Penalty u/s 271(1)(c) of the Income Tax Act Cannot be Imposed for Mistake by Accountant: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that a penalty cannot be imposed under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) for a mistake made by the assessee's accountant and ruled that the assessee was not liable for the penalty because he had provided all the relevant information to his accountant and that the accountant had made a mistake in calculating the income.

The assessee, Dharmendrakumar B Mehta filed his return of income for the assessment year 2013-14 declaring total income of Rs. 10,81,480/-. However, the Assessing Officer (AO) added Rs. 2,15,471/- as Long Term Capital Gain and Rs. 13,091/- as interest income. The AO imposed a penalty of Rs. 48,435/- for providing inaccurate income details. The assessee appealed against the order of AO at ITAT.

The assessee claimed that his accountant made a mistake in calculating his income, claiming he provided all the necessary information. He also claimed that he filed a revised return of income, disclosing all relevant income, demonstrating that he was not concealing his income.

The Revenue claimed the assessee was responsible for a mistake in his accountant's return of income, arguing that he should have taken care to ensure it was filed correctly. They also argued that the assessee's delay in filing the revised return after the AO made the addition and penalty, indicating a desire to conceal his income.

In case of the Supreme Court held that the penalty under Section 271(1)(c) cannot be imposed if the mistake is on the part of the accountant and not the assessee and held that the assessee had provided all the relevant information to its accountant and that the accountant had made a mistake in calculating the provision for gratuity.

The Tribunal noted that the assessee had filed a revised return of income disclosing all the relevant income. This showed that the assessee was not trying to conceal his income.

A Single-member bench Suchitra Kamble (Judicial Member) has allowed the appeal of the assessee and set aside the order of the Assessing Officer (AO) imposing a penalty of Rs. 48,435/- under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) for furnishing inaccurate particulars of income and held that the penalty cannot be imposed as the mistake was on the part of the accountant and not the assessee.

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