Employee Penalised Due to Wrong Advice? Here’s What ITAT Said
Misled by a tax consultant and slapped with a ₹1.15 lakh penalty, a salaried individual finally found relief from the Income Tax Appellate Tribunal (ITAT), Pune. This case highlights how genuine taxpayer mistakes, if backed with transparency and reasonable cause, can get legal protection under the Income Tax Act.
Let’s decode the case and understand how ITAT Pune reversed penalty under Section 271(1)(c).
Key Facts of the Case
| Particulars | Details |
|---|---|
| Assessee | Individual salaried employee |
| Year of dispute | AY 2011–12 |
| Mistake | Claimed fictitious losses and deductions |
| Reason | Followed tax consultant’s wrong advice |
| Penalty levied by AO | ₹1.15 lakh under Section 271(1)(c) |
| Tribunal’s observation | No deliberate concealment or malafide |
| Final outcome | Penalty deleted by ITAT Pune |
What is Section 271(1)(c) of Income Tax Act?
Under Section 271(1)(c), penalty is imposed for:
- Concealment of income, or
- Furnishing inaccurate particulars
Penalty can go up to 100–300% of tax sought to be evaded.
But the law also recognises “reasonable cause” as a defence — especially when there’s no deliberate intent to deceive.
Why ITAT Pune Reversed the Penalty
Here’s how the tribunal reasoned the reversal of ₹1.15 lakh penalty:
- Assessee was a salaried person, not a tax expert.
- Claimed deductions based on genuine belief in consultant’s advice.
- No attempt to hide facts from the department.
- Responded promptly to scrutiny notices and proceedings.
- No malafide intention or fraudulent behaviour found.
📌 Citing Supreme Court’s ruling in Price Waterhouse Coopers Pvt. Ltd. vs. CIT (2012) 348 ITR 306, the ITAT reiterated:
“A bonafide and inadvertent error does not amount to furnishing inaccurate particulars.”
Expert Insight: Avoid Blind Trust in Consultants
Even if you hire a tax consultant, you remain legally responsible for the return filed.
Pro Tip:
- Always review your ITR before filing
- Ask for proper documentation of any claimed deduction or loss
- Use platforms like Efiletax to track and verify your return status
Lessons for Taxpayers
- Wrong advice ≠ automatic penalty — If you act in good faith, tribunals may intervene.
- Maintain clear communication with your CA/consultant
- Respond to notices promptly to avoid escalated legal proceedings
- Document everything you submit
Frequently Asked Questions (FAQs)
Q1. Can a salaried person be penalised under Section 271(1)(c)?
Yes. Even salaried individuals can be penalised for false claims or inaccurate returns.
Q2. What is the defence for wrong tax claims?
If you acted in good faith, relied on professional advice, and disclosed all facts, it can be considered a reasonable cause.
Q3. How to avoid such penalties?
File through trusted portals like Efiletax, verify consultant’s advice, and retain all proof.
Conclusion
This case is a reminder that honesty and prompt cooperation go a long way in tax matters. The ITAT Pune ruling offers relief not just to one employee but also gives hope to many who face penalties due to genuine error.
✅ Need help with your ITR or facing a tax penalty?
Let Efiletax handle your case with expert support and full transparency.
Summary
ITAT Pune reversed a ₹1.15 lakh penalty imposed on a salaried employee for relying on wrong tax advice. The Tribunal held that genuine mistakes backed by transparency are not punishable under Section 271(1)(c).