Penalty u/s 271(1)(c) cannot be levied where there is a bonafide mistake made by the assessee without any intention to evade tax. This was declared and confirmed by Hon’ble ITAT, Pune in Amruta Organics Pvt Ltd vs. DCIT being ITA no. 1121 / PN / 2011 by a judgment dated 22.3.2013.
It was clearly clarified that the questions of imposing any penalty under section 271(1) (c) will be denied by the court if the failure to furnish details of income is due to a “bonafide mistake” made by the assessee.
The Case Details
In the above-mentioned case, the assessee has already shown losses for the previous years and years before that. The assessee has had even claimed incorrect depreciation which was disallowed by the Assessing Officer. Also, a penalty u/s 2871(1)(c) for concealment was levied which was upheld by the Ld. CIT(A). Therefore, there was no intention of the assessee to conceal income to evade taxes.
The assessee never had any intentions to conceal income to evade taxes in this case. This a sheer bonafide mistake which was held due to the wrong advice provided by the Chartered Accountant, who assisted the assessee in this calculation.
The excess claim of depreciation was established as a mistake with the assessee accepting his fault. Furthermore, he accepted that he had no intentions to surface any false index and he was unable to notice the fault. He did not conceal anything from the department. The Honorable ITAT set the order aside of Ld. CIT(A) to impose penalty u/s 271(1)(c) and held the appeal in favor of the assessee.
He did not even conceal anything from the Income Tax department. In this regard, by going through all the statements and the details of the matter, the honorable ITAT set the order aside of Ld. CIT(A) to impose penalty u/s 271(1)(c) on the grounds of the bonafide act and held the appeal in favor of the assessee.
Bonafide Mistake Vs. Malafide Mistake
As a conclusion, it can be said that in the case of such “bonafide mistakes” where the assessee fails to discover the error, he can avoid any such confusions and thereby get rid of all similar troubles just by paying his which is assessed to be payable by him in the normal situation.
Whereas if an assess performs a “mala fide” mistake with intentions to evade tax. Then he/she would be liable to pay penalty under section 271(1) (c) of the Income Tax Act.