The ITAT Chennai has waived a ₹1.92 lakh penalty after accepting that a tax consultant's genuine mistake in ITR filing should not be treated as misreporting of income under Section 270A. According to reports from Mint and Business Standard, the Tribunal held that an honest mistake by a tax professional is not under-reporting and that wrongly classified interest had no extra tax impact. The ruling establishes that penalties under Section 270A cannot be sustained merely because a tax consultant makes errors, emphasizing that tax authorities must establish actual under-reporting or misreporting of income by the taxpayer. As Mint reports, this case demonstrates how taxpayers who rely on tax professionals for filing can receive legal protection when genuine clerical errors are involved.
Saroja, an 81-year-old senior citizen, hired a tax professional to file her ITR for financial year 2016-17 and provided all relevant documents for correct income reporting. As reported by Mint and Business Standard, her ITR showed a total income of ₹51.78 lakh, but during scrutiny, the tax officer found two discrepancies: rental income was reported at ₹5.40 lakh instead of the actual ₹8.40 lakh, resulting in a short reporting of ₹3 lakh, and interest income of ₹8,000 was classified under business income instead of "Income from Other Sources". Despite accepting the errors and paying the additional tax liability of ₹3.08 lakh, the assessing officer imposed a penalty of ₹1.92 lakh under Section 270A for under-reporting and misreporting of income. The Commissioner of Income Tax (Appeals), NFAC Delhi, also upheld the penalty, prompting Saroja to approach ITAT Chennai.
Tax experts emphasize that while the ruling provides relief for genuine errors, it does not create blanket exemption from penalties. Shravanth Shanker from B. Shanker Advocates LLP explained that the ruling recognizes that bona fide, inadvertent errors by a tax professional, absent any intent to conceal, may not amount to misreporting. However, he cautioned that the defence is likely to succeed only where taxpayers have made full disclosure of their income, acted in good faith and can demonstrate that the mistake was genuinely made by the tax professional. Ritika Nayyar from Singhania & Co. noted that the ruling should not be treated as a free pass for taxpayers to avoid penalties simply by blaming their CA or consultant, emphasizing that merely blaming a tax adviser, without credible evidence, is unlikely to be enough to escape penalty. The distinction between under-reporting (50% penalty) and misreporting (200% penalty) remains crucial, with misreporting involving deliberate acts such as misrepresentation or suppression of facts.
The ruling reinforces that taxpayers remain responsible for returns filed in their name, even when prepared by professionals. Experts recommend carrying out a final review before filing, including matching income with Form 26AS, Annual Information Statement (AIS), and Taxpayer Information Summary (TIS), checking income under correct heads, and verifying deductions and exemptions. Shravanth Shanker advises taxpayers to retain written communication and instructions shared with their tax consultant, as these records can help establish bona fide reliance if disputes arise. For errors discovered after filing, taxpayers should file a revised return under Section 139(5) wherever permitted and pay additional tax promptly, as timely compliance can significantly strengthen the taxpayer's case by demonstrating good faith. According to experts, maintaining accurate records, reviewing returns carefully before filing, and promptly correcting any errors remain the best safeguards against penalties.
