Mumbai ITAT Directs Authority to Delete Penalty U/S 271(1)(c) for Bona Fide Mistakes 

In the matter of Meyer Organics Pvt. Ltd. vs. DCIT, the Mumbai Income Tax Appellate Tribunal (ITAT) furnished an important decision for levying the penalties under section 271(1)(c) of the Income Tax Act. The ruling of the tribunal is on the correction of bona fide glitches in the original return in the assessment proceedings.

Detailed Analysis in the Case of Meyer Organics Pvt. Ltd.

The case insights scrutinized the assessee’s profit and loss account, which revealed discrepancies in the treatment of specific expenses. The taxpayer is unable to include the amounts debited for the donation and charity and the losses on the assets sale in calculating the income.

At the time of assessment proceedings on being alert to such difference the taxpayer immediately improves the errors by providing the amended calculations, hence considering and correcting the mistakes.

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Also, the amended calculations were included with the payment of the differential tax amount, demonstrating the taxpayer’s devotion to correcting the errors.

The tribunal witnessed that the errors were unintentional and bona fide in nature since the taxpayer assisted it in the timely rectification and payment of taxes owed. The failure of the taxpayer to claim for the deduction under section 80G shows the inadvertent nature of mistakes.

Drawing to legal precedent, especially in the Price Waterhouse Coopers (P.) Ltd. v/s CIT, a decision the tribunal concluded that the taxpayer’s measures comprised bona fide mistakes, warranting leniency instead of penalization.

Closure:- Under the detailed analysis and legal considerations, the Mumbai ITAT ruled in favor of the taxpayer, directing the deletion of the penalty levied under section 271(1)(c) of the IT Act.

The decision of the tribunal emphasizes the significance of distinguishing between genuine errors and intentional attempts to evade tax obligations, highlighting the requirement for a balanced and judicious practice in penalty assessments.

The matter of Meyer Organics Pvt. Ltd. vs. DCIT acts as a relevant reminder of the principles controlling the penalty levy under tax laws, emphasizing the importance of bona fide intentions and corrective actions in mitigating corrective efforts.