Salaried can't evade taxes in normal cases: ITAT

The Mumbai bench of the Income-Tax Appellate Tribunal, in a recent order, has taken a benevolent view and dismissed the penalty levied by income tax officials on a salaried employee for “concealment of income“.

A punching error by a taxreturn filing portal whose ser vices Richa Dubey had enlisted resulted in under-reporting of her salary income as Rs 2.09 lakh instead of Rs 20.96 lakh in the I-T return. Tax officials treated such underreporting as an attempt to conceal income and hence imposed a heavy penalty on her.

However, the ITAT ruled that at the time of filing of the I-T return, Dubey was five months pregnant and under immense work pressure. Paucity of time had prevented her from checking the content of the I-T return filed. She had relied completely on the services of the portal, blindly signed the e-acknowledgement sent to her by it and forwarded it to the I-T department.

After examining the case and Dubey's circumstances, the ITAT dismissed this penalty on the ground that she had no mala fide intent to evade tax or claim refund through dubious means.

The ITAT order is taxpayer-friendly as it recognised that a taxpayer should not be penalised for negligence by a tax-return filing portal. The ITAT order in the case of Richa Dubey cannot have a blanket application on all other cases where income has been under-reported in I-T returns, caution tax officials and tax experts.

In the context of salaried employees, the ITAT also observed that I-T officials have full details of the salary income of a taxpayer in their data base, as quarterly returns of tax deducted at source (TDS) are filed by the employer. The employers also issue form no 16 to employees which contains salary and TDS details. Hence, it is not possible under normal circumstances for a salaried employee to evade taxes by filing in-accurate salary particulars or by concealing salary income in the I-T return as the mismatch in the information furnished by the taxpayer in the I-T return vis-à-vis information in the data base can be easily detected, the ITAT pointed out.

“In this case, the taxpayer was able to demonstrate her bona fides by showing the circumstances under which the error was committed. Her subsequent behaviour, including paying back the erroneous refund she had obtained, also demonstrated that she had no mala fide intention. Further, the income which was understated in the I-T return was salary income, on which tax had already been deducted at source--this weighed significantly with the ITAT, in deciding to delete the penalty,“ explains Gautam Nayak, tax partner, CNK & Associates.

“Taxpayers must check the contents of the online I-T return which is being filed on their behalf by online tax-re turn filing portals,“ stresses a senior tax official.

At present, all taxpayers (including salaried employees) having an income of over Rs 5 lakh have to file their I-T returns online. During 2015-16, 4.34 crore I-T returns were filed electronically , a rise of nearly 27% over the previous year, according to statistics released by the ministry of finance.

In this case, which was recently heard by the ITAT, Richa Dubey had during the financial year 2010-11, received a salary income of Rs 26,376 from Nielson Research and Rs 21.22 lakh from Hindustan Unilever (HUL), aggregating to Rs 21.48 lakh.

She had submitted copies of Form 16, containing her salary details to the online tax-return filing portal, Taxspanner, whose services she had availed of even in earlier years. This portal wrongly punched her taxable salary from HUL as Rs 2.09 lakh instead of Rs 20.96 lakh, which resulted in her salary income being under-reported in the I-T return.

At the time of filing of the I-T return, the taxpayer was five months pregnant and was also under immense work pressure. Paucity of time had prevented her from checking the content of the I-T return filed.She had relied completely on the services of the portal; blindly signed the e-acknowledgement sent to her by the portal and forwarded it to the I-T department.

The Times of India, New Delhi, 28 April 2016