Fraudulent Refund by Increasing Deductions and Reducing Taxable Income is Fraud committed against Dept to Evade Income Tax: ITAT upholds Penalty [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal upheld a penalty for misreporting income and suppressed gross total income and inflated deduction claims under chapter VI-A of the Income Tax Act, 1961.

The assessee, Sanjeev Kumar Manchand is an individual who derives income from salary. The assessee misreported income in 2017-18, claiming a deduction of Rs. 2,35,000. The Assessing Officer reopened the case, and the appellant filed a revised return, claiming a deduction of Rs. 1,50,000. The AO initiated penalty proceedings, levied a 200% penalty, and the National Faceless Appeal Centre upheld the penalty. The appeal was filed before ITAT.

The assessee claimed that his income tax return had been submitted in good faith and that he hadn’t intended to understate his earnings. Additionally, he said that there was no evidence to support his allegation that he had committed fraud despite the fact that he had a history of claiming refunds.

The revenue department argued that the assessee had deliberately misreported his income in order to reduce his tax liability. They also argued that the assessee’s history of claiming refunds showed that he had a pattern of fraudulent behavior.

The appeallate authority observed that the assessee had not provided a justification for the differences in his income returns. The ITAT also noted the appellant’s history of habitually claiming fraudulent refunds and considered judicial precedents and legal principles.

The Two -member bench comprising Intrirama Rao (Accountant Member) and Partha Sarath Chadhury (Judicial Member) partially allowed the Revenue’s appeal for statistical purposes and restores the issue of employee provident fund (PF) deduction. The Assessing Officer was directed to seek clarification from PF authorities on the interpretation of “every month” in the PF Act.

The ITAT upheld the CIT(A) decision on ESOP expenses deduction under section 37(1) of the Income Tax Act. The Revenue’s appeal on ESOP expenses is rejected. The Assessing Officer must re compute disallowances based on the clarification received.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates