No Penalty U/S. 271(1)(c) Income Tax Act For Voluntarily Disclosing Data Entry Error By Assessee: Chhattisgarh High Court

The Division Bench of Justice Sanjay K. Agarwal and Justice Deepak Kumar Tiwari observed, “…to be covered under the mischief of Section 271(1)(c) of the IT Act, there has to be concealment of the particulars of the income of the assessee or secondly, the assessee must have furnished inaccurate particulars of his income. Both the ingredients are independent to each other, if the assessee has either concealed the particulars of his income or furnished inaccurate particulars of such income, penal provision under Section 271(1)(c) of the IT Act would attract for imposing penalty under Section 271(1)(c).”

The Court explained, “…correct figures provided were not brought to the notice of the Assessing Officer while filing return and revised return and ultimately, on 22-11-2019, it is the appellant/assessee itself who brought correct figures on record informing the AO about the difference in the figures of book profit attributing the same to be inadvertent data feeding mistakes in the return filed, therefore, the assessee’s case will not fall within the mischief of Section 271(1)(c) of the IT Act.”

Advocate Apurv Goyal represented the Appellant, while Advocate Ajay Kumrani appeared for the Respondent.

Brief Facts

The Appellant, Chhattisgarh State Power Transmission Company Limited, a Government Company engaged in power transmission in Chhattisgarh, filed a return declaring nil income after setting off unabsorbed losses and declared book profit under MAT. Tax audit report under Section 44AB was filed, and a revised return was filed with the same book profit. During scrutiny, the Appellant voluntarily informed the Assessing Officer (AO) of a discrepancy in the book profit due to an inadvertent data feeding mistake and submitted a revised computation. The AO accepted revised figures but imposed a penalty under Section 271(1)(c) for furnishing inaccurate particulars. The CIT (Appeals) set aside the penalty, treating it as a feeding mistake without mala fide intention; however, the Income Tax Appellate Tribunal (ITAT) restored the penalty on account of variation in the book profit to the extent of 8.84 crores. The Appellant approached the High Court challenging the decision of the ITAT.

The Appellant contended they had filed the Tax Audit Report under Section 44AB reporting the correct net profit, which was furnished prior to initiation of scrutiny. It was further submitted that the discrepancy was a bona fide data feeding error, not concealment or inaccuracy.

The Respondent submitted that the Appellant had not fairly disclosed the accurate income figures and that penalty was rightly imposed for furnishing inaccurate particulars.

Reasoning of the Court

Adverting to Section 27 (1) (c) of the IT Act, the Court noted that in order to be covered under the Section, there had to be concealment of particulars of the income of the assessee or that the assessee must have furnished inaccurate particulars of his income, and that both ingredients were independent to each other.

The Court referred to the decision of the Supreme Court in Price Waterhouse Coopers Private Limited v. Commissioner of Income Tax, Kolkata-I and another (2012) wherein it as held that that once the tax audit report had been filed and the contents of the tax audit report suggest that there was no question of the assessee concealing its income, there would be no question of the assessee furnishing any inaccurate particulars.

The Bench noted that during the course of the assessment proceedings, the Appellnant on its own volition has pointed out that there was a mistake due to inadvertent date feeding mistake in the return filed. The Court added, “As such, the correct book profit was not only shown in the Tax Audit Report, but it was duly uploaded in the Income Tax Portal and filed before the Assessing Officer much prior to the case was undertaken for scrutiny assessment and also reported the same on 22-11-2019 while making submission and reiterated on 6-12-2019 as well, therefore, 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.”

The Court explained, “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… therefore, the assessee’s case will not fall within the mischief of Section 271(1)(c) of the IT Act.”

Consequently, the Court allowed the appeal, setting aside the order of the ITAT and restoring the order of the CIT (Appeals).

Cause Title: Chhattisgarh State Power Transmission Company Limited v. DCIT Circle-1(1) (Neutral Citation: 2025:CGHC:16667-DB)

Appearance:

Appellant: Advocates Apurv Goyal, Nikhilesh Begani

Respondent: Advocates Ajay Kuumrani, Amit Chaudhari