Tax Authorities should charge legitimate taxes instead of punishing bonafide mistakes

Tax Authorities should charge legitimate taxes from the taxpayers instead of punishing the assessees for their bonafide mistakes – ITAT

In a recent judgment, ITAT Chandigarh has deleted addition made by the AO criticised him of miserably failing to perform his duties and in assessing the true and correct income of the assessee, rather punishing the assessee for his bonafide mistake.

ABCAUS Case Law Citation:
4847 (2025) (11) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming NFAC, Delhi in confirming the addition made by the Assessing Officer by assessing the business income of the assessee u/s 44AD of the Income Tax Act, 1961 (the Act).

The appellant assessee filed his return of income inter alia declaring income under the head ‘Business & Profession’ and offered u/s 44AD of the Act.  However, later on, it came to the knowledge of the assessee even when he had no business income other than partners salary, the tax consultant of the assessee had wrongly included the aforesaid income u/s 44AD of some other person into the return of the assessee. 

The assessee, immediately filed revised computation wherein the income from remuneration of partnership firm was shown along with interest income.

The assessee also deposited the self-assessed tax on the said income and pleaded before the AO that the assessee did not have any business income which was wrongly offered by the tax consultant u/s 44AD of the Act. 

However, the AO did not agree with the contention of the assessee. The AO not only assessed the revised income offered by the assessee as remuneration received from partnership and interest income, but also included the income declared u/s 44AD in original return and assessed the total income.

The Tribunal opined that when the assessee realising the mistake made by the tax consultant in declaring the income which did not belong to him, offered almost five times of the income earlier declared by his consultant and also paid the due taxes. This was enough for the assessee to show his bonafide. 

The Tribunal observed that despite it, not only the AO but also the CIT (Appeals) included the amount wrongly declared u/s 44AD into the income of the assessee despite the assessee being time and again pleading that the said amount was not the income of the assessee.

The Tribunal observed that time and again it has been held that Income Tax Authorities should charge legitimate taxes from the taxpayers and instead of punishing the assessees for their bonafide mistakes, they should rather assist the assessees in offering and assessing their correct income. 

The Tribunal boted that the AO in this case miserably failed to perform his duties and in assessing the true and correct income of the assessee, rather punished the assessee for his bonafide mistake.

Accordingly, the Tribunal held that the impugned addition made by the AO was not sustainable and the same was ordered to be deleted.

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