Penalty U/S 271(1)(c) Of Income Tax Act Not Applicable If Assessee Voluntary Discloses Bona Fide Mistake: Chhattisgarh High Court

Section 271(1)(c) of the Income Tax Act, 1961 deals with penalties for concealment of income or furnishing inaccurate particulars of income.

The Division Bench of Justices Sanjay K. Agrawal and Deepak Kumar Tiwari noted that “it is a case where the assessee came up fairly before the Assessing Officer correcting the error crept in while submitting the return and revised return that too before initiation of the scrutiny assessment proceedings. Even it is not the case of the Revenue that the assessee has concealed the income.”

In this case, the issue before the bench was whether in view of the voluntary disclosure of the income which is said to be feeding mistake, the imposition of penalty by the Assessing Officer under Section 271 (1) (c) of Income Tax Act, 1961 was correct.

The assessee/appellant is a Public Limited Company. The case of the assessee was selected for scrutiny assessment by issuance of mandatory notice under Section 143(2) of the IT Act under CASS by the Assessing Officer (AO) and statutory notices were issued accordingly.

Ultimately, during the course of assessment proceedings, the assessee on its own volition, informed the AO about the difference in the figures of book profit for the purposes of computation of MAT under Section 115JB which was declared as 26,89,97,367/- instead ₹ of ₹ 35,74,90,033/- attributing the same to inadvertent data feeding mistakes in the return filed.

The AO imposed a penalty on the assessee under Section 271(1)(c) of the IT Act alleging that the assessee has tried to furnish inaccurate particulars of income and thereby sought to evade tax.

The assessee filed an appeal before the CIT (Appeals). The CIT (Appeals) accepted the appeal of the assessee holding that mismatch in the figures of book profit was a case of feeding mistake and data transmission error and therefore there was no mala fide intention on the part of the assessee.

The Revenue preferred an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the order passed by the CIT (Appeals). The ITAT allowed the appeal of the Revenue and set aside the order passed by the CIT (Appeals).

The assessee submitted that the assessee had already furnished the tax audit report in Form No.3CA/3CD conducted under Section 44AB of the IT Act, that too before initiating the assessment proceedings, as such, there was bona fide act on the part of the assessee and it is only a data feeding mistake, therefore, would not fall within the mischief of Section 271(1)(c) of the IT Act.

The bench stated that “once the Tax Audit Report conducted under Section 44AB of the IT Act was filed and it was uploaded in the Income Tax Portal along with the return of income, there is no question of submission of any inaccurate particulars and no question of concealment of income by the assessee”.

The bench added that the fact remains that correct figures provided were not brought to the notice of the Assessing Officer while filing return and revised return and ultimately it is the assessee itself who brought correct figures on record informing the AO about the difference in the figures of book profit attributing the same to be inadvertent data feeding mistakes in the return filed, therefore, the assessee's case will not fall within the mischief of Section 271(1)(c) of the IT Act.

In view of the above, the bench allowed the appeal.

Case Title: Chhattisgarh State Power Transmission Company Limited v. DCIT Circle-1(1), Raipur, C.G.

Case Number: TAXC No. 91 of 2024

Counsel for Petitioner/ Assessee: Apurv Goyal and Nikhilesh Begani

Counsel for Respondent/ Department: Ajay Kumrani

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