Penalty confirmed for claiming bogus deductions under Chapter VIA

Penalty confirmed for filing revised return claiming bogus deductions under Chapter VIA with the intention of claiming illegal refund.

In a recent judgment, the ITAT Amritsar has confirmed the penalty for filing revised returns claiming bogus deductions under various sections of Chapter VIA and also claiming loss on house property income, with the intention of claiming refund from the income tax department.

ABCAUS Case Law Citation:
ABCAUS 4099 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC in confirming imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).

The appellant assessee was a salaried employee of a Government sector undertaking working as senior supervisor. On the basis of his salary certificates issued by the employer, regular returns had been filed by the assessee in usual course containing correct particulars of his income and the due taxes payable in respect of both the years under appeal, after considering the TDS deducted as per Form 16.

However, the assessee revised returns for both the assessment years, claiming false deductions under various sections of Chapter VI and also claiming loss on house property income, with the intention of claiming refund from the income tax department.

In course of verification of the revised returns for both the years, it was found by the Assessing Officer (AO) that the claims made by the assessee were absolutely false and baseless and has been made with the sole intention of claiming refund of TDS from the department, which is in contravention of the provisions of law.

In absence of any representation from the assessee before the AO, despite of repeated notices being issued, the AO completed the assessments for both the years by disallowing the claims made under various sections of the Act.

Thereafter, penalty u/s 271(1)(c) of the Act was imposed by the AO calculated @ 200% (two hundred percentage) of the tax sought to be evaded.

Before the CIT(A), the assessee admitted that false claim had been made for both the years, with the sole purpose of obtaining TDS refund, on the guidance and advice of some outsiders, and the claims made were not supported by any documentary evidences, because none exists at all.

As a result, the CIT (A) sustained the penalty for both the years.

Before, the Tribunal also the assessee contended that he was misguided by other persons because he was unfamiliar with tax rules and has also stated financial hardship and prayed for adequate relief in the matter.

The Tribunal opined that the assessee was not an illiterate person, but was a senior supervisor in a Government concern, and it was absolutely transparent that the default committed by the assessee was intentional and wilful and had been done in full knowledge of his conscience to derive additional benefits from the revenue, by way of excess refund , by filing false claims under various sections of Chapter VIA of the Act and also claiming loss on house property income and even going to the extent of projecting himself as disabled by claiming deduction u/s 80U of the Act.

The Tribunal observed that once a revised return is filed it goes and sits on the original return and the AO has to consider the revised returns for the purpose of assessment, and in this case, the contents and particulars of the revised returns filed and claims made in the return were not an inadvertent error or mistake committed by the assessee, but very much intentional and wilful to defraud the revenue of its legitimate taxes.

The Tribunal stated that it cannot have much sympathy with such assessee, because he had not approached the court with clean hands, however, considering the fact that the assessee was a salaried employee with moderate financial means, in the interest of justice, the Tribunal reduced the percentage of penalty imposed to 100% (One hundred percentage) of the tax sought to be evaded. 

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