Your tax consultant made a mistake in your ITR. Can you still be penalised? ITAT Chennai ruling explains

ITR filing 2026: Hiring a chartered accountant or tax consultant to file your Income Tax Return (ITR) does not automatically protect you from penalties if mistakes are made. However, a recent Income Tax Appellate Tribunal (ITAT), Chennai ruling has clarified that genuine, inadvertent errors committed by a tax professional cannot automatically be treated as "misreporting of income" under the Income Tax Act.

The ruling came in the case of S. Saroja, an 81-year-old Chennai resident, who was initially asked to pay a penalty of Rs 1.92 lakh despite accepting the mistakes in her return and paying the additional tax. The tribunal eventually deleted the entire penalty, holding that the errors were bona fide and not intentional.

The case was highlighted by TaxBuddy founder Sujit Bangar in a detailed post on X.

What happened?

According to Bangar, Saroja had hired a tax professional to file her ITR for FY 2016-17 after sharing all the required documents. Her return declared a total income of Rs 51.78 lakh.

However, the tax consultant made two errors while preparing the return. Rental income of Rs 8.40 lakh was mistakenly reported as Rs 5.40 lakh, resulting in an under-reporting of Rs 3 lakh. Additionally, Rs 8,000 of interest income was shown under "Business Income" instead of "Income from Other Sources."

During scrutiny, the Income Tax Department detected both discrepancies. Saroja accepted the mistakes immediately and paid tax on the additional income of Rs 3.08 lakh.

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Despite this, the assessing officer imposed a penalty of Rs 1,92,192 under Section 270A, treating the case as one of "under-reporting by misreporting of income." The Commissioner of Income Tax (Appeals) later upheld the penalty.

 

What did ITAT Chennai say?

The taxpayer challenged the order before the ITAT Chennai, which ruled in her favour.

According to Bangar's post, the tribunal held that an honest mistake by a tax professional does not amount to misreporting of income. It also observed that the incorrect classification of the Rs 8,000 interest income had no additional tax impact, while the rental income omission was a bona fide error rather than deliberate concealment.

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As a result, the tribunal deleted the entire penalty of Rs 1.92 lakh.

Sharing the key takeaway, Bangar wrote, "Section 270A punishes intentional misreporting of income. A genuine, honest mistake by your tax professional is NOT misreporting. Accepting the mistake early and paying tax shows good faith. The law protects honest taxpayers."

What does this mean for taxpayers?

Bangar said the ruling reinforces that "your professional's mistake does NOT automatically become your misreporting." He added that taxpayers who discover such mistakes should accept the correction, pay the additional tax promptly and retain evidence showing that the error originated from the tax professional.

He also suggested obtaining a written note from the tax consultant acknowledging the mistake and, if required, relying on the S. Saroja (ITAT Chennai, ITA No. 418/Chny/2023) ruling while challenging any penalty.

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While the judgment provides relief in genuine cases, it also highlights the importance of reviewing an ITR carefully before e-verification, even when it has been prepared by a tax professional. Matching income with AIS, TIS and Form 26AS, verifying deductions and checking income under the correct heads can help taxpayers avoid disputes later.