ITAT Deletes Rs 70 Lakh Penalty, Says Genuine ITR Clerical Error Is Not Misreporting of Income:

The Income Tax Appellate Tribunal (ITAT), Mumbai, deleted a penalty of about Rs 70 lakh imposed on a Mumbai taxpayer, holding that a genuine clerical mistake in an ITR, when all relevant facts have already been disclosed, does not automatically amount to misreporting of income.

The taxpayer had initially filed its income tax return (ITR) for Assessment Year (AY) 2017-18 on November 28, 2017, declaring a loss of Rs 1.59 lakh. Later, a revised ITR was furnished, wherein the taxpayer had disclosed a much higher loss of Rs 1.06 crore.

During the assessment, the taxpayer explained that the higher loss was caused by a clerical error. The exempt share of profit from a partnership firm had already been correctly reported in Schedule EI but was mistakenly deducted again in Schedule BP while preparing the return. The taxpayer also submitted an affidavit from the Chartered Accountant's firm stating that a junior staff member had made the mistake.

However, the Assessing Officer (AO) rejected the assessee's explanation and levied a penalty amounting to Rs 69.67 lakh under Section 270A of the Income Tax Act for alleged misreporting of income. The aggrieved assessee filed an appeal before the first appellate authority, i.e., the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) did not completely delete the penalty but reduced it to Rs 17.41 lakh.

Thereafter, the taxpayer took the matter to the Income Tax Appellate Tribunal (ITAT) Mumbai for complete relief. The Tribunal noted that the taxpayer had already disclosed the exempt income and its source in the return. It held that the error was only a mistake in filling Schedule BP and not an attempt to conceal income or evade tax. The Tribunal also clarified that repeating the same mistake in the revised return does not automatically prove misreporting. In conclusion, the Tribunal deleted the entire penalty via an order dated July 8, 2026.

Commenting on the ruling, Chartered Accountant Suresh Surana said the tribunal rightly treated the issue as a genuine clerical error rather than concealment of income. Since the exempt income had already been disclosed, the incorrect deduction was only a return preparation mistake, making the penalty under Section 270A unjustified.