No Penalty u/s 271(1)(c) for Voluntarily Disclosed Bona Fide Mistake by Taxpayer: Chhattisgarh HC [Read Order]

In a recent ruling, the Chhattisgarh High Court ruled that no penalty under Section 271(1)(c) of the Income Tax Act, 1961, can be imposed where the taxpayer voluntarily discloses a bona fide error in their return.

Chhattisgarh State Power Transmission Company Ltd., a government-owned entity, had initially filed its income tax return for the assessment year 2016-17, declaring nil income after setting off carried-forward losses and reported book profits of Rs. 26.90 crore under the MAT provisions of Section 115JB of the Income Tax Act.

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The tax audit report, which had been uploaded to the Income Tax Department portal, reflected the actual book profit as Rs. 35.74 crore. The difference of Rs. 8.84 crore was not due to any deliberate act of concealment or misstatement but arose from an error in entering the figures during return filing.

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During the scrutiny proceedings, and before the assessment was finalized, the assessee voluntarily disclosed the discrepancy through a written submission dated 22.11.2019. The assessing officer accepted the corrected computation but also imposed a penalty of Rs. 2.72 crore, alleging that the assessee had furnished inaccurate particulars of income with an intent to evade tax.

The assessee challenged the penalty before the Commissioner of Income Tax (Appeals), who allowed the appeal and held that the error was merely a clerical mistake and not a case of deliberate concealment.

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The appellate authority observed that the tax audit report had already disclosed the correct figures and there was no malafide intention on the part of the assessee, especially considering its status as a government entity. The Income Tax Department appealed to the Income Tax Appellate Tribunal (ITAT), which reversed the CIT(A)’s decision and reinstated the penalty order.

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A Single-Judge comprising Justice Sanjay K. Agrawal explained that the assessee had proactively brought the error to the department’s attention and had never attempted to suppress income and that both the tax audit report and the revised return were filed well before the scrutiny assessment commenced.

The court ruled that the imposition of a penalty in such a case was not under the law, and there was neither concealment of income nor furnishing of inaccurate particulars, as the assessee disclosed a bona fide mistake upfront.

To Read the full text of the Order CLICK HERE

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