No Penalty Is Leviable U/s 271(1)(C) If Bona Fide Mistake In Original Return Was Corrected By Revised Computation During Assessment: Mumbai ITAT

The Bench of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “the fact that the donation given was stated in the Tax Audit Report and the deduction under section 80G of the Act was also computed by the tax auditor, however even then the assessee failed to claim a deduction under section 80G of the Act supports the claim of the assessee that the mistakes were sheer inadvertent human error.” (Para 8)

As per the brief facts of the case, the Assessee's return was selected for scrutiny, wherein AO found that the assessee has debited Rs. 51,35,000 towards donation and charity, however, the same has not been added by the assessee in the computation of income. On being pointed out the discrepancy, the assessee submitted the revised computation of income including the amount of donation and charity of Rs. 51,35,000. Further, it was also noted that the assessee has debited an amount of Rs. 2,26,832 on account of loss on sale of assets, however, the same has not been added to the computation of income by the assessee. In this regard, no reply was furnished by the assessee, accordingly the amount of Rs. 2,26,832 claimed on account of loss on sale of assets was disallowed and added to the total income of the assessee.

Meanwhile, the penalty proceedings u/s 274 r/w section 271(1)(c) were initiated. The AO levied a penalty of Rs. 17,81,066, on the basis of additions on account of donation and charity, and on account of loss on sale of assets, which were debited to the profit and loss account, however, the same were not been added by the assessee in the computation of income.

The CIT(A), dismissed the appeal filed by the assessee and held that both the issues were identified during the assessment proceedings from the profit and loss account and therefore this is not a case of a bona fide reasonable mistake.

The Bench noted that the assessee claimed it to be sheer inadvertent human error, as the assessee not only missed to add the aforesaid amount but also failed to claim deduction u/s 80G of 50% of the aforesaid amount.

The Bench further noted that the loss on sale of assets of Rs. 2,26,832, which was debited to the profit and loss account but not added to the computation of income, the assessee accepted the error and did not object to the discrepancy pointed out by the AO during the assessment proceedings.

The Bench observed that once the aforesaid discrepancies were pointed out the assessee accepted its mistake and filed the revised computation of income, and paid the tax difference of Rs. 22,59,394.

Therefore, on finding that the assessee made bona fide mistakes in the computation of the total income, ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Mihir C. Naniwadekar

Counsel for Respondent/Department: Mahita Nair

Case Title: Meyer Organics Pvt. Ltd. verses Commissioner of Income Tax

Case Number: ITA No.: ITA no.3307/Mum./2023

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