Clipped from: https://taxguru.in/income-tax/itat-pune-penalty-mistake-attributable-tax-consultant-bona-fide-conduct-accepted.html
Gangadhar Gopinath Wagh Vs ITO (ITAT Pune)
In this case, penalty u/s 271(1)(c) was levied on a salaried assessee for claiming excess deductions, allegedly resulting in inaccurate particulars of income.
Key facts:
- Assessee’s return was filed by a tax consultant who fraudulently claimed excess deductions without the assessee’s knowledge.
- On discovering the issue:
- Assessee voluntarily paid tax + interest (before issue of notice u/s 148)
- Filed correct return in response to notice
- AO still levied penalty, upheld by CIT(A), on ground that correction was not voluntary
ITAT Findings:
- Assessee was a salaried individual with no tax expertise, fully dependent on consultant
- Fraud by consultant was established (including complaints and survey findings)
- Crucially:
- Tax + interest paid BEFORE notice u/s 148
- No deliberate concealment by assessee
Decision:
- This is not a fit case for penalty u/s 271(1)(c)
- Penalty deleted for all years
Final outcome:
- All appeals allowed
- Relief granted on bona fide mistake + voluntary compliance
FULL TEXT OF THE ORDER OF ITAT PUNE
These appeals filed by the assessee are directed against the separate orders dated 12.03.2025 passed by Ld. CIT(A)/NFAC for the assessment years 2016-17 to 2018-19 respectively.
2. Since identical facts and common issues are involved in all the above captioned three appeals of the assessee, therefore, we proceed to dispose of the same by this common order.
3. First, we shall take up the appeal of the assessee in ITA No.701/PUN/2025 for A.Y. 2016-17 for adjudication as the lead case.
ITA No.701/PUN/2025, A.Y. 2016-17 :
4. The appellant has raised the following grounds of appeal :-
“1. The learned Commissioner of Income Tax is not justified in levying penalty u/s 271(1)(c) of Rs. 71,800/- on the ground that the assessee had inaccurate particular of income without appreciating that the said levy of penalty was not justified in law.
2. The learned Commissioner of Income Tax failed to appreciate that before the Commissioner of Income Tax, the assessee had duly explained that inaccurate particular of income in his case was attributable to wrong action of tax consultant and all the material facts relating thereto along with substantiating evidences in form of complaint filed against Tax Consultant before Economic Wing of Police Department etc. were also furnished by the assessee and therefore, the levy of penalty u/s 271(1)(c) without rebutting the explanation offered by the assessee was not justified in view of provisions of the said Act.
3. The learned Commissioner of Income Tax ought to have appreciated that the bona fides of the explanation offered by assessee were established from the fact that the assessee, being salaried employee from technical background, was totally dependent upon the tax consultant for filing income tax return and therefore, the levy of penalty u/s 271(1)(c) was not justified in view of the explanation offered by the assesse.”
5. Facts of the case, in brief, are that the assessee is an individual salaried employee filed revised return of income on 07.07.2017 declaring income of Rs.4,17,330/- after claiming various deductions which resulted in refund of Rs.69,618/-. The Assessing Officer reopened the case and issued notice u/s 148 of the IT Act on 05.03.2020 on the reason to believe that the assessee has understated his income and claimed excessive deduction and relief in the return of income. The assessee furnished return of income in response to notice u/s 148 of the IT Act, declaring taxable income of Rs.7,97,210/- after claiming deductions under Chapter VI-A of the IT Act and deposited self-assessment tax of Rs.1,02,482/- on 15.05.2019 with interest. The assessment was completed u/s 147 of the IT Act on 06.04.2021 by accepting the income returned in response to notice u/s 148 of the IT Act. Subsequently, vide order dated 29.12.2021 the Assessing Officer imposed penalty of Rs.71,800/- u/s 271(1)(c) of the IT Act for furnishing inaccurate particulars of income.
6. Being aggrieved with the above penalty order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal and confirmed the penalty of Rs.71,800/- imposed u/s 271(1)(c) of the IT Act.
7. It is this order against which the assessee is in appeal before this Tribunal.
8. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR submitted before us that as soon as the fact of claiming excess refund by the tax consultant came in the knowledge of the assessee, he immediately paid the due tax along with interest on 15.05.2019 whereas the notice u/s 148 was issued to him on 05.03.2020, however the revised return could not be filed voluntarily since the date was over. Accordingly, it was requested before the bench to delete the penalty of Rs.71,800/- imposed u/s 271(1)(c) of the IT Act.
9. Ld. DR appearing from the side of the Revenue submitted before us that the appellant has not filed correct return of income voluntarily & therefore the appellant is liable for penalty. It was therefore requested by Ld. DR to confirm the penalty order passed by Assessing Officer & sustained by Ld. CIT(A)/NFAC.
10. We have heard Ld. Counsels from both the sides and perused the material available on record including copy of challan furnished by the assessee. In this regard, we find that the assessee is a salaried employee & belongs to technical background. The return of most of the employees of Bosch Company and other company including that of the assessee was filed by a tax consultant namely Kishor Patil.
We further find that the assessee came to know from other employees in company that Mr. Kishor Patil with his expertise is able to legally calculate lower tax, resulting in refund of TDS deducted by employer. The assessee was unaware about the contents of the Income Tax Return filed by Kishor Patil & truly believed that the returns are filed legally as per the provisions of the Income Tax Act. The assessee being from technical background does not understand ABCD of Income Tax & therefore completely relied on the above named tax consultant, who without informing him & others, claimed excess deduction under Chapter VI-A of the IT Act. It was Kishor Patil who cheated all the employees & claimed excess deduction in their returns without informing them for his own benefit. The fact of the cheating came in light when a survey u/s 133A was conducted at the premises of Mr Kishor Patil. When the fact that this kind of fraud was made in the name of number of persons, all of them complained to the Economic Offence Wing of Police Nashik, against the tax consultant Kishore Patil. The news regarding fraud committed by Kishore Patil also flashed in the daily newspaper of Nashik. It is also apparent that there is no mistake of the assessee but it was the hidden interest of the tax consultant who triggered the gun by using shoulders of the assessee & many more for his own benefit. It is also found that as soon as the fact of excess deduction claimed, came to the knowledge of the assessee he immediately paid the due tax with interest, even before the issue of notice u/s 148 of the IT Act & contacted another genuine tax consultant who prepared and furnished correct return in response to the notice issued u/s 148 of the IT Act. We find that the Assessing Officer has levied penalty u/s 271(1)(c) of the IT Act of Rs.71,800/- on the basis of the fact that the correct income was not returned voluntarily but only after issue of notice u/s 148 of the IT Act. It is also found that when the notice u/s 148 was issued the appellant has disclosed his correct income & paid the due tax even before issue of notice. We also find that the Assessing Officer has accepted the return as it is which was furnished by the appellant in response to the notice u/s 148 of the IT Act. We cannot accept the contention of Ld. DR that the revised return was not voluntary therefore the penalty u/s 271(1)(c) of the Act is inevitable. In this regard, the contention of Ld. counsel is also important wherein he stated that the due tax along-with interest was already paid before the issue of notice u/s 148 of the IT Act & admittedly the return of income could not be filed as the due date was already over. We find force in the arguments of the Ld. counsel of the assesse that the amount of tax & interest was deposited voluntarily much prior to the issue of notice u/s 148 of the IT Act since the income tax with interest was deposited by the assesse on 15-05-2019 whereas the notice u/s 148 was issued on 05-03-2020. Considering the totality of the facts of the case, we are of the considered opinion that this is not a fit case to impose penalty u/s 271(1)(c) of the IT Act & accordingly the order passed by Ld. CIT(A)/NFAC is set-aside & the Assessing Officer is directed to delete the penalty of Rs.71,800/- imposed u/s 271(1)(c) of the IT Act. Thus, the grounds of appeal raised by the assessee are allowed.
11. In the result, the appeal of the assessee in ITA No.701/PUN/2025 for A.Y. 2016-17 is allowed.
ITA Nos.702 & 703/PUN/2025, A.Y. 2017-18 & 2018-19 :
12. Since the facts and issues involved in both the remaining appeals of the assessee for assessment years 2017-18 & 2018-19 are identical to the facts and issued involved in the appeal of the assessee for assessment year 2016-17, therefore, our decision in ITA No.701/PUN/2025 for A.Y. 2016-17 shall apply mutatis mutandis to the remaining two appeals of the assessee in ITA Nos.702 & 703/PUN/2025 for A.Ys. 2017-18 & 2018-19. Accordingly, both the appeals of the assessee in ITA Nos.702 & 703/PUN/2025 for A.Ys. 2017-18 & 2018-19 is allowed.
13. To sum up, all the above captioned three appeals filed by the assessee are allowed.
Order pronounced on this 09th day of April, 2026.
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