Harish VitthalraO Kale Vs ITO (ITAT Pune Bench)
Consultant May Prepare the Return, but Taxpayer Owns the Claim: Blaming Tax Adviser Cannot Save Penalty Where Bogus Deductions Were Withdrawn Only After Survey – ITAT Pune
Summary: The assessee, a salaried employee of Bosch Limited, filed his original return of income on 03.08.2016 declaring total income of ₹7,06,040. The income and deductions disclosed in this return were found to be substantially correct.
However, on 22.07.2017, the assessee filed a revised return reducing his total income to ₹3,82,850. The reduction was achieved by claiming additional deductions under Chapter VI-A, which were subsequently found to be bogus.
The revised return also resulted in a refund becoming payable to the assessee.
The controversy surfaced following a survey conducted on 23.08.2019 at the premises of Shri Kishore Patil, a tax consultant. During the survey, the Department allegedly discovered that the consultant had filed returns for various taxpayers by claiming bogus Chapter VI-A deductions.
Based upon the information gathered during the survey, the AO issued notice u/s 148 to the assessee on 26.02.2020.
In response to the reassessment notice, the assessee filed a return on 23.03.2020 declaring total income of ₹7,06,750. This was broadly consistent with the income disclosed in the original return and substantially higher than the income shown in the revised return.
The return filed in response to notice u/s 148 disclosed gross salary of ₹8,91,746 and deductions of ₹1,50,000. Thus, the disputed additional deductions claimed in the revised return were effectively withdrawn—but only after the Department detected the consultant’s activities during survey and initiated reassessment.
The AO concluded that the assessee had consciously claimed excessive and inadmissible deductions in the revised return. Penalty proceedings u/s 271(1)(c) were accordingly initiated, and a penalty of ₹56,717 was imposed for concealment of income or furnishing inaccurate particulars.
The CIT(A) confirmed the penalty. He observed that the assessee was employed by a reputed private-sector company and tax had been deducted at source from his salary. As an employee, he would have furnished details of his eligible investments and deductions to the employer’s accounts department for determining TDS.
Therefore, when the tax consultant suggested additional deductions, the assessee ought to have known that those claims were not supported by genuine investments or payments. The CIT(A) also noted that the assessee had admitted the wrongdoing but pleaded ignorance of the provisions of the Income-tax Act.
The appeal before the Tribunal witnessed repeated adjournments. The authorised representative sought adjournments on several dates. On other dates, no one appeared. Even on the final date of hearing, there was no representation for the assessee. The Tribunal therefore proceeded ex parte qua the assessee, heard the Departmental Representative and examined the record.
The principal defence appearing from the record was that the assessee had been misguided by the tax consultant, Shri Kishore Patil.
The Tribunal rejected this explanation. It observed that the assessee was aware that he was not entitled to the additional Chapter VI-A deductions claimed in the revised return. Nevertheless, he claimed those deductions and obtained a refund.
The bogus claim was not voluntarily corrected before detection. The correct income was restored only after the survey unearthed the practice and the AO issued notice u/s 148. This sequence indicated that the corrective return was filed due to detection and compulsion rather than voluntary disclosure.
The Tribunal relied upon the Bombay High Court judgment in Jyoti Laxman Konkar v. CIT [292 ITR 163 (Bom.)]. The High Court had held that where an original return was filed dishonestly with the intention of concealing income and a corrected return was filed only after discovery by the Department, such compelled disclosure would not absolve the assessee from penalty.
The ITAT also relied upon the Karnataka High Court judgment in CIT v. Sangameshwara Associates [345 ITR 396 (Kar.)]. The High Court held that where the assessee admits that an earlier return did not disclose true and complete income, the Revenue is not required to independently prove an admitted fact. The burden of proof becomes unnecessary where the relevant wrongdoing is acknowledged rather than contested.
Applying these principles, the Tribunal held that the AO had rightly levied penalty u/s 271(1)(c). The assessee’s attempt to shift responsibility entirely to the consultant was not accepted, particularly when the inadmissible deductions were within the assessee’s personal knowledge and the revised return had generated a tax refund.
The appeal was accordingly dismissed, and the penalty of ₹56,717 stood confirmed.
Legal Principle
A taxpayer cannot escape penalty merely by alleging that bogus deductions were inserted by a tax consultant, particularly where the deductions concern personal investments or payments within the taxpayer’s own knowledge and the claim is withdrawn only after departmental detection.
A corrected return filed after survey or reassessment notice does not necessarily amount to voluntary disclosure. Disclosure made after detection may establish compulsion, not bona fides.
Author’s Comment
The judgment does not mean that every error committed by a return preparer must automatically result in penalty upon the taxpayer. Genuine clerical errors, misunderstanding of a debatable provision or an incorrect professional interpretation may stand on a different footing.
The fatal facts here were that the original return reflected the correct income, the later revised return introduced unsupported deductions and generated a refund, and the correct position was restored only after a survey exposed the consultant’s modus operandi.
A taxpayer may delegate preparation and uploading of the return, but cannot delegate responsibility for the truth of personal deductions claimed in it. Before verifying a return, the assessee must ask a basic question: What investment or payment supports this deduction?
In short, the consultant may have shown the road to a false refund, but the assessee signed and travelled on it. The journey back began only after the Department raised the barrier—and therefore the penalty survived.
Cases Discussed
- Jyoti Laxman Konkar v. CIT [292 ITR 163 (Bom.)]
- CIT v. Sangameshwara Associates [345 ITR 396 (Kar.)]
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, PUNE BENCH SMC
This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2016-17 on 13.10.2025, emanating from the Assessment Order u/s 147 of the Act, dated 27.08.2021.
2. Basic Facts :
- In this case, hearing was scheduled on 13.01.2026, Mr. Mahesh Pagare requested for adjournment. Accordingly, case was adjourned to 29.01.2026.
- On 29.01.2026 again Ld. AR requested for adjournment. Accordingly case was adjourned to 07.04.2026.
- On 07.04.2026 no one appeared on behalf of the assessee. Accordingly was adjourned to 13.05.2026.
- On 13.05.2026 Mr. Mahesh Pagare requested for adjournment and the case was adjourned to 18.05.2026.
- On 18.05.2026 the Ld. AR requested for adjournment and case was adjourned to 27.07.2026.
- On 27.07.2026 none appeared for assessee and the case was adjourned to 01.09.2026.
- On 01.09.2026 none appeared on behalf of the assessee.
2.1 In these backgrounds, we heard the case on 01.09.2026 ex-parte qua the assessee. We heard Ld. DR and perused the records.
Findings and Analysis :
3. In this case, assessee had filed return of income for AY 2016-17 on 03.08.2016 declaring total income at Rs.7,06,040/-. Subsequently, the return was revised on 22.07.2017 declaring total income at Rs.3,82,850/-. Assessee was served notice u/s 148 of the Act dated 26.02.2020. In response to the notice u/s 148, the assessee filed return of income on 23.03.2020 declaring total income at Rs.7,06,750/-.
3.1 In this case, the notice u/s 148 was issued because during the survey conducted on 23.08.2019 at the premises of the Kishore Patil the Tax Consultant, it was observed that Kishor Patil had filed returns claiming bogus deductions under Chapter VI-A of the Act. In this background, the Assessing Officer (AO) issued notice u/s 148 to the assessee. The assessee filed return of income in response to notice u/s 148 of the Act showing gross salary of Rs.8,91,746/- and deductions of Rs.1,50,000/-, declaring total income at Rs.7,06,750/-. Thus, return filed by the assessee in response to notice u/s 148 and the original return filed on 03.08.2016 was having the same income. However, on 22.07.2017 assessee had filed revised return showing return income of Rs.3,82,850/-. Thus, assessee consciously claimed excess deduction under Chapter VI-A of the Act. Therefore, AO issued notice u/s 271(1)(c) of the Act. The AO levied penalty u/s 271(1)(c) of the Act. Aggrieved by the penalty order, the assessee filed appeal before the Ld. CIT(A), who confirmed the penalty. The relevant paragraph of the Ld. CIT(A)’s order is reproduced here as under :
“4. I have carefully considered the facts of the case and the submissions of the appellant. Assessee is an employee of a Bosch Limited. In the original return of income, he had reported correct income and claimed only those deductions which were legally admissible. However, subsequently, under the influence of Sh Kishore Rajendra Patil his return was revised, bogus deductions were intentionally claimed which resulted in refund to the assessee. This fact is not denied by the assessee. In his notes, assessee admits to the wrong doing. However, he has mentioned that he was unaware about the provisions of the Income Tax Act. This explanation of the assessee does not hold good. Assessee is an employee of a reputed Private sector Company. He is a salaried person. Tax has been deducted at source before making payments. As an employee he must have shared all his details of investment and intimated about the admissible deductions in his case to his accounts department, on the basis of which tax has been deducted at source. Thus, it is apparent that when suggestion for claiming extra deductions was made, he was aware that these are not as per law. Thus knowingly he has claimed bogus deductions, resulting in suppression of income. Under the circumstances, penalty has been rightly levied. Hence penalty of Rs.56,717/- u/s 271(1)(c) of the I.T. Act is confirmed.”
3.2 Aggrieved by the order of the Ld. CIT(A), the assessee has filed appeal before this Tribunal.
4. The only contention of the assessee was that Mr. Kishor Patil the Tax Consultant misguided assessee. However, the assessee was well aware about the facts that the assessee was not entitled to the deduction claimed under Chapter VI-A, inspite of that assessee claimed it in the revised return dated 22.07.2017 and also claimed refund. Only because of the survey action this fact was unearthed. Therefore, after the survey, the AO issued notice u/s 148 of the Act. Only after the notice u/s 148 the assessee filed a correct return. This explains that assessee had conceal the income and AO rightly levied penalty u/s 271(1)(c) of the Act.
5. In this context, we find support from the decision of Hon’ble Bombay High Court in the case of Jyoti Laxman Konkar Vs. CIT (2007) 292 ITR 163 (Bombay) held as under :
Quote, “In our view, the Assessing Officer as well as the Income-tax Appellate Tribunal having come to the conclusion that the assessee had filed the initial return dishonestly with a view to conceal the income and the revised return was filed out of compulsion, i.e., after having found that the assessee had concealed the income and filed a false return with a view to avoid tax liability, in our view, no substantial question/s of law arises in this case either in the manner formulated on behalf of the assessee in the memorandum of appeal or otherwise. The Commissioner of Income-tax allowed the appeal of the assessee by misapplying the said decision of the Division Bench of the Madhya Pradesh High Court which had no relevance to the fact situation prevailing in the case at hand, Whether there is concealment of income or not has to be decided with reference to the facts of a given case and the lact-finding authorities under the Act having come to the conclusion that in the facts of the case, the assessee had concealed the income initially with a view to avoid the payment of tax, we are of the view that no substantial question of law is involved in this case requiring the admission of the appeal. Consequently, the same is hereby dismissed.” Unquote.
6. Similarly, the Hon’ble Karnataka High Court in the case of CIT Vs. Sangmeshwara Associates, (2012) 345 ITR 396 (Kar.) has held as under :
Quote, “36. In a situation where the assessee admits that a return which had been filed earlier did not disclose a true or full income, which is the case in the present situation, does not warrant proof or burden on the revenue to prove things, as it is well settled legal principle that any proof and manner of proof are all not required when there is an admission. Proof is required where it becomes a contentions issue and person asserting is required to make good his version. But in a situation where it is not contested, but admitted, production of proof is not necessary nor warranted in law.
37. In this view of the matter, we are of the opinion that both the appellate commissioner and the tribunal erred in setting aside the order of the Assessing Officer levying penalty, by adverting to irrelevant grounds and on untenable reasoning.
38. The decisions relied upon also did not further the case of the assessee and therefore we allow this appeal and set aside the order of the Tribunal by answering the question in favour of the revenue and against the assessee.
39. Appeal allowed and the order of the Assessing Officer restored.” Unquote.
7. Respectfully following the Hon’ble High Court (supra), we hold that AO has rightly levied penalty u/s 271(1)(c) of the Act. Accordingly, appeal of the assessee is dismissed.
8. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 10th September, 2026
