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IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND VIVEK VARMA, (JM)
.. , ,
./I.T.A. No.2590/Mum/2013
( / Assessment Year : 2008-09)
Devina Mehra, / Income Tax Officer
#2, Crescent Chambers, 4th Floor, Vs. Ward 4(1)(1), Room No.636,
Tamarind Lane, 6th Floor, Aayaker Bhavan,
Fort, M K Road,
Mumbai-400001 Mumbai-400020
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :AAHPM4465E
/ Appellant by : Shri Satish Mody
/Respondent by : Shri Durga Dutta
/ Date of Hearing
: 10.7.2014
/Date of Pronouncement : 31.7.2014
/ O R D E R
Per B.R.BASKARAN, Accountant Member:
The appeal filed by the assessee is directed against the order dated
15.02.2013 passed by Ld CIT(A)-8, Mumbai and it relates to the assessment year
2008-09. The assessee is aggrieved by the decision of Ld CIT(A) in confirming
the penalty of Rs.28,32,635/- levied by the AO u/s 271(1)(c) of the Income Tax
Act, 1961 (the Act).
2. The facts relating to the issue under consideration are stated in brief. The
assessee filed the return of income for the year under consideration declaring a
I.T.A. No.2590/Mum/2013
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total income of Rs.9.00 lakhs. During the course of scrutiny proceedings, the AO
noticed that the assessee has received interest of Rs.47,21,056/- from the
income tax department on the refund received by the assessee and the same
was not included in the return of income. When questioned about the same, the
assessee admitted that it was an inadvertent error and accordingly agreed for its
addition. Accordingly, the AO added the amount of Rs.47,21,056/- to the total
income of the assessee. The AO initiated penalty proceedings by holding that
the assessee has concealed the particulars of income and also furnished
inaccurate particulars of income. After hearing the assessee, the AO imposed a
penalty of Rs.28,32,365/-, being the amount calculated at 200% of the tax
sought to be evaded. The assessee could not succeed in the appeal filed before
the Ld CIT(A). Hence, the assessee has filed this appeal before us.
3. The Ld A.R submitted that the assessee has omitted to include the
interest income in its return of income by inadvertence. He submitted that the
assessee has duly narrated the break-up details of the refund amount of Rs.2.14
crores received from the Income tax department in the bank account ledger
maintained in the books of account. He submitted that it is stated in the
narration that the income tax refund was Rs.1.67 crores and interest on IT
refund was Rs.0.47 crore. Accordingly, the Ld A.R submitted that there was no
intention to conceal the above said interest income in the return of income. He
further submitted that the assessee himself has given the details of bank account
to the AO during the course of assessment proceeding and when the mistake
was pointed out by the assessing officer, he immediately admitted the same and
agreed for the assessment of the interest income. By placing reliance on the
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decision dated 25-09-2012 rendered by the Hon'ble Supreme Court in the case of
Price Waterhouse Coopers Pvt Ltd Vs. CIT (Appeal No.6924 -2012), the Ld A.R
submitted that the inadvertent mistakes shall not give rise to penalty. He further
submitted that the assessing officer has levied penalty @ 200% of the tax sought
to be evaded, which in any case, is on the higher side.
4. The Ld D.R, on the contrary, submitted that the claim of inadvertent
mistake is not a proper explanation contemplated in sec. 271(1)(c) of the Act.
The assessee, having properly accounted the break up details of the income tax
refund, should not have omitted the same to include it in the total income.
Accordingly he submitted that the assessee has concealed the particulars of
income and also furnished inaccurate particulars of income and hence the Ld
CIT(A) was justified in confirming the penalty levied by the AO.
5. We have heard the rival contentions and carefully perused the record.
There is no dispute with regard to the fact that the assessee has received refund
from income tax department and the said refund included interest amount of
Rs.47,21,056/- granted by the department. There is also no dispute that the
said interest is liable to be included in the total income of the assessee. It is
also a fact that the assessee has given the break-up details of the income tax
refund in the narration shown for accounting the receipt. Hence, normally it
would not escape the attention of the person scrutinizing the books of account
for the purpose of computing the total income. Before us, the Ld A.R furnished a
copy of bank account as available in the ledger of the assessee to show that the
assessee has given the break-up details. On verification of the same, it is
noticed that the assessee has given the break-up details in the narration portion.
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According to the assessee, the details of bank account was furnished to the AO
and from that details only, the AO has found out that the assessee has received
interest.
6. Under double entry system, if the cheque received from the department is
debited to the Bank account, then a corresponding credit should be given to
some other account. In that system, normally the interest receipt is directly
credited to the "Interest receipt" account. Hence, a specific query was put to the
Ld A.R to find out as to how the Credit entry was accounted. The Ld A.R
submitted that the corresponding credit entry was made in the Capital account of
the assessee. Then the ld A.R was asked to furnish copy of Capital account.
Though the Ld A.R agreed to furnish the same, but till date we have not received
it. We notice that the assessee has maintained the books of account in a
Computer system. Hence, normally the same narration given in the bank
account (containing break-up details) shall find place in the Capital account also.
It is also in the common knowledge of every body that the total income of any
person is computed for filing return of income only after analysing the Capital
account. Hence, it is hard to accept that the assessee has committed
inadvertent mistake by not including the interest income in the computation of
the total income.
7. The Ld A.R placed reliance on the decision rendered by the Hon'ble
Supreme Court in the case of Price Waterhouse Coopers Pvt Ltd (supra). The
following observations show that it was an exceptional case:-
"20. We are of the opinion, given the peculiar facts of this case, that the
imposition of penalty on the assessee is not justified. We are satisfied
that the assessee had committed an inadvertent and bona fide error and
I.T.A. No.2590/Mum/2013
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had not intended to or attempted to either conceal its income or furnish
inaccurate particulars."
In the above said case, other evidences showed that assessee had committed
inadvertent mistake and it did not intend to conceal the income. Following
observations made by Hon'ble Apex Court bring out this point:-
"18. The fact that the Tax Audit Report was filed along with the return
and that it unequivocally stated that the provision for payment was not
allowable under section 40A(7) of the Act indicates that the assessee
made a computation error in its return of income. Apart from the fact
that the assessee did not notice the error, it was not even noticed even by
the Assessing officer who framed the assessment order. In that sense,
even the Assessing Officer seems to have made a mistake in overlooking
the contents of the Tax Audit Report.
19. The contents of the Tax audit report suggest that there is no
question of the assessee concealing its income. There is also no question
of the assessee furnishing any inaccurate particulars. It appears to us
that all that has happened in the present case is that through a bona fide
and inadvertent error, the assessee while submitting its return, failed to
add the provision for gratuity to its total income. This can only be
described as a human error which we are all prone to make."
The fact that the assessee had shown in the Tax audit report that the provision
for payment of gratuity is not allowable u/s 40A(7) of the Act and the fact that
even the AO did not notice the said omission heavily supported the case of the
assessee therein that it was an inadvertent human error.
8. However, in the instant case, the assessee, besides claiming that it was an
inadvertent error, could not bring any other material to show that the said claim
was bona fide one. On the contrary, the break up details given by the assessee,
in our view, militates against his claim for the reason that the interest element
could not have escaped the attention of the person preparing the return of
income on a scrutiny of the Capital Account of the assessee. Hence, in our view,
I.T.A. No.2590/Mum/2013
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the assessee could not take support of the decision of Hon'ble Apex Court
referred supra.
9. It is also pertinent to refer to the decision rendered by Hon'ble Supreme
Court in the case of Mak Data Ltd (358 ITR 598), wherein the Hon'ble Apex
Court has held that the Explanation offered by the assessee during the course of
penalty proceeding determines the scope of penalty. In the instant case, apart
from stating that it was inadvertent mistake, the assessee could not furnish any
other explanation or material. Further the assessee has also failed to prove that
the explanation offered by him is bona fide one.
10. In view of the foregoing discussions, we are of the view that the Ld
CIT(A) was justified in confirming the penalty levied by the AO. However, we
notice that the penalty has been levied @ 200% of the tax sought to be evaded.
We consider it to be on the higher side. Accordingly we modify the order of Ld
CIT(A) and direct the AO to levy the penalty @ 100% of the tax sought to be
evaded. We order accordingly.
11. In the result, the appeal filed by the assessee is partly allowed.
The above order was pronounced in the open court on 31st July, 2014.
31st July, 2014
Sd sd
( / VIVEK VARMA) (.. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
st
Mumbai: 31 July,2014.
. ../ SRL , Sr. PS
I.T.A. No.2590/Mum/2013
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/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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