A Mumbai taxpayer has received significant relief from the Income Tax Appellate Tribunal (ITAT), which set aside a ₹17.41 lakh penalty. The tribunal concluded that discrepancies in the taxpayer's revised Income Tax Return (ITR) were due to a Chartered Accountant (CA) firm's mistake, not a deliberate attempt to evade taxes.
Discrepancy in ITR Filing Leads to Penalty
The case pertains to Assessment Year (AY) 2017-18. Initially, the taxpayer filed an income tax return on November 28, 2017, declaring a loss of ₹1.59 lakh. However, a revised return submitted on April 7, 2018, reported a substantially higher loss of ₹1.06 crore.
This significant increase in the reported loss prompted the Income Tax Department to suspect under-reporting and misreporting of income. Consequently, penalty proceedings were initiated under Section 270A of the Income Tax Act, leading to the imposition of a ₹17.41 lakh penalty.
Taxpayer Blames CA Firm, Submits Evidence
During the appellate proceedings, the taxpayer argued that the revised return did not reflect any intentional tax evasion. Instead, the discrepancy arose because the CA firm's office had inadvertently uploaded the wrong return while processing the revised ITR.
A crucial piece of evidence presented was an affidavit from the owner of the CA firm. This affidavit explicitly accepted responsibility for the clerical error, confirming that the incorrect return had been uploaded due to a genuine mistake.
ITAT Rules in Favor of Taxpayer
After reviewing the facts and the submitted affidavit, the Mumbai bench of the ITAT determined there was no evidence of deliberate tax evasion or mala fide intent on the taxpayer's part. The tribunal found the CA firm's admission credible and accepted that the filing error was inadvertent.
Based on these findings, the ITAT ruled that the penalty under Section 270A could not be sustained. It granted relief to the taxpayer by quashing the ₹17.41 lakh penalty.
Implications for Taxpayers and Professionals
This decision underscores that while taxpayers remain ultimately responsible for their tax filings, courts and tribunals may differentiate between intentional tax misreporting and genuine professional or clerical mistakes. This distinction is particularly important when supported by strong documentary evidence, such as affidavits and detailed records.
The ruling also serves as a reminder for taxpayers to meticulously review all income tax returns, especially revised submissions, before filing. Maintaining proper documentation is vital in case disputes arise. Concurrently, it reinforces the value of transparent admissions by tax professionals when genuine filing errors occur, helping to ensure fair outcomes.