ITAT Cancels ₹2.21 Lakh Penalty After Tax Consultant Filed Wrong Deduction Claims

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The order is useful for salaried taxpayers because it shows what can happen when an ITR prepared by someone else contains claims that cannot later be supported. A consultant may fill and submit the return, but notices and tax proceedings still reach the taxpayer whose PAN appears on it. Mali received relief after the tribunal examined when he corrected the income, when the additional tax was paid and how the penalty proceedings had been framed.

Why Did ITAT Cancel The ₹2.21 Lakh Penalty?

The dispute was over what Mali did prior to his reassessment. His 2017 return declared an income of ₹5,06,720, with ₹2,35,000 claimed under Chapter VI-A. In June 2019, he reported an income of ₹9,12,160 and paid ₹1,02,875 toward taxes and interest.

The department later evaluated his income at ₹9,12,160. Still, a ₹2,21,310 penalty was imposed on him under Section 270A in November 2021. While determining whether the penalty was valid, the Pune ITAT considered the department’s order and the reasons for imposition of the penalty.

The chronology is easier to follow when the main dates are placed together.

Section 270A provides for a penalty equal to 50% of tax payable on under-reported income. Where the under-reporting is treated as arising from misreporting, the rate is 200%. Section 270A(9) lists the situations that can fall within misreporting.

Mali’s representative, Chinmayy Suhas Pathak, argued that the higher income had already been disclosed and the related tax and interest had been paid before reassessment. Revenue representative Rajesh Haladkar supported the earlier CIT(A) decision that had upheld the penalty.

How Does This Affect Salaried Taxpayers In India?

The order does not give taxpayers a general escape route whenever a consultant prepares an incorrect return. Pune ITAT decided Mali’s appeal on the record before it, including the correction of income, payment of tax and earlier tribunal decisions dealing with similar proceedings.

For an employee, the safer approach comes much earlier. Form 16 should be compared with the return before submission. Deductions under Chapter VI-A should also match the documents actually available. AIS, Form 26AS and tax-payment records can help spot figures that look unfamiliar.

LoansJagat’s view is that taxpayers should ask for the completed ITR before it is filed, even when a tax professional handles the work. That small check can catch an unfamiliar deduction, refund claim or income figure before it turns into a notice. A related LoansJagat guide on common income-tax notices also explains what taxpayers should verify when a notice reaches them.

What Did The Taxpayer And Revenue Argue?

Pathak told the tribunal that Mali had already offered the higher income to tax and discharged the related liability before reassessment. He also relied on previous Pune ITAT decisions where Section 270A penalties had been examined on similar facts.

The Revenue defended the penalty through the CIT(A)’s earlier findings. Pune ITAT, however, looked at the sequence of the return correction, tax payment and the tribunal’s own earlier rulings before allowing Mali’s appeals.

That distinction is important. The order was not based on a single statement that the consultant was responsible. The bench examined the taxpayer’s conduct after the incorrect claims surfaced and the way the misreporting allegation had been pursued.

Which Earlier ITAT Case Influenced The 2026 Ruling?

A major reference was Prashant Balasaheb Kage v. ITO, decided by Pune ITAT on 21 February 2025. That proceeding also involved a salaried employee whose return had been prepared by tax consultant Kishor Patil.

The earlier order recorded the taxpayer’s claim that excess Chapter VI-A deductions had been entered without his knowledge. It also referred to employees approaching the Economic Offence Wing in Nashik after the alleged conduct came to light.

There was another legal issue. In the Kage case, the tribunal found that the show-cause notice did not specify which clause of Section 270A(9)(a) to (f) formed the basis of the misreporting allegation.

That bench relied in part on Shashikant Sukdeo Ambekar, decided by Pune ITAT on 20 July 2023. In that ruling too, the tribunal dealt with failure to identify the specific Section 270A(9) clause relied upon for misreporting.

When Mali’s appeals reached the tribunal in 2026, the bench followed the reasoning from those earlier cases. His AY 2018-19 appeal was also allowed because the tribunal recorded that the facts were identical apart from the figures.

What Should A Taxpayer Do After Finding A Wrong Deduction?

The first check should be the filed return itself. Salary income, Chapter VI-A deductions, AIS, Form 26AS, Form 16, challans and supporting receipts should be compared line by line where necessary.

If a tax notice has already been issued, the taxpayer should read the section mentioned in it, note the assessment year, check the DIN and record the response deadline. The available correction route will depend on the year involved and how far the proceedings have progressed.

Documents should not be discarded once a return is processed. Mali’s AY 2017-18 return was filed in 2017, while the ITAT order came on 2 September 2026. Tax disputes can remain open for years.

Conclusion

Pune ITAT’s 2 September 2026 order removed the ₹2.21 lakh penalty imposed on Dilip Gangaram Mali. The result came after the bench considered his higher income disclosure, payment of tax and interest, and earlier Pune tribunal decisions dealing with Section 270A penalties.

For salaried employees, there is a simpler lesson before any dispute begins. Check the return that is being filed in the taxpayer’s name. Keep proof for every deduction. If an error appears later, preserve the correction records, challans and correspondence. Those papers can become central evidence if the department questions the return years later.

FAQ’s

1. Why Did Pune ITAT Delete The ₹2.21 Lakh Penalty?

The tribunal considered that Mali had disclosed higher income, paid tax and interest, and relied on earlier Pune ITAT decisions dealing with similar Section 270A proceedings.

2. Does Section 270A Apply To Wrong Deduction Claims?

Section 270A covers under-reporting and misreporting of income. It provides a 50% penalty on tax payable on under-reported income and 200% where the case involves misreporting.

3. Is A Taxpayer Responsible If A Consultant Files Wrong Deductions?

Using a consultant does not automatically shield a taxpayer from proceedings. Mali’s relief came after ITAT considered the facts of his correction, payment history and earlier legal precedents.

4. My ITR Preparer Claimed A Deduction I Did Not Ask For. What Should I Check?

The taxpayer should compare the filed ITR with Form 16, AIS, Form 26AS, deduction documents and tax challans. Any notice received should also be checked for its section, DIN, assessment year and deadline.

5. Did ITAT Also Allow Mali’s AY 2018-19 Appeal?

Yes. Pune ITAT recorded that the facts for AY 2018-19 were identical apart from the amounts involved and applied the same reasoning while allowing that appeal.