No Penalty if  there was mistake while uploading the ITR as expenses were disallowed in the Tax Audit report but not in ITR  : High Court

ORDER

1. The following substantial question of law is proposed:

“Whether on the facts and circumstances and in law, the Hon’ble ITAT erred in appreciating the fact that the error on the part of the assessee was detected during the course of assessment proceeding u/s. 143(3) of the Act on scrutiny by the AO, failing which the error would not had surfaced and therefore, levy of penalty, as a deterrent, was justified and taking any lenient view would encourage the assessee to perpetuate such mistakes?”

2. Respondent (assessee) filed the return of income on 14th February 2012 for A.Y.-2010-2011 declaring loss of Rs.16,10,43,542/- During the course of assessment, the Assessing Officer (AO) observed that certain expenses which were not allowable expenses under the Act were not added back to the total income in the computation of income to the tune of Rs.13,11,45,849/-. The AO also observed that disallowance of such expenses has been mentioned by the auditors in the tax audit report dated 2nd May 2012 furnished by assessee. The AO, therefore, disallowed the said expenses of Rs.13,11,45,849/- and added the same back to the total income of the assessee. During the scrutiny assessment u/s. 143(3) which was completed on 28th February 2013 a loss of Rs. 1,81,57,433/- was determined.

3. Subsequently, penalty proceeding were initiated and notice was issued u/s. 274 r.w.s 271 of the Act for concealing/ furnishing Inaccurate particulars of income. Assessee responded to the notice and the stand of assessee was that while filing the return electronically, cetain disallowances were not properly entered in the column of disallowances and accordingly it showed a loss. Before the Income Tax Appellate Tribunal (ITAT), affidavit of Managing Director of the assessee was filed stating that return was filed by the then CFO one Mr. Sudesh Vaidya and the said Mr. Vaidya has since left the company and migrated to United Kingdom, it is assessee’s case that the CFO made an inadvertent error of not considering the disallowances which were mentioned in the tax audit report while uploading the return of income. It was also submitted that the return of income was filed belatedly and, therefore, the same cannot be revised. It was further asserted that even after the subject disallowances, the return of income showed a loss of return and due to delay in filing the return, even the loss could not be carried forward. Therefore, the mistake was not intentional or delieberate and the penalty proceedings be dropped.

4. Mr. Sharma pointed out that the Commissioner of Income Tax (Appeals) (CIT(A)), has made a factual finding that the tax audit report was not filed. In our view, there is an error in such a finding because the AO has accepted that the tax audit report was filed. In fact, even in this appeal in the facts of the case narrated, it is admitted in paragraph 3.1 that the tax audit report dated 2nd May 2012 was furnished by assessee.

5. Be that as it may, the ITAT in its order pronounced on 31st March 2017, as impugned in this appeal, has come to a factual finding that there is no intention on the part of assessee to conceal the income or furnish inaccurate particulars of income. It has also accepted the explanation that the CFO was entrusted with the filing of return and the CFO made a mistake in not properly uploading the return by filling up the return with the disallowances which were already reported by the auditors in the tax audit report. The ITAT has come to a factual finding that there was no intention of furnishing any inaccurate particulars or concealment of income as the facts undoubtedly suggest so. In a case that was before the Apex Court in the matter of Price Waterhouse Coopers Pvt Ltd. v. Commissioner of Income Tax & Anr [2012] 348 ITR 306(SC) the Apex Court set aside the penalty proceedings in view of the findings of fact that the tax audit report was filed a/w return which would indicate that assessee had made a computation error in its return of income.

6. In the case at hand also, the tax report has been filed alongwith the return of income. Therefore, we would agree with the ITAT that it was only a mistake while uploading the return of income in the given facts and circumstances of the case.

7. Since the order of the ITAT on this issue is based on finding of fact, we see no reason to entertain this appeal.

8. Appeal dismissed.