendi: Reduction of a returned loss under section 270A(2)(g) does not by itself justify penalty where the assessee has disclosed all material facts and established that the reduction resulted from a bona fide computational error rather than under-reporting or misreporting.

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