Inadvertent and Bonafide Error in Return won’t attract Penalty: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that an inadvertent and bonafide error in return would not attract penalty under section 271(1)(c) of the Income Tax Act, 1961.

The assessee disclosed the deduction pertaining to ‘building premises’ under the head ‘block of assets’. During the course of assessment proceedings, the assessee realized the omission in not offering the LTCG on the sale of the aforesaid shops had worked out its income under the said head and offered the same for tax. However, the Assessing Officer initiated penalty against the assessee under section 271(1)(c) of the Act.

The Tribunal observed that when the assessee had disclosed the deduction of Rs.67,00,000/- pertaining to sale of the aforesaid three shops from the ‘block of assets’ in its balance sheet for the year under consideration, therefore, there is substantial force in its claim that the failure to offer LTCG on the sale of the said shops had inadvertently remained omitted to be shown in the return of income for the year under consideration.

“We are of the considered view that imposition of penalty under Sec. 271(1)(c) would be unwarranted in a case where the assessee had committed an inadvertent and a bonafide error, and had not intended or attempted to either conceal its income or furnish inaccurate particulars,” the Tribunal observed.

“Admittedly, there has been an omission on the part of the assessee to disclose the LTCG on sale of the shops in its return of income for the year under consideration. However, at the same time, we cannot remain oblivious of the bonafides of the assessee, which can safely be gathered from the aforesaid facts and discard its explanation for no justifiable reason. Accordingly, in the totality of the facts of the case, we are of a strong conviction that imposition of penalty under Sec. 271(1)(c) would be unwarranted on account of the aforesaid inadvertent and bonafide error on the part of the assessee. We thus not being able to persuade ourselves to accept the view taken by the lower authorities set aside the order of the CIT(A) and delete the penalty imposed by the A.O under Sec. 271(1)(c),” the Tribunal said.