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Facts
The assessee, a salaried employee, initially filed a return declaring income of Rs.4,46,390/-. Subsequently, based on information of claimed excess deductions, reassessment proceedings were initiated. The assessee filed a revised return declaring higher income, which was accepted. However, the Assessing Officer imposed a penalty of Rs.1,71,616/- under Section 270A for misreporting income.
Held
The Tribunal held that the assessee was a salaried employee who completely relied on his tax consultant for filing returns. The consultant engaged in fraudulent practices, which the assessee was unaware of. Upon discovering the excess deductions, the assessee promptly contacted another consultant and filed a correct return with interest. Therefore, the penalty under Section 270A was not justified.
Key Issues
Whether penalty under Section 270A is leviable when the assessee's misreporting of income was due to the fraudulent actions of their tax consultant, and the assessee acted diligently upon discovery?
Sections Cited
147, 148, 270A, VI-A
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER PER VINAY BHAMORE, JM: These appeals filed by the assessee are directed against the separate orders dated 29.03.2024 passed by Ld. CIT(A)/NFAC for the assessment years 2017-18 & 2018-19 respectively. 2. Since the identical facts and common issues are involved in both the above captioned appeals of the assessee, we proceed to dispose of the same by this common order.
& 936/PUN/2024 3. First, we shall take up the appeal of the assessee in for A.Y. 2017-18. ITA No.935/PUN/2024, A.Y. 2017-18 : 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 270A of Rs.1,71,616/- on the ground that the assesse had under reported and mis reported his income. In consequence of misreporting 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 under reporting 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 assesse and therefore, the levy of penalty u/s 270A without rebutting the explanation offered by the assesse 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 assesse were established from the fact that the assesse, 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 270A 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 return of income for the assessment year 2017-18 declaring taxable income of Rs.4,46,390/-, after claiming various deductions of Rs.3,59,500/- under Chapter VI-A. Later the Assessing Officer, on the basis of information received from the & 936/PUN/2024 Income Tax Officer, (Investigation) Nashik, that the assessee has claimed excess deductions, initiated proceeding u/s 147 of the IT Act after obtaining approval from the authorities & accordingly, a notice u/s 148 was issued. The assessee furnished return of income in response to notice u/s 148 of the IT Act, declaring gross total income of Rs.8,64,740/- after claiming deduction of Rs.1,55,300/- under Chapter VI-A. The assessment was completed u/s 147 of the IT Act on 26.02.2021 by accepting the income returned in response to notice u/s 148 of the IT Act. Subsequently, vide order dated 01.03.2022 the Assessing Officer imposed penalty of Rs.1,71,616/- u/s 270A of the IT Act for misreported income by observing as under :- “7. The submissions made by the assessee have been perused and considered. However, they are not tenable and are unsatisfactory. Hence, this case is considered to be a fit case for levying penalty u/s 270A of the I.T. Act, 1961. As per the provisions of section 270A of the Act, the assessee is liable for penalty @ 200% of the tax payable on the misreported income. The tax payable, including educational cess, on the misreported income is arrived at Rs.85,808/-. Considering the facts of the case, a penalty of Rs.1,71,616/- (being 200% of Rs.85,808/-) is hereby levied as penalty u/s 270A of the I.T. Act, 1961.”
6. After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal and confirmed the penalty of Rs.1,71,616/- & 936/PUN/2024 imposed u/s 270A of the IT Act. It is this order against which the assessee is in appeal before this Tribunal.
When the present appeal was called for hearing, none appeared on behalf of the assessee, neither any application for adjournment was filed despite due service of notice. Therefore, we proceed to decide the appeal on the basis of material available on record & after hearing Ld. DR.
Ld. DR submitted before us that the appellant has not filed correct return of income voluntarily therefore he is liable for penalty. It was therefore requested by Ld. DR to confirm the penalty order passed by AO & sustained by Ld. CIT(A)/NFAC.
We have heard Ld. DR & perused the material available on record. From the statement of facts, we find that the assessee is a salaried employee & belongs to technical background. The return of most of the employees of Bosch 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 & 936/PUN/2024 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 & claimed refund. It was Kishor Patil who cheated all the employees & claimed excess deduction in their returns without informing them for his own benefit. When the fact that this kind of fraud was made in the name of number of persons all of them complaint 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 news paper 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 contacted another genuine tax consultant who prepared and furnished correct return in response to the notice u/s 148 of the IT Act & paid the due & 936/PUN/2024 tax with interest even before issue of notice u/s 148 of the IT Act. We find that the Assessing Officer has levied penalty u/s 270A of the IT Act of Rs.1,71,616/- due to the fact that the assessee has not filed correct income voluntarily but only after issue of notice u/s 148 of the IT Act. It is found that when the notice u/s 148 was issued the appellant has disclosed his correct income & even paid the due tax along with interest before the issue of notice u/s 148 of the IT Act. 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 270A is inevitable. From the perusal of penalty order, it appears that the Assessing Officer himself is not sure about the particular limb under which the penalty is imposed. In such kind of situation, we find support from the decision of Co-ordinate Bench of this Tribunal in the case of Shashikant Sukdeo Ambekar in & 366/PUN/2023 dated 20-07-2023 wherein under identical facts and similar circumstances the Tribunal has deleted the penalty u/s 270A by observing as under : - & 936/PUN/2024 “8. In the case under consideration, the AO has failed to identify the specific Clauses from Clause (a-f) of section 270A(9) of the Act. Therefore, respectfully following ITAT Pune and ITAT Mumbai decisions the AO is directed to delete the penalty under section 270A of the Act. Accordingly, grounds of appeal
raised by the assessee are allowed.”
10. Respectfully following the above decision passed by the Coordinate Bench of this Tribunal (supra) & also in the light of other various decisions passed by Co-ordinate Pune Benches, Pune in the case of Annasaheb Namdeo Gunjal vs. ITO, Nashik in order dated 21-10-2024 & in the case of Deepak Bhikha vs. ITO, Nashik in ITA No.685/PUN/2024 order dated 21-10-2024, we direct the AO to delete the penalty of Rs.1,71,616/- imposed u/s 270A of the IT Act. Thus, the grounds of appeal raised by the assessee are allowed.
11. In the result, the appeal filed by the assessee in for A.Y. 2017-18 is allowed.
A.Y. 2018-19 : 12. Since the facts and issues involved in the appeal of the assessee for the assessment year 2018-19 are identical to the facts of the case for assessment year 2017-18, therefore, our decision in for A.Y. 2017-18 shall apply mutatis mutandis