Income Tax Practitioner misled Assessee in making False Refund: ITAT deletes Penalty against Assessee [Read Order]

The Income Tax Appellate Tribunal (ITAT) Chennai bench has deleted penalty under section 271(1)(c) of the Income Tax Act, 1961 against the assessee by holding that assessee cannot be penalized for false refund claims made by income tax practitioner.

The assesee pleaded before the Tribunal that the case was mishandled by one Mr. Nagesh Shastry, Income Tax Practitioner, who has been indulging in claim of fraudulent refunds by fictitious claim of deductions, which was unearthed by the Investigation Wing of the Income Tax Department. It was submitted that without the knowledge of assessee, Mr. Nagesh Shastry has filed revised return and all requisite password, etc. was kept with him and by giving the mobile number of Mr. Nagesh Shastry only.

Subsequently, the proceedings under section 271(1)(c) of the Income Tax Act, 1961 were initiated against the assessee.

According to the assessee, there was no fault of assessee in filing the revised return so as to claim the fraudulent refund. The entire issue of claim of fraudulent refund is by Mr. Nagesh Shastry only and the assessee was bonafide in his action and there was no fault from the assessee’s side.

The department, on the other hand, argued that the entire claim of fraudulent refund was with full knowledge of assessee and the assessee at this stage cannot say that it was handiwork of Mr. Nagesh Shastry.

A bench comprising N.V. Vasudevan, Vice President and Shri B. R. Baskaran, Accountant Member has held that in the quantum proceedings, the assessee accepted the addition because he was misled by Mr. Nagesh Shastry who was instrumental in fling the revised return of the assessee making false claims.

“However, the same facts and arguments in the penalty proceedings are not considered. In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee’s act is bonafide, penalty cannot be levied. With these observations. we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard,” the Tribunal said.

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