ITR filing mistake: ITAT deletes ₹17.41 lakh penalty after CA firm's affidavit proves clerical error

Income Tax Appellate Tribunal (ITAT) held that an inadvertent filing mistake by a chartered accountant's office, backed by a sworn affidavit, did not amount to misreporting of income.

The dispute arose for Assessment Year (AY) 2017-18 after the taxpayer filed an original income tax return declaring a loss of ₹1.59 lakh. A revised return filed later reflected a loss of more than ₹1.06 crore, prompting the Income Tax Department to initiate penalty proceedings under Section 270A of the Income-tax Act on the ground of under-reporting and misreporting of income.

The taxpayer challenged the penalty, contending that the revised return containing incorrect figures had been uploaded inadvertently by a junior employee at the chartered accountant's office while handling multiple tax filings. The proprietor of the CA firm filed a sworn affidavit accepting responsibility for the mistake and explaining how the incorrect return came to be uploaded.

Why the ITAT deleted the penalty

The Mumbai bench of the ITAT examined whether the incorrect revised return represented a deliberate attempt to evade tax or was merely a bona fide human error.

The Tribunal noted that the CA firm's proprietor had admitted the mistake through an affidavit and that the Revenue had not produced any material to disprove the explanation. It found no evidence to suggest that the taxpayer had intentionally furnished inaccurate particulars of income or attempted to misreport income to reduce tax liability.

Since the explanation remained uncontroverted and was supported by documentary evidence, the Tribunal concluded that the conditions necessary for imposing a penalty under Section 270A were not met. It therefore directed the deletion of the ₹17.41 lakh penalty.

What the ruling means for taxpayers

The ruling reiterates that penalties under Section 270A cannot be sustained merely because an incorrect return has been filed. Tax authorities must establish that the taxpayer under-reported or misreported income in accordance with the statutory provisions before levying a penalty.

The decision also highlights the importance of contemporaneous evidence in tax litigation. In this case, the affidavit filed by the proprietor of the chartered accountant's firm played a central role in establishing that the error originated at the tax consultant's office and was not a deliberate act by the taxpayer.

While taxpayers remain responsible for verifying the information contained in their income tax returns, the Tribunal's order makes it clear that a genuine clerical error, when supported by credible evidence and unaccompanied by any intent to evade tax, cannot by itself justify a penalty under Section 270A.