Tax consultant made error in ITR filing: ITAT Chennai gives relief to taxpayer, waives ₹1.92 lakh penalty

If you file your ITR through a CA or tax consultant and they make a mistake, are you liable to pay the penalty? The ITAT says “no”.

A taxpayer from Chennai hired a tax consultant who made errors while filing her ITR. The Income Tax Department asked her to pay a penalty of ₹1.92 lakh.

However, the Income Tax Appellate Tribunal (ITAT), Chennai, later waived off the entire penalty, holding that a genuine mistake by a tax professional cannot automatically be treated as misreporting of income.

The case was highlighted by TaxBuddy founder Sujit Bangar in an X post, where he explained how the tribunal protected a taxpayer who had relied on her tax consultant while filing her return.

Tax professional made errors while filing ITR

According to Bangar, Saroja, an 81-year-old senior citizen, had hired a tax professional to file her ITR for the financial year 2016-17. She provided all relevant documents and relied on her consultant to correctly report her income.

Her ITR showed a total income of ₹51.78 lakh. However, 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.
• Interest income of ₹8,000 was classified under business income instead of “Income from Other Sources”.

Saroja accepted the errors and paid the additional tax liability arising from the correction. The additional income considered by the tax department was ₹3.08 lakh.

Tax officer imposed ₹1.92 lakh penalty under Section 270A

Despite the taxpayer paying the additional tax, the assessing officer imposed a penalty of ₹1,92,192 under Section 270A of the Income Tax Act for “under-reporting by misreporting of income”.

The Commissioner of Income Tax (Appeals), NFAC Delhi, also upheld the penalty, following which Saroja approached ITAT Chennai.

ITAT Chennai waives off penalty

The ITAT Chennai ruled in favour of Saroja and waived off the entire penalty of ₹1.92 lakh.

The tribunal observed that the errors were inadvertent and there was no evidence of deliberate concealment or misreporting of income.

Sharing the ruling details, Bangar wrote, “An honest mistake by your tax professional is not under-reporting. Wrongly classified interest had no extra tax impact, and bona fide mistake does not equal misreporting u/s 270A.”

He noted that Section 270A punishes “intentional misreporting of income”. A genuine and honest mistake made by a tax professional does not automatically qualify as misreporting by the taxpayer.

He added that accepting the error, correcting it, and paying the applicable tax reflects the taxpayer’s good faith, and the law provides protection to honest taxpayers.

Key lessons for taxpayers

Bangar highlighted that a mistake made by a tax professional does not automatically amount to misreporting by the taxpayer. If the error is genuine and unintentional, taxpayers may have legal protection.

He advised taxpayers that if a mistake occurs, they should:

• Accept the correction and pay additional tax, if applicable.
• Maintain written communication with the tax professional regarding the error.
• Present evidence showing that the mistake was genuine and not intentional.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified tax expert for the latest tax laws and regulations.