ITAT Pune Deletes Penalty Under Section 271(1)(c): Bona Fide Reliance on Fraudulent Tax Consultant Shields Salaried Assessee
Case Reference
Gangadhar Gopinath Wagh Vs ITO (ITAT Pune)
ITA Nos. 701, 702 & 703/PUN/2025
Assessment Years: 2016-17, 2017-18 & 2018-19
Order Pronounced: 09th April, 2026
Background and Context
This ruling by the Income Tax Appellate Tribunal, Pune Bench, addresses a critical question that arises frequently in penalty proceedings — whether a salaried assessee with no understanding of tax law can be penalised for inaccurate particulars of income when the fault lies entirely with a fraudulent tax consultant and not with the assessee himself.
The Tribunal, after carefully examining the facts across three assessment years, concluded that imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 was wholly unjustified in the circumstances of this case, and directed deletion of the penalty for all three years.
Facts of the Case
Who Is the Assessee?
The assessee, Gangadhar Gopinath Wagh, is a salaried individual employed at Bosch Company, belonging to a purely technical professional background with no knowledge or expertise in income tax matters. Like several of his colleagues, he had entrusted the filing of his income tax returns to a tax consultant named Kishor Patil.
What the Consultant Did
Kishor Patil had built a reputation among employees of Bosch Company and other organisations by representing that he could legally reduce tax liability and secure TDS refunds through his expertise. Trusting this claim, the assessee — along with numerous other employees — authorised Kishor Patil to file their returns without independently verifying the contents.
Unknown to the assessee, Kishor Patil fraudulently inflated deductions under Chapter VI-A of the Income Tax Act, 1961 in the returns, without disclosing this to the assessees, purely for his own financial benefit. The assessee genuinely believed that the returns were filed in full compliance with the law.
How the Fraud Came to Light
The fraud was unearthed when a survey under Section 133A of the Income Tax Act, 1961 was conducted at the premises of Kishor Patil. Upon discovery of the large-scale manipulation affecting multiple individuals, all affected assessees, including Gangadhar Gopinath Wagh, filed complaints against Kishor Patil before the Economic Offence Wing of Police, Nashik. The fraud also received coverage in local Nashik newspapers, further corroborating the claims of the affected assessees.
Assessee's Response Upon Discovery
Upon becoming aware of the fraudulent deductions claimed in his name, the assessee took immediate corrective steps:
- He deposited the entire outstanding tax liability along with applicable interest on 15.05.2019.
- He engaged a new, genuine tax consultant to handle his affairs going forward.
- He filed a correct return of income disclosing his actual taxable income of Rs. 7,97,210/- in response to the notice subsequently issued under
Section 148.
Critically, the tax payment with interest was made on 15.05.2019 — nearly ten months before the notice under
Section 148was issued on 05.03.2020.
Sequence of Events: Assessment History
Original Return
The assessee had filed a revised return of income on 07.07.2017 declaring income of Rs. 4,17,330/-, which incorporated the fraudulently inflated Chapter VI-A deductions claimed by Kishor Patil, resulting in a refund of Rs. 69,618/-.