Commissioner Of Income Tax,Panchkula v. Adarsh Bhatia

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 149 of 2011Date of decision: 26.5.2011 Commissioner of Income Tax,Panchkula --- Appellant Versus Adarsh Bhatia --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Yogesh Putney, Senior Standing Counselfor the appellant-revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act,1961 (for short “the Act”) has been filed by the Revenue against theorder dated 30.7.2010, passed by the Income Tax Appellate TribunalChandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No.399/CHANDI/2010, relating to the assessment year 2006-07. 2.The following substantial question of law has beenclaimed for determination of this Court: “(i)Whether on the facts and circumstances of the case, theITAT is justified in quashing the penalty of Rs. 5,07,385/-merely on the ground that the excess claim made by theassessee was due to clerical mistake of the accountantignoring the fact that the excess claim was found outduring the scrutiny of the return and the assessee did notvoluntarily file a revised return or corrected the excessclaim.”ITAT is justified in quashing the penalty of Rs. 5,07,385/-merely on the ground that the excess claim made by theassessee was due to clerical mistake of the accountantignoring the fact that the excess claim was found outduring the scrutiny of the return and the assessee did notvoluntarily file a revised return or corrected the excessclaim.” 3.The facts, in brief, necessary for adjudication as narratedin the appeal, are that the assessee is in the business of tradingin shares. The assessee filed his return for the assessment year2006-07 declaring total income of Rs. 2,57,21,220/-. On examinationof the return, it was found that the assessee had debited a sum ofRs. 7,12,025/- on account of loss on trading of commodities, whilecalculating net profit which was arrived at Rs. 2,68,91,617/-. Theassessing officer further found that the same amount which had beenshown as loss on trading of commodities had also been reducedwhile computing total income. This way, the assessee claimed theloss of Rs. 7,12,025/- twice. The assessee later admitted thatexcess claim of Rs. 14,24,050/- was made and explained that it wasonly due to clerical error. Revised computation was accordingly filedand the assessing officer, vide order dated 24.12.2008 made additionof the above amount to the returned income besides initiating penaltyproceedings for furnishing inaccurate particulars of income. TheDeputy Commissioner of Income Tax, Panchkula later imposed apenalty of Rs. 5,07,385/- under Section 271(1)(c) of the Act on theassessee vide order dated 29.6.2009. 4.On appeal before the Commissioner of Income Tax(Appeals) [for short “the CIT(A)”], the plea of the assessee that it wasdue to clerical mistake which resulted in wrong claim was acceptedvide order dated 1.2.2010. Appeal of the Revenue against the orderof the CIT(A) was dismissed by the Tribunal, vide the order underappeal and hence, this appeal at the instance of the Revenue. 5.We have heard learned counsel for the Revenue andperused the record. 6. The issue raised in this appeal is, whether in the factsand circumstances of the case penalty under Section 271(1)(c) of theAct could be imposed on the assessee. 7. According to the learned counsel for the Revenue, theassessee had made excess claim of loss which was, however,surrendered by him by means of filing the revised computation whenhe was called upon to explain and, thus, the same cannot be termedto be a voluntary surrender. The counsel further submitted that theassessee had furnished inaccurate particulars of his income andhence, penalty was rightly imposed and the CIT(A) and the Tribunalwere legally not justified in deleting the same. 5.We have heard learned counsel for the Revenue andperused the record. 6. The issue raised in this appeal is, whether in the factsand circumstances of the case penalty under Section 271(1)(c) of theAct could be imposed on the assessee. 7. According to the learned counsel for the Revenue, theassessee had made excess claim of loss which was, however,surrendered by him by means of filing the revised computation whenhe was called upon to explain and, thus, the same cannot be termedto be a voluntary surrender. The counsel further submitted that theassessee had furnished inaccurate particulars of his income andhence, penalty was rightly imposed and the CIT(A) and the Tribunalwere legally not justified in deleting the same. 8.After giving our thoughtful consideration to thesubmissions made by the counsel, we are unable to accept thesame. The Tribunal on appreciation of material on record had cometo the conclusion that the mistake in making excess claim was bonafide and the mistake had occurred due to clerical error. The findingsrecorded by the Tribunal in this regard in para Nos. 5 to 7 of its orderare as under: “5. We have heard the rival contentions and perused therecords. In the computation of income filed along with theoriginal return of income the assessee had made a claimof deduction of Rs. 7,12,025/- twice resulting in excessclaim of deduction of Rs.14,24,050/-. In the P & Laccount, the assessee had claimed the loss onderivatives amounting to Rs. 7,12,025/-. The assesseeduring the course of assessment proceedings whenconfronted with the above said mistake, filed a revisedcomputation of income under which the income wasenhanced by Rs. 14,25,050/-. The mistake in making theexcess claim was claimed to be bona fide as the saidmistake had occurred due to clerical error. Theexplanation of the assessee was that in the computationof income, the said amount should have been first addedto the net profit declared as per P & L Account thereafterdeducted from the computation of income in order toarrive at the business income for the year, However, by aclerical error, instead of adding back to the net profit forthe year, the same was debited to the said profits frombusiness and was again claimed as a deduction in thecomputation of income. This resulted in the addition ofRs. 14,24,050/- and Assessing Officer held the assesseeto have furnished inaccurate particulars of incomejustifying levy of penalty under Section 271(1)(c) of theAct, amounting to Rs.5,07,385/-. 6. Penalty under Section 271(1)(c) of the Act is imposable 6. Penalty under Section 271(1)(c) of the Act is imposable in all such cases where the assessee has concealed itsincome or furnished inaccurate particulars of income. Inthe facts of the present case before us, the assessee hadsuffered loss on sale of derivatives, which was to beallowed to the assessee. However, the assessee whilecomputing the income for the year under considerationhad instead of adding back the said loss to the profits ofthe business and thereafter claiming the loss had by anerror deducted the said loss to the profits of business andhad further claimed the same as deduction in thecomputation of income. This resulted in claiming excessloss of Rs. 14,24,050/-. The Assessing Officer during thecourse of assessment proceedings confronted theassessee with the said mistake and realizing the same, arevised computation of income was filed. The assesseeclaimed the mistake to be a clerical error. In the facts andcircumstances of the case, we are of the view that theassessee is not exigible to levy of penalty under Section271(1)(c) of the Act as the assessee cannot be held tohave furnished inaccurate particulars of income as theincome and a mistake was committed by the Accountantin computing the income. We find support from the ratiolaid down by the Punjab and Haryana High Court in CITvs. Sidhartha Enterprises (supra) that “penalty underSection 271(1)(c) of the Act was imposable only whenthere was some element of deliberate default and not a mere mistake. The findings had been recorded on thefacts that the furnishing of inaccurate particulars wassimply a mistake and not a deliberate attempt to evadetax. The view taken by the Tribunal could not beperverse.” 9. No illegality or perversity could be pointed out by thelearned counsel for the Revenue so as to persuade this Court tointerfere with the aforesaid findings of fact based on appreciation ofthe material on record. No substantial question of law, thus, arisesin the appeal. The appeal is accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE May 26, 2011*rkmalik* (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE