ITR filing: How a taxpayer beat a Rs 1.46 lakh penalty despite false deductions
A salaried employee who under-reported half his income due to misreporting by his CA, walked free from a Rs 1.4 lakh tax penalty after proving his innocence. Tax advisory platform Taxbuddy said the case underscores the importance of verifying filings, fixing errors early, and being honest—even after a mistake.
- Jul 30, 2025,
- Updated Jul 30, 2025 2:08 PM IST
In a rare but eye-opening tax case, a salaried individual, Mr Shinde, managed to escape a hefty penalty of Rs 1.46 lakh — even after it was revealed he had under-reported 50% of his income using bogus deductions. Here's how he turned what looked like a sure-shot penalty into a clean slate.
In a social media post on X, tax advisory platform Tax Buddy noted that the Income Tax Department imposed a penalty equivalent to 17% of Mr. Shinde's salary after it was proved that he had claimed false income tax deductions to under-report his income by about 50% to lower his net income tax liability. The penalty imposed by the income tax department amounted to Rs 1.4 lakh. Shinde’s actual salary was Rs 8 lakh a year, which he reported as only Rs 4 lakh.
The sharp discrepancy stemmed from exaggerated deductions claimed in his Income Tax Return (ITR) for FY 2017–18 — deductions that, according to Shinde, were added by his tax consultant without his knowledge.
While the penalty might seem justified for willful tax evasion, Mr. Shinde presented a different picture in court. He argued he was an innocent employee with a technical background who, like many others from companies such as Ceat, Bosch, HAL, and Mahindra and Mahindra, relied on a tax consultant named Mr. Patil to file their Income Tax Returns (ITRs). Mr. Shinde stated that Patil had assured them he was a tax law expert and could legitimately calculate a lower tax liability, resulting in a refund of the Tax Deducted at Source (TDS) by their employers.
In May 2019, after discovering the issue, Shinde didn’t wait to be caught. He voluntarily paid the correct tax and interest totaling Rs 1.3 lakh. This was done before any penalty notice was issued under Section 270A(8), which typically penalizes under-reporting of income.
However, he couldn’t file a revised return because the statutory deadline had already passed. Though he had corrected the financial mistake, the procedural door to file an updated ITR had closed.
Despite his proactive approach, the tax department sent him a reassessment notice under Section 148 in February 2020. Shinde complied and filed the correct ITR. Still, in September 2021, a penalty of Rs 1.46 lakh was imposed under Section 270A for under-reporting income.
His first appeal to the Commissioner of Income Tax (Appeals) failed — the penalty was upheld. So, Shinde escalated the matter to the Income Tax Appellate Tribunal (ITAT), Pune.
At ITAT, Shinde presented strong evidence in his defence:
Proof of full tax and interest payment before any penalty notice
A police complaint filed against the consultant
Evidence that multiple clients were misled
Demonstrated intent to comply, not defraud
The Tribunal agreed. It noted that there was no deliberate concealment, and Shinde had shown transparency and corrective intent.
The final verdict
The Income Tax Appellate Tribunal (ITAT) Pune has ruled in favor of a taxpayer, canceling a penalty of ₹1.4 lakh that was imposed by the Income Tax Department. The tribunal found that the taxpayer had voluntarily paid the outstanding tax and interest well in advance of any official notice.
The ITAT Pune dismissed the department's argument that the revised return was not voluntary. It highlighted that the taxpayer had deposited the tax and interest on May 28, 2019, significantly earlier than the Section 148 notice, which was issued on February 25, 2020.
The judgment concluded that it was "not a fit case to impose penalty u/s 270(A)," directing the Assessing Officer to delete the penalty.
Tax Buddy noted that this case highlights three crucial lessons for taxpayers: always verify what your tax preparer files, as blindly trusting them can lead to serious consequences; fix errors as early as possible, since intent and timing often play a major role in how authorities respond; and remember that being honest and transparent, even after a mistake, can significantly improve the chances of a favorable outcome.
In a rare but eye-opening tax case, a salaried individual, Mr Shinde, managed to escape a hefty penalty of Rs 1.46 lakh — even after it was revealed he had under-reported 50% of his income using bogus deductions. Here's how he turned what looked like a sure-shot penalty into a clean slate.
In a social media post on X, tax advisory platform Tax Buddy noted that the Income Tax Department imposed a penalty equivalent to 17% of Mr. Shinde's salary after it was proved that he had claimed false income tax deductions to under-report his income by about 50% to lower his net income tax liability. The penalty imposed by the income tax department amounted to Rs 1.4 lakh. Shinde’s actual salary was Rs 8 lakh a year, which he reported as only Rs 4 lakh.
The sharp discrepancy stemmed from exaggerated deductions claimed in his Income Tax Return (ITR) for FY 2017–18 — deductions that, according to Shinde, were added by his tax consultant without his knowledge.
While the penalty might seem justified for willful tax evasion, Mr. Shinde presented a different picture in court. He argued he was an innocent employee with a technical background who, like many others from companies such as Ceat, Bosch, HAL, and Mahindra and Mahindra, relied on a tax consultant named Mr. Patil to file their Income Tax Returns (ITRs). Mr. Shinde stated that Patil had assured them he was a tax law expert and could legitimately calculate a lower tax liability, resulting in a refund of the Tax Deducted at Source (TDS) by their employers.
In May 2019, after discovering the issue, Shinde didn’t wait to be caught. He voluntarily paid the correct tax and interest totaling Rs 1.3 lakh. This was done before any penalty notice was issued under Section 270A(8), which typically penalizes under-reporting of income.
However, he couldn’t file a revised return because the statutory deadline had already passed. Though he had corrected the financial mistake, the procedural door to file an updated ITR had closed.
Despite his proactive approach, the tax department sent him a reassessment notice under Section 148 in February 2020. Shinde complied and filed the correct ITR. Still, in September 2021, a penalty of Rs 1.46 lakh was imposed under Section 270A for under-reporting income.
His first appeal to the Commissioner of Income Tax (Appeals) failed — the penalty was upheld. So, Shinde escalated the matter to the Income Tax Appellate Tribunal (ITAT), Pune.
At ITAT, Shinde presented strong evidence in his defence:
Proof of full tax and interest payment before any penalty notice
A police complaint filed against the consultant
Evidence that multiple clients were misled
Demonstrated intent to comply, not defraud
The Tribunal agreed. It noted that there was no deliberate concealment, and Shinde had shown transparency and corrective intent.
The final verdict
The Income Tax Appellate Tribunal (ITAT) Pune has ruled in favor of a taxpayer, canceling a penalty of ₹1.4 lakh that was imposed by the Income Tax Department. The tribunal found that the taxpayer had voluntarily paid the outstanding tax and interest well in advance of any official notice.
The ITAT Pune dismissed the department's argument that the revised return was not voluntary. It highlighted that the taxpayer had deposited the tax and interest on May 28, 2019, significantly earlier than the Section 148 notice, which was issued on February 25, 2020.
The judgment concluded that it was "not a fit case to impose penalty u/s 270(A)," directing the Assessing Officer to delete the penalty.
Tax Buddy noted that this case highlights three crucial lessons for taxpayers: always verify what your tax preparer files, as blindly trusting them can lead to serious consequences; fix errors as early as possible, since intent and timing often play a major role in how authorities respond; and remember that being honest and transparent, even after a mistake, can significantly improve the chances of a favorable outcome.