M/s. Seed Infotech Limited, Pune V. Deputy Commissioner of Income-tax, Circle - 6, Pune

ITA 552/PUN/2018

AI Insights

M/s. Seed Infotech Limited appealed against the penalty imposed by the Assessing Officer and upheld by the CIT(A) for alleged furnishing of inaccurate particulars of income and concealment of income. The penalty was based on a clerical error where bad debts were incorrectly reported as Rs.2,87,83,999 instead of Rs.28,78,399 due to the inadvertent addition of an extra digit. The Tribunal examined the circumstances of the error, the appellant's explanations, and relevant judicial precedents, ultimately deciding that the mistake was unintentional and did not warrant a penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137161 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2018
• Other Referred Cases: Price Waterhouse Coopers (P.) Ltd. vs. CIT, CIT vs. Anwar Ali, Amruta Organics Pvt. Ltd. vs. DCIT, CIT vs. Compro Technologies (P.) Ltd., MAK Data (P.) Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Revised return
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.552/PUN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2013-14 M/s. Seed Infotech Limited, Panchsheel, 42/16, Erandawana, Off Karve Road, Pune- 411004. PAN : AACCS5852P Vs. DCIT, Circle-6, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 10, Pune [‘the CIT(A)’] dated 18.01.2018 for the assessment year 2013-14. 2. The appellant raised the following grounds of appeal :- “1. The learned CIT(A)-10 and the learned AO erred in law and on the facts in levying penalty u/s 271(1)(c) of the ITA,1961 amounting to Rs. 80,04,380/- for furnishing inaccurate particulars of income and thereby concealing the income. Assessee by : Shri Kishor B. Phadke Revenue by : Shri Ramnath P. Murkunde Date of hearing : 02.02.2023 Date of pronouncement : 08.02.2023 ITA No.552/PUN/2018 2 2. The learned CIT(A)-10 and the learned AO erred in law and on facts in not appreciating that, there was a mistake in filing revised return of income in claiming bad debts amount of 2,87,83,999/- instead of 28,78,399/- i.e. an extra digit of "9" was inserted erroneously. 3. The learned CIT(A)-10 and the learned AO further erred in law and on facts in not appreciating that appellant company had accepted its mistake in filing the revised return of income and was ready to add back the loss claimed wrongly to the tune of Rs.2,59,05,600/-. Also, it was not appreciated that, no set-off of loss benefit was enjoyed by the appellant in subsequent assessment years. 4. The learned CIT(A)-10 and the learned AO further erred in law and on facts in levying penalty for furnishing inaccurate particulars of income and at the same time framing it as concealment of income. The Ld. AO erred in law and on the facts in levying penalty under two limbs at the same time without appreciating that penalty for furnishing inaccurate particulars and for concealment of income does not merge with each other and that satisfaction for each limb has to be separate and is not automatic. 5. The appellant craves leave to add / modify / delete / amend all / any of the grounds of appeal.” 3. Briefly, the facts of the case are as under :- The appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of providing high end Information Technology trading, consultancy, staffing solutions and other allied services. The Return of Income for the assessment year 2013-14 was filed on 30.09.2013 declaring loss of Rs.2,64,86,484/-. The same was revised on 27.05.2014 by Rs.4,78,08,848/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-6(2), Pune (‘the Assessing Officer’) vide order dated 22.03.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total loss on account of ITA No.552/PUN/2018 3 incurred expenditure of Rs.2,19,03,248/-. The disparity between the returned loss and assessed loss is on account of excess claim of bad debts written off of Rs.2,59,05,600/-. The factual background of leading to the above addition is as under :- During the previous year relevant to the assessment year under consideration, the appellant company had written off of bad debts of Rs.28,78,399/- and the same claim was made in the original return of income. However, in the revised return of income filed on 27.05.2014, the said bad debts written off were shown at Rs.2,87,83,999/-. During the course of assessment proceedings, the Assessing Officer had called upon the appellant company to explain the discrepancies in the claim between the original return of income and revised return of income. The appellant company had filed an explanation before the Assessing Officer explaining that it is inadvertent mistake that the bad debts written off was wrongly shown as Rs.2,87,83,999/-. It was further submitted that mistake has occurred because of addition of another figure ‘9’ at the end of figure of Rs.28,78,399/-. The appellant company also demonstrated the inadvertence by showing that even the Profit & Loss Account had shown bad debts written off of Rs.28,78,399/- only. However, the Assessing Officer had initiated the penalty proceedings u/s ITA No.552/PUN/2018 4 271(1)(c) of the Act by issuing show-cause notice u/s 274 r.w.s. 271(1)(c) dated 22.03.2016. In response to the show-cause notice, it was explained that the bad debts claim was wrongly shown at Rs.2,87,83,999/- instead of Rs.28,78,399/-. The mistake has occurred on account of insertion of the figure ‘9’ inadvertently to the figure of Rs.28,78,399/-. It is further submitted that even the financial statement of the appellant company clearly shows that the bad debts written off of Rs.28,78,399/-. Thus, it was pleaded that the appellant was not guilty of concealment of income or furnishing of inaccurate particulars of income. The appellant placed reliance on the following decisions :- (i) Price Waterhouse Coopers (P.) Ltd. vs. CIT, 25 taxmann.com 400 (SC). (ii) CIT vs. Anwar Ali, 76 ITR 696 (SC). (iii) Amruta Organics Pvt. Ltd. vs. DCIT (ITA No.1121/PUN/2011). (iv) CIT vs. Compro Technologies (P.) Ltd., 35 taxmann.com 180 (Delhi). 4. However, the Assessing Officer brushing aside the above explanation of the appellant and applying the ratio of the decision of the Hon’ble Supreme Court in the case of MAK Data (P.) Ltd. vs. CIT, 358 ITR 593 (SC) levied penalty of Rs.80,04,830/- by holding ITA No.552/PUN/2018 5 that the appellant company is guilty of furnishing of inaccurate particulars of income vide penalty order dated 29.09.2016. 5. Being aggrieved by the above penalty order, an appeal filed before the ld. CIT(A) contending that there was bona-fide mistake while filing the revised return of income in claiming the bad debts written off of Rs.2,87,83,999/- instead of Rs.28,78,399/- and the assessee was not guilty of furnishing of inaccurate particulars of income. However, the ld. CIT(A) was of the opinion that the claim was made with mala-fide intention as the assessee had failed to verify the deduction increasing loss, while filing the revised return of income as well as also failed to verify the reason for the said loss. 6. Being aggrieved, the appellant is in appeal before us in the present appeal. 7. The ld. AR reiterated the same submissions as made before the lower authorities and pleaded that the mistake has occurred on account of adding of figure ‘9’ to figure of Rs.28,78,399/- and this bona-fide mistake can be demonstrated with reference to the financial statements, wherein, the bad debts claim written off of Rs.28,78,399/- only shown. He submits that the ratio of the Price Waterhouse Coopers (P.) Ltd. (supra) is squarely applicable to the fact of the present case. ITA No.552/PUN/2018 6 8. On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities. 9. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the levy of penalty u/s 271(1)(c) of the Act. The disparity between the returned income and assessed income is on account of addition made by the Assessing Officer on account of bad debts claim written off. It is an admitted fact that in the original return of income as well as financial statement, the claim for deduction of bad debts written off of Rs.28,78,399/- was made. However, in the revised return of income, the bad debts claim written off of Rs.2,87,83,999/- was made. When this discrepancy was brought to the notice of the appellant company, it has rightly admitted the mistake which had occurred on account of inadvertently addition figure ‘9’ to Rs.28,78,399/-. This was further corroborated by the fact that even in the Profit & Loss Account shown a claim of bad debts written off of Rs.28,78,399/- only, therefore, in our considered opinion, no ill motive can be attributed to the assessee company and cannot be held that the assessee is guilty of concealment of particulars of income expressly in view of the fact that in the original return of income as well as the profits shown in the Profit & Loss Account ITA No.552/PUN/2018 7 that the bad debts written off of Rs.28,78,399/-. Therefore, in our considered opinion, the ratio of the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P.) Ltd. (supra) is squarely applicable to the facts of the present case. The held portion of the said decision of the Hon’ble Supreme Court (supra) is as under :- “Filing of Tax Audit Report showed that it was bona fide computation error • The facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a 'silly' mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court. [Para 17] • 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) 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 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. [Para 18] Calibre and expertise of assessee have little to do with inadvertent error • 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 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 caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. [Para 19] ITA No.552/PUN/2018 8 • Given the peculiar facts of this case, the imposition of penalty on the assessee is not justified. The assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. [Para 20]” 10. The ratio of the decision of the Hon’ble Supreme Court in the case of MAK Data (P.) Ltd. (supra) is not applicable, inasmuch as, the addition was not made on agreed basis to buy peace, there is no voluntary disclosure of income to buy peace with the Department. In the circumstances, we direct the Assessing Officer to delete the penalty of Rs.80,04,830/- made u/s 271(1)(c) of the Act. Thus, the grounds of appeal filed by the assessee stands allowed. 11. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 08 th day of February, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 08 th February, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-10, Pune. 4. The Pr. CIT-3, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.