ET OnlineThe taxpayer, who had paid an income tax of Rs 27,792, was ordered to pay a penalty of Rs 9,44,073, a nearly 34 times amount from what he had paid.
Pune taxpayer Mr Nevase didn’t know that misreporting a Rs 10.65 lakh deduction under the old tax regime for the Assessment Year 2022-23 will land him hot water, leading to a hefty penalty of Rs 9.44 lakh (200% of actual tax liability) imposed by the Income Tax (I-T) Department. Nevase challenged the order in Income Tax Appellate Tribunal (ITAT), Pune, but lost the case and the penalty was upheld.
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Nevase, who had paid an income tax of Rs 27,792, was ordered to pay a penalty of Rs 9,44,073, nearly 34 times the amount of what he had paid.
ITAT Pune’s findings in Navase’s case
ITAT Pune found that the assessee (Navase) had consciously claimed deduction under Section 80DD, 80CCD, 80DDB, 80E, 80EEA, 80EEB and 80GGC of the Act, knowing fully well that he is not eligible.
One of the eye-catching claims that invited the tribunal’s attention was Navase’s donation to a political party. The Income Tax Department had found this claim to be completely fake.
ITAT Pune pointed out that regarding the Navase’s deduction under Section 80GGC, Navase knew very well that he hadn’t actually donated to any political party. Yet, he still went ahead and claimed it.
Another fake deduction mentioned by the tribunal was the one which Navase claimed for medical treatment. The Income Tax Department found that no such expenditure was incurred for medical treatment, and hence, so they deemed it to be false.
The tribunal said that deduction under Section 80DDB is applicable to actual payment for medical treatment for diseases specified in the Income Tax Rules for the Navase or a dependent. The Navase knows very well that he had not incurred any such expenditure, but still claimed it.
ITAT Pune says that this itself shows that Navase had consciously claimed all the deductions even though he was not eligible for them.
Had the Navase’s case was not selected for scrutiny, he would have enjoyed the wrong claims, says the tribunal.
Therefore ITAT Pune said they are of the opinion that 10 ITA No.2606/PUN/2025 [A] was not a bonafide mistake at all.
The tribunal found that the Income Tax Department was right in imposing a 200% penalty on Navase.
“Therefore, we are of the opinion that Assessing Officer was right in levying penalty under Section 270A of the Act,” says the tribunal.
Let’s see how the entire episode of misreporting of income by Navase unfolded.
Navase’s total income and tax deductions
According to the case, Nevase vs the Assessing Officer/Assessment Unit (ITAT), Pune, Appeal No. ITA No.2606/PUN/2025, for the Assessment Year 2022-23, Nevase, in his Income Tax Return (ITR) filed on June 15, 2022, showed his taxable income as Rs 5.71 lakh after showing a deduction of Rs 13.25 lakh . Apart from this, Navase also showed a house rent allowance (HRA) of Rs 2.15 lakh while claiming a standard deduction of Rs 50,000. With these tax deductions, his total income for AY 2022-23 was Rs 21.61 lakh . However, after showing his taxable income as Rs 5.71 lakh, he paid an income tax of around Rs 28,000.
As her the ITAT order, his deductions for AY 2022-23 were-
| Section | Amount (₹) |
| 80C | 1,50,000 |
| 80CCD(1B) | 50,000 |
| 80D | 50,000 |
| 80TTA | 10,000 |
| 80DD | 75,000 |
| 80CCD(2) | 1,00,000 |
| 80DDB | 90,000 |
| 80E | 4,00,000 |
| 80EEA | 1,50,000 |
| 80EEB | 1,50,000 |
| 80GGC | 1,00,000 |
| Total | 13,25,000 |
Navase couldn’t produce documentary evidence of these claims
However, Navase couldn’t produce documentary evidence of some of his deductions while filing his ITR, and the ITAT said in its order that Navase accepted submitting wrong claims.
Deductions that Navase wrongly claimed in his ITR filing (as per tribunal)
| Section | Amount (₹) |
| 80DD | 75,000 |
| 80CCD(2) | 1,00,000 |
| 80DDB | 90,000 |
| 80E | 4,00,000 |
| 80EEA | 1,50,000 |
| 80EEB | 1,50,000 |
| 80GGC | 1,00,000 |
| Total | 10,65,000 |
Why Income Tax Department imposed penalty
The I-T Department found that Navase was eligible for deductions of only Rs 2.60 lakh instead of Rs 13.25 lakh. Another discrepancy that the taxman found was Navase’s excess HRA exemption of Rs 86,593. As per the taxman, he was eligible for a HR exemption of nearly Rs 1.29 lakh. Because of this mis-reporting, Navase’s taxable income wasn’t Rs 5.71 lakh. Actually, it was nearly Rs 17.23 lakh that included deductions of Rs 2.60 lakh and HRA of nearly Rs 1.29 lakh. On nearly Rs 17.23 lakh income, he was liable to pay a tax of Rs 3.42 lakh. Since he had paid a tax of Rs 27,792 in tax, he was supposed to pay Rs 3.14 lakh more. However, this is not the amount Navase ended up paying. He had to pay Rs 9.44 lakh as per Section 270A of the Income Tax Act, 1961.
What is Section 270 A?
Abhishek Soni, founder and CEO, Tax2Win, says under Section 270A of the Income-tax Act, 1961, a penalty is charged if a taxpayer under-reports or misreports income.
There are two types of penalties:
Under-reporting of income → Penalty is 50% of the tax on the extra income.
Misreporting of income (more serious, like false claims or unsupported deductions) → Penalty is 200% of the tax on that amount.
For example, if a taxpayer claimed Rs 1 lakh deduction (80C, HRA, etc.) but cannot provide supporting documents, and the tax officer treats it as misreporting:
Rs 1 lakh will be added back to income.
Tax will be calculated on that Rs 1 lakh.
Penalty will be 200% of the tax on Rs 1 lakh.
For example, if tax on Rs 1 lakh is Rs 30,000,
Penalty = Rs 60,000 (200% of ₹30,000).
So, the person may have to pay Rs 30,000 (tax) + Rs 60,000 (penalty), plus interest.
As per tax ruled, in Navase’s case, total tax liability was Rs 3.14 lakh+ (200% of Rs 3.14 lakh)= Rs 3.14 lakh+Rs 6.29 lakh= Rs 9.44 lakh.
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