Abhijeet Patil Vs ITO (ITAT Pune)
Bogus Deduction Claims: ITAT Pune Upholds 200% Penalty Despite Tax Consultant Defence
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) upheld a penalty of Rs.1,41,910 under Section 270A in Abhijeet Patil v. ITO, concerning Assessment Year 2018-19. The penalty represented 200% of the tax on under-reported income arising from deductions treated as bogus. The assessee attributed the incorrect claims to his tax consultant, but the Tribunal found no material warranting interference with the first appellate authority’s order.
The decision was pronounced on 26 October 2026 by R. K. Panda, Vice President, and Astha Chandra, Judicial Member, in ITA No.2444/PUN/2024.
Background of the Case
The assessee was a salaried individual. According to the Tribunal’s factual narration, he declared total income of Rs.5,53,380 for the relevant assessment year. Information available with the Income Tax Department indicated that he had claimed bogus deductions of Rs.2,28,562 under Chapter VI-A.
The Department reopened the assessment under Section 147 and issued a notice under Section 148 on 29 March 2022. In response, the assessee filed a return on 27 April 2022, declaring total income of Rs.5,53,380.
The Assessing Officer completed the reassessment by adding Rs.2,28,562, determining total income at Rs.7,81,942. Penalty proceedings were subsequently initiated for under-reporting of income in consequence of misreporting, culminating in the disputed penalty of Rs.1,41,910.
Assessee’s Explanation
Before the Commissioner of Income Tax (Appeals), the assessee contended that he came from a technical background and lacked knowledge of income tax provisions. He claimed that he had relied entirely on a tax consultant who misguided him and made incorrect claims while filing his return.
The assessee further submitted that several employees of CEAT Limited had been similarly affected. According to his explanation, the employees lodged a complaint against the consultant with the Economic Wing of the Police Department, and a copy was submitted to the Assessing Officer.
He also stated that an erroneous refund of Rs.21,940 had been repaid, together with interest, on 28 April 2022. He denied any intention to conceal income and maintained that the incorrect claims had been corrected.
To support deletion of the penalty, the assessee relied on decisions involving allegedly improper refund claims attributable to tax practitioners, including Shashikant Sukdeo Ambdekar v. ITO.
Findings of the CIT(A)
The CIT(A)/NFAC rejected the explanation and sustained the penalty. It distinguished the decisions relied upon by the assessee because, in those cases, the Assessing Officer had accepted the income disclosed in the returns filed in response to Section 148 notices.
In the present case, however, the Assessing Officer made a further addition of Rs.2,28,562 to the returned income of Rs.5,53,380. The appellate authority therefore considered the factual position materially different.
The CIT(A) also observed that the decision in Shashikant Sukdeo Ambdekar involved failure to identify the specific clause of Section 270A(9)” target=”_blank” rel=”noopener noreferrer”>Section 270A(9), whereas the assessee had not raised such a ground in the present proceedings.
Applying Sections 270A(8) and 270A(9), the CIT(A) treated the case as involving suppression of facts under clause (a) and claims unsupported by evidence under clause (c). Its discussion referred to suppression of gross total income, higher deductions under Chapter VI-A and excess deduction relating to interest on borrowed capital.
The authority additionally relied on Sanjeev Kumar Manchand Rajput v. ITO, concerning suppression of income and overstated Chapter VI-A deductions attracting a 200% penalty.
Complaint Against Consultant Did Not Secure Relief
The CIT(A) considered it significant that the assessee revised his income only after the Section 148 notice. It regarded the explanation as an afterthought and held that filing a police complaint against the consultant did not absolve the assessee from penalty.
Its order also referred to the consultant having made bogus claims in the names of 1,888 employees and charging 20% of the refund amount. On the facts recorded, the CIT(A) rejected the plea that the assessee was unaware of the arrangement and concluded that the income had been misreported within Section 270A(9)” target=”_blank” rel=”noopener noreferrer”>Section 270A(9).
Tribunal’s Decision
No one appeared for the assessee before the Tribunal despite service of notices and earlier opportunities. No adjournment application was filed. The Tribunal therefore decided the appeal after hearing the Departmental Representative and examining the available record.
It described the CIT(A)’s decision as a well-reasoned and speaking order. Since nothing had been brought before it to justify a contrary view, the Tribunal upheld that order and dismissed the appeal.
The ruling sustains the penalty on the particular findings recorded against the assessee. The Tribunal’s reasoning centred on the existing record and the absence of material displacing the CIT(A)’s conclusions; it did not undertake a fresh, detailed examination of each statutory ingredient of misreporting.
Cases Discussed
- Shashikant Sukdeo Ambdekar Vs ITO — ITA Nos. 365 and 366/PUN/2023, dated 20/07/2023; distinguished in the CIT(A) order, including on the return accepted in reassessment and the specified-clause objection.
- Sanjeev Kumar Manchand Rajput Vs ITO — [2023] 157 taxmann.com 747 (ITAT Pune); relied upon by CIT(A) concerning penalty for overstated Chapter VI-A deductions.
- McDowell & Co. Ltd. Vs Commercial Tax Officer — [1985] 154 ITR 148 (SC); quoted in the CIT(A) reasoning concerning colourable tax arrangements.
- S. P. Chengalvaraya Naidu Vs Jagannath — AIR 1994 SC 853; quoted in the CIT(A) discussion of fraud and judicial process.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 17.09.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2018-19.
2. None appeared for and / or on behalf of the assessee when the matter was called for hearing on 24.08.2026. No application seeking adjournment of the case has been filed. A perusal of the order sheet entries shows that on previous occasions also, no one was appearing. Under these circumstances, we deem it proper to decide this appeal on the basis of material available on record and after hearing the Ld. DR.
3. Facts of the case, in brief, are that the assessee is a salaried person and filed his return of income for the assessment year 2018-19 declaring total income of Rs.5,53,380/-. As per the information available with the Department, it was found that the assessee has claimed bogus deductions to the tune of Rs.2,28,562/- under Chapter VI-A. Accordingly, the case of the assessee was reopened under the provisions of section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and notice u/s 148 of the Act was issued on 29.03.2022, in response to which the assessee filed his return of income on 27.04.2022 declaring total income of Rs.5,53,380/-. The Assessing Officer completed the assessment u/s 147 r.w.s. 144 r.w.s. 144B of the Act by making addition of Rs.2,28,562/- vide order dated 28.02.2023. He accordingly determined the total income of the assessee at Rs.7,81,942/-. Thereafter, the Assessing Officer initiated penalty proceedings u/s 270A of the Act for under-reporting of income in consequence of mis-reporting. Accordingly, the Assessing Officer imposed penalty of Rs.1,41,910/- being 200% on the tax on under-reported income.
4. The Ld. CIT(A) / NFAC dismissed the appeal of the assessee by observing as under:
5.1 Ground No 1 and the only ground in appeal is directed against the AO imposing penalty of Rs 1,41,910 u/s 270A of the Act. The brief facts of the case is that the appellant is an individual salaried person employed with CEAT Limited at Nasik. The appellant filed the return of income under section 139(1) for AY 2018-19 on 26/08/2018 declaring Total Income at Rs.3,00,660. The appellant had filed his return of income through tax practitioner Shri Kishor Rajendra Patil. A survey u/s 133A of the Act was conducted on 02.05.2019 in the business premises of Shri Kishor Rajendra Patil and Shri Kishor Rajendra Patil admitted that income under the head ‘salaries’ were suppressed by excluding and/or reporting bogus deduction and also by claiming bogus loss from house property. The case of the appellant was reopened and Notice under section 148 read with section 147 of the Act was issued to the appellant on 29.03.2022 and in response the appellant has filed return of income for Assessment Year 2018-19 on 27.04.2022 by declaring total Income of Rs 5,53,380. The assessment order was passed on 28.03.2023 u/s 144 r.w.s 144B of the Act determining total income at Rs 7,81,942 on account of addition of bogus deductions of Rs 2,28,562. Thereafter, the AO has levied penalty of Rs. 1,41,910 u/s 270A of the Act.
5.2 The appellant during the course of appeal proceedings has submitted written submission as under:
“1. Appeal in response to NFAC order vide DIN ITBA/PNL/F/270A/2023-24/1055333502(1) received on 22/08/2023 was filed 13/10/2023. Acknowledgment number for the same is 407094810131023.
2. In support of statement facts submitted earlier while filling appeal we are filing this ground wise written submission along with supporting documentary evidence and /or documents as per mentioned in hearing notice. We are submitting our submission as follow.
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- About concealed Income
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As you mentioned in the order under section 147 “Basing on your submissions with reference to above notice and the information available on record, the assessing officer completed assessment u/s 147 of Income Tax Act 1961 on 28-02-2023 at an income of Rs. 7,81,942/-. Instead of original income declared by assessee for filling of return under section 148 Rs. 5,53,380/- Since you have under-reporting of income in consequence of misreporting Income to the tune of Rs.2,28,562/-, the Assessing officer has initiated penalty proceedings u/s 270A of Income Tax Act,1961.”
Just to clarify this appellant want to again highlight the point here that he was not aware of any Income tax provisions as he is coming from technical background and the revised return earlier filed by Mr. Kishor patil where he claims refund. he was totally dependent on the tax consultant for filing the income tax return, who misguided the appellant. It is submitted that the wrong claims were made by the tax consultant in the revised return by misguiding many employees in the company, CEAT LIMITED. When he became aware of the fraud committed by Mr. Kishor patil all employees has immediately lodged a complaint against the tax consultant (Mr. Kishor Patil) with Economic Wing of Police Department and copy of the said complaint was also filed before the A.O.
On receiving Notice under section 148 read with section 147 of the Income-tax Act, 1961 (Act) vide DIN ITBA/AST/S/148_1/2021-22/1041982405(1) on dated 29/03/2022 appellant has filed return of income for Assessment Year 2018-19 in response to notice under section 148 of the Act, vide Ack. no. 599417480270422 on 27/04/2022 by declaring true and correct income details showing Total income as Rs 5,53,380/- We are hereby attaching computation sheet of the same.
There was no any malafied intention of any concealment of income and causing loss to department concern. Appellant was clearly cheated by Tax consultant.
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- About Refund claimed in revised return
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We are likely to mentioned here that appellant has not concealed any income, refund claimed and erroneously refunded to appellant of Rs. 21,940/- as per return filed earlier on 26/08/2018 by declaring lower income or claiming excessive deduction by Tax consultant. Appellant has paid full amount of refund along with Interest till the date of payment on dated 28/04/2022. We are hereby attaching Tax payment challan details for your reference.
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- About Excess deduction claimed under Chap VI A
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As mentioned in the order appellant have claimed excess deduction under ChapterIVA of Income Tax Act,1961, excess deduction on interest on borrowed capital and suppression of certain part of income aggregating to the tune of Rs. 1,65,561/- as against eligible amount of deduction for AY 2018-19.
We are likely to clarify here that while filling Return under section 148 appellant has claimed all true and fair deduction and no excess deduction has claimed while return filling. False deduction shown by tax consultant has been rectified by appellant in return filed under section 148 on 16/06/2020.
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- ITAT deletes Penalty claim of fraudulent refunds due to malpractices of Income Tax Practitioner
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As per the Case Law attached herewith Mr. Avinash Borase and other persons also were accused of the case of furnished inaccurate particulars of income and in this case law Mr. Avinash Borase and other persons also were misguided/mishandled by Mr. Kishor Patil (Tax Consultant) in the same reference Mr. Kishor Patil misguided/mishandled Mr. Abhijeet Patil.
Conclusion for the same case law ordered passed by ITAT is that Assesses act of return filed is bonafide and Tax Consultant misled the assessee and tax consultant is solely responsible for the fraud.
3. We are hereby requesting the honorable commissioner that we have give ground wise true and fair submission and clarification on disputed points and also hereby attaching all the relevant and required documents for your reference, kindly consider the same and please do the needful. We are hereby requesting to kindly consider the same and drop the demand processing.”
5.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant has claimed that the original return under section 139(1) for AY 2018-19 was filed on the advice of Mr. Kishor Patil a Tax consultant, without his knowledge on 26.08.2018 by declaring Total Income at Rs.3,00,660. The appellant submitted that he is not aware of the income tax provisions and hence, he was totally dependent on the tax consultant for filing the income tax return, who misguided him. The appellant submitted that the wrong claims were made by the tax consultant in the revised return by misguiding many employees in the company, CEAT LIMITED. who had no knowledge of the income tax provisions and that after becoming aware of this fact, the employees also lodged a complaint against the tax payer with Economic Wing of Police Department and copy of the said complaint was also filed before the A.O. the appellant also submitted that on becoming aware of the correct tax computation in the course of asst. proceedings, paid the tax dues without contesting the additions. The appellant submitted that he has not concealed any income and that the refund claimed and refunded to appellant of Rs. 21,940 as per return filed on 26/08/2018 by declaring lower income or claiming excessive deduction by Tax consultant has been paid in full amount along with Interest till the date of payment on dated 28/04/2022. The appellant also submitted that while filling Return under section 148, he has claimed all true and fair deduction and no excess deduction has claimed while return filling.
5.4 The appellant has also relied on the case of Mr. Avinash Borase and other persons passed by the Ld CIT(A) and also decision of Hon’ble Pune ITAT in the case of Sashikant Sukdeo Ambedkar vs ITO in ITA No 365 & 366/PUN/2023 dated 20.07.2023. In the case of Sashikant Sukdeo Ambedkar, the penalty was deleted as the Hon’ble ITAT held that the AO had accepted the return of income shown in the return filed in response to notice u/s 148 and has failed to identify the specific clauses form Clause (a-f) of section 270A(9)” target=”_blank” rel=”noopener noreferrer”>section 270A(9) of the Act, which is not the case as in the present case of the appellant, no such grounds has been taken by the appellant. I find that in all the cases relied on by the appellant, the AO had accepted the return of income shown in the return filed in response to notice u/s 148 but in the case of the appellant there was addition of Rs 2,28,562 made to the return income of RS 5,53,380. Therefore, I find that the facts are distinguishable and therefore, the cases relied on by the appellant as not applicable.
5.5 Sections 270A(8) and (9) of the Act reads as under:
“(8) Notwithstanding anything contained in sub-section (6) or sub-section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income.
(9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:—
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account;
(c) claim of expenditure not substantiated by any evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing on total income; and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.”
5.6 Therefore, it is clear that in cases of under reporting of income as a consequence of mis-reporting, sec.270A(8) and (9) would operate and a higher penalty is prescribed. Mis-reporting is defined in sec. 270A(9) and the case of the appellant would fall under clause (a) for suppressing the gross total income and under clause (c) for claiming a higher deduction under Chap VIA, excess deduction on interest on borrowed capital and suppression of certain part of income, which was not substantiated by any evidence. The Hon’ble Supreme Court in the case of Mc Dowell & Co. Ltd. v. Commercial tax Officer [1985] 22 Taxman 11 /154 ITR 148 has held that “Tax planning may be legitimate provided it is within the framework of law, Colourable devices cannot be part of tax planning…..”. Further, the application of principle of fraud was considered by the Hon’ble Supreme Court in the case of Badami (deceased) by her LRs v. Bhali in Civil Appeal No. 1723/2008, dated 22/05/2012 wherein the Hon’ble Supreme Court has held as follows:-
“20. In S. P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and others AIR 1994 SC 853 this court commenced the verdict with the following words:-
“Fraud-avoids all judicial acts, ecclesiastical or temporal” observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree – by the first court or by the highest court – has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings.
21. In the said case it was clearly stated that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands. A person whose case is based on falsehood has no right to approach the Court. A litigant who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If a vital document is withheld in order to gain advantage on the other side he would be guilty of playing fraud on court as well as on the opposite party.
22. In Smt. Shrist Dhawan v. M/s. Shaw Brothers AIR 1992 SC 1555 it has been opined that fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It has been defined as an act of trickery or deceit. The aforesaid principle has been reiterated in Roshan Deen v. Preeti Lal AIR 2002 SC 33, Ram Preeti Yadav v. U.P.Board of High School and Intermediate Education and others (2003) 8 SCC 312 and Ram Chandra Singh v. Savitri Devi and others (2003) 8 SCC 319.”
5.7 The Hon’ble ITAT Pune in the case of Sanjeev Kumar Manchand Rajput Vs ITO in [2023] 157 taxmann.com 747 (Pune – Trib.) has held that where assessee had suppressed gross total income and overstated deduction under chapter VI-A without offering any explanation, he was liable to be levied penalty at rate of 200 per cent under section 270A for misreporting of income
5.8 It may also be noted that the appellant has revised his income only when the notice u/s 148 of the Act was issued. This lends credence to the evidence that the explanation of the appellant is only an afterthought to evade penalty and that the appellant knowingly participated in connivance with the tax practitioner to defraud the revenue. Filing of compliant against the tax consultant with the Police would not absolve the appellant of the penalty. It may be noted that Shri Kishor Rajendra Patil has filed bogus claims under the name of 1,888 employees of various private and public sector undertakings and availed benefit of tax returns. Shri Kishor Rajendra Patil used to get 20% of the refund amount from each assessee. Therefore, the claim of the appellant that he was not aware of the fraud cannot be accepted as he had paid percentage of the refund to the CA from the bogus refund claimed. The department issued notices to the 1,888 employees following which many of them repaid the bogus refund. In view of the above facts as discussed above, I am of the considered view that the appellant has clearly mis-reported his income as defined in sec 270A(9) and thus the penalty imposed of Rs 1,41,910 u/s 270A of the Act is sustained. Therefore, the appeal on the single ground of appeal is dismissed.
5. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal.
6. Although a number of grounds have been raised by the assessee, however, all these relate to the levy of penalty of Rs.1,41,910/- levied by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC.
7. We have heard the Ld. DR and perused the record. We find the Ld. AO in the instant case made addition of Rs.2,28,562/- on the ground that the assessee has claimed bogus deductions to the tune of Rs.2,28,562/- under Chapter VI-A. Thereafter, he imposed the penalty of Rs.1,41,910/- being 200% on the tax on under-reported income. On appeal, the Ld. CIT(A) / NFAC has dismissed the assessee’s appeal for the reasons which we have already reproduced in the preceding paragraphs. We find that the Ld. CIT(A) / NFAC has passed a well reasoned and speaking order. No one has appeared before us despite service of notices. Since nothing has been brought to our notice, to take a view contrary to the view taken by the Ld. CIT(A) / NFAC, we uphold the order of the Ld. CIT(A)/NFAC.
8. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 26th October, 2026.
