Relief for Honest Salaried Taxpayer: ITAT Pune Quashes Penalty Imposed Due to Tax Consultant’s Fraud

A salaried employee named Sachin Baban Shinde (Appellant) from Nashik, Maharashtra, has filed this present writ petition against the Income Tax Officer (ITO) (Respondent) in ITAT Pune.

In 2018-19, Mr. Shinde filed a return showing his aggregate income as Rs. 4,07,090. Later, the Income Tax Department discovered that he had claimed excessive deductions. In conclusion, the Assessing Officer (AO) reopened his case under Section 147 of the Income Tax Act and sent him a notice dated February 25, 2025, under Section 148. In response to this notice, Mr. Shinde filed a new return on March 11, 2020, declaring his correct income of Rs. 8,32,990. After the revised return was accepted, the Assessing Officer issued a penalty order dated September 12, 2021, imposing a penalty of Rs. 1,46,760 under Section 270A(8), claiming that Mr. Shinde had misreported income.

Mr. Sachin Baban Shinde is here challenging a penalty order of Rs. 1,46,760, imposed under Section 270A of the Income Tax Act. This penalty was imposed because the Income Tax Department believed that Mr. Shinde had under-reported his income intentionally.

Mr. Shinde claimed that the penalty is unjustified because he did not intentionally underreport his income. He explained that the mistake was due to the wrong actions of his tax consultant, not his own fault. He even filed a complaint with the Economic Offences Wing of the Police against the tax consultant. Being a technical employee (not from a finance/accounting background), he relied completely on the consultant and wasn’t aware of the wrong claim for deductions.

The CIT(A)/NFAC (first appellate authority) agreed with the assessing officer and confirmed the penalty and rejected the claims by Mr. Shinde.

When they approached the ITAT, Mr. Shinde claimed that he had no knowledge of the incorrect deductions. He was entirely dependent on his tax consultant, Mr. Kishor Patil, who had also filed returns for numerous other employees of companies like CEAT, Bosch, HAL, and M&M. He got to know about the fraud in 2019; he immediately paid the correct tax and interest on May 28, 2019, before receiving any notice from the Tax Department. The revised return could not be filed voluntarily at that time because the deadline had already passed, not because Mr. Shinde was trying to hide anything.

When the ITAT listened to both sides, it concluded that this is not a case of deliberate misreporting or under-reporting of income. Therefore, it held that the penalty under Section 270A was not justified. Hence, as a result, ITAT allowed the appeal and ordered the deletion of the penalty of Rs. 1,46,760.