Penalty can’t be levied for Genuine Omissions in Income Tax Returns: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that genuine omissions must be excluded from the levy of penalty under section 271 (1)(a) of the Income Tax Act, 1961.

During the relevant assessment year, the assessee debited a sum of Rs.3,57,541/- towards loss on the sale of the motor car in its profit and loss account but omitted to disallow the same while computing the total income from a business.

The Assessing Officer(AO) discovered the same during the course of assessment proceedings. This, being a genuine mistake, the assessee immediately agreed for disallowance of the same in the assessment. However, the penalty was imposed on the assessee in respect of disallowance made towards loss of sale of motor car amounting to Rs.3,57,541/-.

On appeal, the assessee contended that it was a genuine omissions on the part of the assessee and the entire details for making the addition/disallowance was very much available in the return of income filed by the assessee together with the audited statement of accounts wherein this sum of Rs.3,57,541/- was clearly and separately mentioned in the P & L Account as loss on sale of fixed assets.

Allowing the contentions of the assessee, the Tribunal observed that the Apex Court judgment in the case of Price Waterhouse Coopers (P) Ltd is applicable to the case wherein the Supreme Court held that “There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee have little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.”