Income Tax Appeal No. 149 of 2011 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 149 of 2011 Date of decision: 26.5.2011 Commissioner of Income Tax, Panchkula --- Appellant Versus Adarsh Bhatia --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant-revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 30.7.2010, passed by the Income Tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 399/CHANDI/2010, relating to the assessment year 2006-07. 2. The following substantial question of law has been claimed for determination of this Court: Income Tax Appeal No. 149 of 2011 2 “(i) Whether on the facts and circumstances of the case, the ITAT is justified in quashing the penalty of Rs. 5,07,385/- merely on the ground that the excess claim made by the assessee was due to clerical mistake of the accountant ignoring the fact that the excess claim was found out during the scrutiny of the return and the assessee did not voluntarily file a revised return or corrected the excess claim.” 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the assessee is in the business of trading in shares. The assessee filed his return for the assessment year 2006-07 declaring total income of Rs. 2,57,21,220/-. On examination of the return, it was found that the assessee had debited a sum of Rs. 7,12,025/- on account of loss on trading of commodities, while calculating net profit which was arrived at Rs. 2,68,91,617/-. The assessing officer further found that the same amount which had been shown as loss on trading of commodities had also been reduced while computing total income. This way, the assessee claimed the loss of Rs. 7,12,025/- twice. The assessee later admitted that excess claim of Rs. 14,24,050/- was made and explained that it was only due to clerical error. Revised computation was accordingly filed and the assessing officer, vide order dated 24.12.2008 made addition of the above amount to the returned income besides initiating penalty proceedings for furnishing inaccurate particulars of income. The Deputy Commissioner of Income Tax, Panchkula later imposed a penalty of Rs. 5,07,385/- under Section 271(1)(c) of the Act on the assessee vide order dated 29.6.2009. Income Tax Appeal No. 149 of 2011 3 4. On appeal before the Commissioner of Income Tax (Appeals) [for short “the CIT(A)”], the plea of the assessee that it was due to clerical mistake which resulted in wrong claim was accepted vide order dated 1.2.2010. Appeal of the Revenue against the order of the CIT(A) was dismissed by the Tribunal, vide the order under appeal and hence, this appeal at the instance of the Revenue. 5. We have heard learned counsel for the Revenue and perused the record. 6. The issue raised in this appeal is, whether in the facts and circumstances of the case penalty under Section 271(1)(c) of the Act could be imposed on the assessee. 7. According to the learned counsel for the Revenue, the assessee had made excess claim of loss which was, however, surrendered by him by means of filing the revised computation when he was called upon to explain and, thus, the same cannot be termed to be a voluntary surrender. The counsel further submitted that the assessee had furnished inaccurate particulars of his income and hence, penalty was rightly imposed and the CIT(A) and the Tribunal were legally not justified in deleting the same. 8. After giving our thoughtful consideration to the submissions made by the counsel, we are unable to accept the same. The Tribunal on appreciation of material on record had come to the conclusion that the mistake in making excess claim was bona fide and the mistake had occurred due to clerical error. The findings recorded by the Tribunal in this regard in para Nos. 5 to 7 of its order are as under: Income Tax Appeal No. 149 of 2011 4 “5. We have heard the rival contentions and perused the records. In the computation of income filed along with the original return of income the assessee had made a claim of deduction of Rs. 7,12,025/- twice resulting in excess claim of deduction of Rs.14,24,050/-. In the P & L account, the assessee had claimed the loss on derivatives amounting to Rs. 7,12,025/-. The assessee during the course of assessment proceedings when confronted with the above said mistake, filed a revised computation of income under which the income was enhanced by Rs. 14,25,050/-. The mistake in making the excess claim was claimed to be bona fide as the said mistake had occurred due to clerical error. The explanation of the assessee was that in the computation of income, the said amount should have been first added to the net profit declared as per P & L Account thereafter deducted from the computation of income in order to arrive at the business income for the year, However, by a clerical error, instead of adding back to the net profit for the year, the same was debited to the said profits from business and was again claimed as a deduction in the computation of income. This resulted in the addition of Rs. 14,24,050/- and Assessing Officer held the assessee to have furnished inaccurate particulars of income justifying levy of penalty under Section 271(1)(c) of the Act, amounting to Rs.5,07,385/-. Income Tax Appeal No. 149 of 2011 5 6. Penalty under Section 271(1)(c) of the Act is imposable in all such cases where the assessee has concealed its income or furnished inaccurate particulars of income. In the facts of the present case before us, the assessee had suffered loss on sale of derivatives, which was to be allowed to the assessee. However, the assessee while computing the income for the year under consideration had instead of adding back the said loss to the profits of the business and thereafter claiming the loss had by an error deducted the said loss to the profits of business and had further claimed the same as deduction in the computation of income. This resulted in claiming excess loss of Rs. 14,24,050/-. The Assessing Officer during the course of assessment proceedings confronted the assessee with the said mistake and realizing the same, a revised computation of income was filed. The assessee claimed the mistake to be a clerical error. In the facts and circumstances of the case, we are of the view that the assessee is not exigible to levy of penalty under Section 271(1)(c) of the Act as the assessee cannot be held to have furnished inaccurate particulars of income as the income and a mistake was committed by the Accountant in computing the income. We find support from the ratio laid down by the Punjab and Haryana High Court in CIT vs. Sidhartha Enterprises (supra) that “penalty under Section 271(1)(c) of the Act was imposable only when there was some element of deliberate default and not a Income Tax Appeal No. 149 of 2011 6 mere mistake. The findings had been recorded on the facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax. The view taken by the Tribunal could not be perverse.” 9. No illegality or perversity could be pointed out by the learned counsel for the Revenue so as to persuade this Court to interfere with the aforesaid findings of fact based on appreciation of the material on record. No substantial question of law, thus, arises in the appeal. The appeal is accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) May 26, 2011 ACTING CHIEF JUSTICE *rkmalik*