PRICE WATERHOUSE COOPERS PVT. LTD. versus COMMISSIONER OF INCOME TAX, KOLKATA-1 AND ANR.

Citation: [2012] 8 S.C.R. 849 · Decided: 25-09-2012 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

(2012] 8 S.C.R. 849 
PRICE WATERHOUSE COOPERS PVT. LTD. 
v. 
COMMISSIONER OF INCOME TAX, KOLKATA-1 AND 
ANR. 
(Civil Appeal No. 6924 of 2012) 
SEPTEMBER 25, 2012 
[S.H. KAPADIA, CJI AND MADAN B. LOKUR, J.] 
INCOME TAX ACT, 1961: 
A 
B 
c 
s.271(1)(c) read with s.40A(7) - Penalty proceedings -
Computation error - Provision for payment of gratuity - Not 
added to total income - Held: Contents of Tax Audit Report 
filed along with the return stating that the provision for payment 
was not allowable u/s 40A(7) suggest that it was a bona fide 
D 
and inadvertent computation error, as the ass~ssee while 
submitting its return, failed to add the provision for gratuity to 
its total income - It cannot be said that the assessee is guilty 
of either furnishing inaccurate particulars or attempting to 
conceal its income - In view of the peculiar facts of the case, 
the imposition of penalty on the assessee being not justified, 
is set aside. 
· 
E 
The assessee, engaged in providing multi-
disciplinary management consultancy services, filed its 
return of income on 30.11.2000 u/s 139(6) read with 
F 
s.139(6A) of the Income Tax Act, 1961, accompanied by 
its Tax Audit Report as required u/s 44AB of the Act. The 
Statement of Particulars filed by the assessee was in 
Form 3CD as required by r.6G (2) of the Income Tax Rules, 
1962. In Column 17(i) of the Statement, though it was G 
stated that the provision for payment of gratuity was not 
allowable uls 40A(7), the assessee claimed a deduction 
thereon amounting to Rs.23,70,306/- in its return of 
income and, accordingly, the assessment order was 
849 
H 
850 
SUPREME COURT REPORTS 
[2012] 8 S.C.R. 
A passed u/s 143(3) of the Act on 26.03.2003. However, on 
22.1.2004, the Assessing Officer iss•Jed a notice to the 
assessee u/s 148 of the Act for reopening the assessment 
and, ultimately, the assessee filed a revised return. A re-
assessment was passed and the assessee paid the tax 
B due on the said amount of Rs.23,70,3061- as well as 
interest thereon. The Assessing Officer thereafter initiated 
penalty proceedings u/s 271(1)(c) of.the Act and imposed 
a penalty at 300% on the tax sought to be evaded by the 
assessee for furnishing inaccurate particulars. The 
c appeal of the assessee was dismissed by the 
Commissioner of Income Tax (Appeals). The Income Tax 
Appellate Tribunal reduced the penalty to 100%. The 
appeal filed by the assessee was dismissed by the High 
Court. 
D 
Allowing the appeal, the Court 
HELD: 1.1 The facts of the case are rather peculiar 
and somewhat unique. The assessee is undoubtedly a 
reputed firm and has great expertise available with it. 
E Notwithstanding this, it is possible that even the 
assessee could make a "silly" mistake and indeed this 
has been acknowledged both by the Tribunal as well as 
the High Court. It has further been explained in the 
affidavit filed before this Court. [para 16, 17] [856-D] 
F 
1.2 The fact that the Tax Audit Report was filed along 
with the return and that it unequivocally stated that the 
provision for payment of gratuity was not allowable u/s 
40A(7) of the Act indicates that the assessee made a 
computation error in its return of income. Apart from the 
G fact that the assessee did not notice the error, it was not 
noticed even by the Assessing Officer who framed the 
assessment order. It appears that all that has happened 
in the instant case is that through a bona fide and 
inadvertent error, the assessee while submitting its 
H 
PRICE WATERHOUSE COOPERS PVT. LTD. v. COMMNR 
851 
OF INCOME TAX, KOLKATA-1 
return, failed to add the provision for gratuity to its total 
A 
income. This can only be described as a human error. 
That the assessee should have been careful cannot be 
doubted, but the absence of due care, in such a case 
does not mean that the assessee is guilty of either 
furnishing inaccurate particulars or attempting to conceal 
B 
its income. [para 18-19] [856-E-H; 857-A-B] 
1.3 In view of the peculiar facts of the case, the 
imposition of penalty on the assessee is not justified. This 
Court is satisfied that the assessee had committed an 
inadvertent and bona fide error and had not intended to 
C 
or attempted to either conceal its income or furnish 
inaccurate particulars. [para 20] [857-C] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
6924 of 2011. 
D 
From the Judgment and Order dated 18.12.2008 of the 
High Court at Calcutta in ITA No. 120 of 2006. 
Harish N. Salve, Pawan Sharma, Ekta Kap

Excerpt shown. Read the full judgment & AI analysis in Lexace.