Whether bona fide mistake was committed on advice of CA can be a reasonable explanation as per Explanation 1B of s. 271(1) and whether penalty can be avoided?

Last updated: 19 November 2014

Court :
ITAT Mumbai

Brief :
Assesse, an individual senior citizen filed return of income wherein long term capital gains on sale of paintings, were offered to tax at the normal tax rate of20% to long term capital gains. The assessee filed revised return wherein the aforesaid long termcapital gains are offered to tax at the concessional tax rate of 10% u/s 112(1). During scrutiny proceedings, assessee filed the second revised return inwhich, the aforesaid long term capital gains were offered to tax back @ 20% taxrate as in the original return and the taxes due on the impugned capital gainswere paid along with interest. While completing the assessment, AO noted that the second revised return was filedbeyond the time allowed under the Act and therefore, no cognizance can be taken. Thus AO considered the first revised return filed in which assessee has made a wrong claimby offering the impugned capital gains at 10% tax rate instead of20% tax rate on sale of Bonds, debentures, listed shares etc. Assessee submitted that owing to the advice given by her Auditor she was under the bonafide impression that the impugned capital gains are taxable at the concessional rate of 10%.

Citation :
Assistant Commissioner of Income Tax – Appellant – Versus - Smt. Cecilia HareshChaganlal – Respondent