The Income Tax Appellate Tribunal (ITAT) has ruled in favour of an IT professional who was imposed a penalty of over Rs 50 lakh for alleged misreporting. ITAT Bengaluru said the employee had relied on his employer-issued Form 16 in good faith and did not intentionally hide income or provide false details.
According to the case, Renil E K Kumar, a Wipro Ltd employee, claimed tax exemption using details provided in his Form 16 for AY2022-'23, Financial Express reported. However, the Income Tax Department later rejected the exemption and imposed a penalty of Rs 51.2 lakh for alleged misreporting of income.
The tribunal cancelled the penalty and clarified that penalties cannot be imposed automatically when a taxpayer makes a genuine mistake based on employer documents, the report stated.
ALSO READ: Here's How Digital, Physical, And Inherited Gold Are Taxed — Rules For Indians And NRIs Explained
The Case
Kumar filed his income tax return on Dec. 30, 2022, showing a total income of Rs 84.27 lakh. He claimed an exemption of Rs 82.05 lakh under Section 10(10CC) for ESOP-related perquisites, based on details mentioned in the Form 16 issued by his employer, Wipro Ltd.
Since the company had treated the amount as exempt and did not deduct TDS, the taxpayer believed the claim was correct. He later sought a refund of Rs 28.69 lakh, and after processing the return under Section 143(1), the Income Tax Department issued a refund of nearly Rs 29.98 lakh, the FE report added.
However, during scrutiny of the records, the Assessing Officer (AO) rejected the taxpayer's Rs 82.05 lakh exemption claim, saying it was not valid. This increased his taxable income from Rs 84.27 lakh to Rs 1.66 crore in the assessment order issued on March 19, 2024. On the same day, penalty proceedings were started. Later, the AO imposed a Rs 51.20 lakh penalty under Section 270A, treating the case as misreporting of income, which carries a penalty equal to 200% of the tax on under-reported income.
The taxpayer accepted the tax addition, paid the dues and returned the Rs 29.98 lakh refund. However, he challenged the Rs 51.20 lakh penalty imposed on him, the report stated.
The ITAT ruled in favour of the taxpayer, noting he acted in good faith by relying on the Form 16 issued by his employer. The tribunal noted the employer had shown Rs 82.05 lakh as exempt and had not deducted TDS. It said the employee had fully disclosed all facts and could not be accused of misreporting income for trusting that the employer had correctly handled the tax treatment.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
