While saving a bona fide employee from the rigours of penalty provisions under the Income Tax Act, the Pune ITAT recently ruled that a salaried employee need not be penalized for underreporting or misreporting of income when the actual fraud was played by the tax consultant who has cheated all the employees & claimed excess deduction in their returns without informing them for his own benefit.
The Division Bench comprising Vinay Bhamore (Judicial Member) and Manish Borad (Accountant Member) observed that the mistake was not attributable to the appellant taxpayer, but it was the hidden interest of the tax consultant who played the role in the backend of many similarly placed taxpayers for his own benefit. The Bench also noted that the tax dues with interest were immediately paid by the appellant even before issuance of the reopening notice, once he became aware of the excess deduction claimed in his return, by contacting another genuine tax consultant who prepared and furnished a correct return in response to the notice u/s 148.
The Bench went on to observe that the appellant was unaware of the contents of the Income Tax Return filed by the consultant, who, without informing him & others, claimed excess deductions and refund, and the fact of cheating by the consultant came to light only when a survey u/s 133A was conducted at his premises, pursuant to which complaints were filed before the Economic Offence Wing and also flashed in the daily newspaper of Nashik.
Briefly, in this case, the appellant is a salaried employee, whose return declaring taxable income of Rs. 4.07 lacs was accepted during assessment. However, later, the AO reopened the assessment u/s 147 based on information received from the Investigation Wing that the appellant has claimed excess deductions. Even though the reopening was concluded accepting the income returned in response to notice u/s 148, the AO imposed a penalty of Rs. 1.46 lacs u/s 270A(8) for underreporting of income in consequence of misreporting, which was also confirmed by the NFAC on appeal.
Now, the matter has reached the ITAT, it was found that the AO has levied the penalty u/s 270(A) based on the fact that the correct income was not returned voluntarily, but only after issuance of the reopening notice. However, when the notice u/s 148 was issued, the appellant had disclosed his correct income & paid the due tax, which was accepted by the AO. Therefore, rejecting the argument of the Department that penalty u/s 270(A) was inevitable as the revised return was not filed voluntarily, the ITAT allowed the appeal and directed the AO to delete the entire penalty.
Appearances:
Advocate Dhananjay Vijay Salunkhe, for the Appellant/ taxpayer
Advocate Ganesh B. Budru, for the Respondent/ Department
