The Chhattisgarh High Court recently ruled that penalty under Section 271(1)(c) of the Income Tax Act does not apply when the assessee voluntarily discloses a bona fide mistake.
The assessee, a government-owned power transmission company, filed a revised income tax return correcting an inadvertent error in book profit calculation under Section 115JB of the Income Tax Act. Although the Assessing Officer accepted the revised figures, penalty proceedings under Section 271(1)(c) were initiated for allegedly furnishing inaccurate income details. The AO imposed a penalty of ₹2.72 crore, later upheld by ITAT due to a book profit variation of approx. ₹8.84 crore, which the assessee challenged in appeal.
The Division Bench of Justice Sanjay K. Agrawal and Justice Deepak Kumar Tiwari observed, “in our considered opinion, it is a case where the assessee came up fairly before the Assessing Officer correcting the error crept in while submitting the return and revised return that too before initiation of the scrutiny assessment proceedings. Even it is not the case of the Revenue that the appellant/assessee has concealed the income. Once the Tax Audit Report conducted under Section 44AB of the IT Act was filed and it was uploaded in the Income Tax Portal along with the return of income, there is no question of submission of any inaccurate particulars and no question of concealment of income by the appellant herein/assessee. While accepting the appeal of the appellant, the Commissioner of Income Tax (Appeals) has rightly deleted the penalty levied holding that the mismatch in the figures of book profit was a case of feeding mistake and data transmission error and there was no mala fide intention on the part of the appellant being a Government entity.”
The Court held that the assessee voluntarily disclosed the correct book profit figures and attributed the earlier error to an inadvertent data entry mistake. Since the correction was made by the assessee itself before detection by the Assessing Officer, the case does not attract penalty under Section 271(1)(c) of the Income Tax Act.
The Court set aside the ITAT’s order and upheld the decision of the CIT (Appeals). Read Here: