Case Law Details
Assessee submitted that the lapse in offering the interest earned on fixed deposit was due to oversight on the part of the accountant because of the fact that though assessee’s accounts are subject to tax audit as well as statutory audit, however, the mistake in not offering the interest income on fixed deposit was not pointed out by either of the auditors. Therefore, he submitted, it is a genuine mistake due to oversight and once it came to the notice of the assessee the income was offered to tax.
Undisputedly, in the return of income assessee has failed to offer interest on fixed deposit amounting to Rs. 5,92,186 and loss claimed on account of fixed asset written–off amounting to Rs. 1,82,242. It is also a fact on record that in the course of assessment proceedings, the assessee accepted the taxability of these items of income and offered them to tax. The assessee has explained that non–disclosure of aforesaid two items of income is due to oversight and due to the fact that neither in the tax audit nor in the statutory audit such omission was pointed out. We find merit in the aforesaid explanation of the assessee. In fact, in Para–4.3.2 of his order, the learned Commissioner (Appeals) has observed that the explanation offered by the assessee with regard to imposition of penalty has not been found to be false. On a perusal of the audit report, we have also noted that the auditors have not pointed out the omission. Thus, assessee’s explanation that non–disclosure of two items of income is on account of omission due to oversight is believable since the auditors have also failed to detect such omission in the audit report. Therefore, in our opinion, the ratio laid down by the Hon’ble Supreme Court in PricewaterhouseCoopers Pvt. Ltd. (supra), clearly applies to the facts of the present case as, in our opinion, it is a bonafide mistake committed by the assessee. The other decision relied upon by the learned Authorised Representative also support such view. That being the case, in our opinion, imposition of penalty under section 271(1)(c) in the present case is not justified.
RELEVANT EXTRACT OF THE JUDGMENT
2. Brief facts are, the assessee a company filed its return of income on 30th September 2011, for the impugned assessment year, declaring loss of Rs. 2,49,493, under the normal provisions. In the course of assessment proceedings, on the basis of AIR information available on record, the Assessing Officer finding mismatch in the interest received on fixed deposit as per books of account and as per Form–26AS called upon the assessee to reconcile the same. In response, it was submitted by the assessee that due to over sight the assessee has offered interest income on fixed deposit at ` 18,90,833, as against actual interest received of ` 24,83,019. It was submitted by the assessee that the aforesaid figure of ` 18,90,833 was considered on the basis of audited account. The assessee, however, offered the differential amount of ` 5,92,186 to tax. Further, an Assessing Officer noticed that the assessee has debited the amount of ` 1,82,242 on account of fixed asset written–off. According to the Assessing Officer, since the loss arising out of writing–off of fixed asset is capital in nature the same is not allowable under section 37(1) of the Act and the assessee should have added back the same while computing his total income. As it appears, assessee accepted the aforesaid decision of the Assessing Officer and did not contest the addition. On the basis of these two additions, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c). In reply, to the show cause notice issued under section 274 r/w section 271(1)(c), though, the assessee objected to the initiation of proceeding for imposition of penalty under section 271(1)(c) by explaining that the non–disclosure of income resulting in addition was on account of oversight, however, the Assessing Officer rejecting the explanation of the assessee proceeded to impose penalty under section 271(1)(c) alleging filing of inaccurate particulars of income. Though, the assessee challenged the imposition of penalty under section 271(1)(c) before the first appellate authority, however, the learned Commissioner (Appeals) confirmed the imposition of penalty.
3. Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted that the assessee though, was having a number of fixed deposit in different banks, however, he has offered to tax interest received from all fixed deposits except one. He submitted, the lapse in offering the interest earned on fixed deposit was due to oversight on the part of the accountant because of the fact that though assessee’s accounts are subject to tax audit as well as statutory audit, however, the mistake in not offering the interest income on fixed deposit was not pointed out by either of the auditors. Therefore, he submitted, it is a genuine mistake due to oversight and once it came to the notice of the assessee the income was offered to tax. The learned Authorised Representative submitted, the same is the case with the claim of loss on account of write–off of fixed asset amounting to Rs. 1,82,242. Learned Authorised Representative submitted, as the non–disclosure of income was due to bonafide mistake, imposition of penalty under section 271(1)(c) is improper. For such proposition, he relied upon the following decisions:–
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