The ITAT Mumbai in Gopalkrishna Narla Rao Versus Income Tax Officer examined whether penalty under section 271(1)(c) is leviable when an assessee voluntarily revises computation during assessment proceedings due to inadvertent errors and the assessed income matches such revised computation. The assessee, a Chartered Accountant, initially declared income of ₹21.23 lakh but later identified computational mistakes, including double deduction of housing loan interest and incorrect income classification, and revised income to ₹27.11 lakh. The Assessing Officer accepted the revised computation but imposed penalty, alleging inaccurate particulars, which was upheld by NFAC. However, the Tribunal found that the additions arose solely from the assessee’s own correction, with no independent detection by the department. It held that the errors were bona fide and computational, not deliberate concealment. Relying on Supreme Court rulings, the Tribunal concluded that inadvertent mistakes do not attract penalty where full facts are disclosed, and accordingly deleted the penalty.
Core Issue Whether penalty under section 271(1)(c) can be imposed where:
(i) The assessee voluntarily revises computation during assessment proceedings, and
(ii) The final assessed income matches the revised computation,
(iii) The discrepancy arose due to inadvertent computational errors.
The decision of the Mumbai Bench of the Tribunal in Gopalkrishna Narla Rao vs Income Tax Officer (order dated 16.03.2026) deals with the sustainability of penalty under section 271(1)(c) in a case where the assessee revised the computation of income during the course of assessment proceedings. The assessee, a practicing Chartered Accountant, had originally filed his return declaring income of ₹21.23 lakh. During the scrutiny proceedings initiated under section 142(1), he noticed certain inadvertent computational errors in the return, namely double deduction of housing loan interest and incorrect classification of certain income. Upon detection of these mistakes, the assessee furnished a revised computation offering additional income, thereby increasing the total income to ₹27.11 lakh. The Assessing Officer accepted the revised computation and completed the assessment at the same figure, but proceeded to initiate and levy penalty of ₹6.17 lakh under section 271(1)(c) alleging furnishing of inaccurate particulars of income, which was also confirmed by the NFAC.
Facts- In Gopalkrishna Narla Rao vs Income Tax Officer, the assessee, a practicing Chartered Accountant, filed his return of income for AY 2015–16 declaring total income of ₹21.23 lakh. The case was selected for limited scrutiny, and during the course of assessment proceedings pursuant to notice under section 142(1), the assessee, while preparing replies, noticed certain inadvertent computational mistakes in the original return. These included double deduction of housing loan interest and incorrect classification of certain income under the wrong head.
Errors identified:
1. Double deduction of housing loan interest (₹3.62 lakh approx.)
2. Misclassification of income under wrong head (₹3.01 lakh approx.)
Accordingly, the assessee furnished a revised computation of income during assessment proceedings, enhancing the total income to ₹27.11 lakh. The Assessing Officer ultimately completed the assessment at the same income as declared in the revised computation.
Assessing Officer’s Findings :The Assessing Officer, while accepting the revised computation and completing the assessment at ₹27.11 lakh, initiated penalty proceedings under section 271(1)(c) on the ground that the assessee had originally furnished inaccurate particulars of income. According to the Assessing Officer, the assessee disclosed additional income only after the case was selected for scrutiny, and therefore, it could not be said that the disclosure was voluntary. He held that, had the scrutiny not taken place, the income would have escaped assessment. On this reasoning, the Assessing Officer concluded that the assessee had furnished inaccurate particulars of income and imposed penalty of ₹6,17,612.
CIT(A) / NFAC Findings-The National Faceless Appeal Centre (NFAC), acting as the first appellate authority, upheld the penalty imposed by the Assessing Officer. It agreed with the view that the revised computation was filed only after detection by the department through scrutiny proceedings, and therefore, the assessee could not claim that the disclosure was bona fide or voluntary. The appellate authority thus confirmed that the case fell within the ambit of furnishing inaccurate particulars of income under section 271(1)(c).
Assessee’s Arguments before ITAT :Before the Tribunal, the assessee contended that the errors in the original return were purely inadvertent and arose due to computational mistakes, which were discovered during the course of assessment proceedings and immediately rectified by filing a revised computation. It was argued that there was no concealment of income or furnishing of inaccurate particulars, as all primary facts were already on record and the corrections were made suo motu. The assessee emphasized that the Assessing Officer had accepted the revised computation in toto and there was no variation between the assessed income and the income offered in the revised computation. Reliance was placed on the judgments of the Hon’ble Supreme Court in CIT vs Reliance Petroproducts Pvt Ltd and Price Waterhouse Coopers Pvt Ltd vs CIT, to submit that a bona fide and inadvertent error does not attract penalty under section 271(1)(c), even if it results in higher income. The assessee further submitted that merely because he is a Chartered Accountant, it cannot be presumed that no mistakes could occur, especially when the surrounding facts demonstrated multiple computational inconsistencies supporting the bona fide nature of the errors.
ITAT Finding- Before the Tribunal, the assessee contended that the discrepancies were purely inadvertent and arose due to computational mistakes, which were voluntarily rectified during the assessment proceedings, and therefore there was neither concealment of income nor furnishing of inaccurate particulars. Reliance was placed on the decisions of the Hon’ble Supreme Court in CIT vs Reliance Petroproducts Pvt Ltd and Price Waterhouse Coopers Pvt Ltd vs CIT, wherein it was held that a bona fide mistake or an incorrect claim does not automatically attract penalty. The Revenue, on the other hand, argued that the additional income was offered only after the case was selected for scrutiny and that, but for such scrutiny, the income would have escaped assessment, thereby justifying the penalty.
The Tribunal, after considering the rival submissions and examining the factual matrix, observed that there was no variation between the income offered by the assessee in the revised computation and the income ultimately assessed by the Assessing Officer. It noted that the additions were not the result of any independent detection by the Assessing Officer, but arose entirely due to the assessee’s own rectification of errors during the assessment proceedings. The Tribunal further held that the nature of errors, such as double deduction of interest and incorrect head of income, were clearly computational and inadvertent, and could not be construed as deliberate furnishing of inaccurate particulars. Importantly, the Tribunal rejected the contention that being a Chartered Accountant, the assessee could not have committed such errors, placing reliance on the principle laid down by the Supreme Court in Price Waterhouse Coopers (P.) Ltd. that even professionals are prone to bona fide mistakes.
The Tribunal also found support for the assessee’s explanation from the fact that there were other computational inconsistencies in the return, such as incorrect claim of brought forward losses, which further established that the errors were unintentional. Emphasizing the bona fide conduct of the assessee in promptly correcting the mistakes during the assessment proceedings, and in the absence of any material to show deliberate concealment or furnishing of inaccurate particulars, the Tribunal held that the conditions for invoking section 271(1)(c) were not satisfied. Accordingly, applying the ratio of the Supreme Court judgments, the Tribunal deleted the penalty and allowed the appeal of the assessee.
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