Responsibility for ITR Filing Mistakes by CA

When filing your income tax return (ITR), there are some important points to consider to ensure the correct filing of your ITR. It is difficult for ordinary taxpayers, especially for NRIs, to understand the complexities of submitting ITR. It is because they are frequently unaware of several income tax notifications and rates that impact their current tax structure. To resolve this issue, a taxpayer seeks assistance from a tax professional, such as a CA.

But what if a CA makes mistakes in filing your ITR? In this situation, who is responsible for mistakes in an ITR filed by a CA? Well, according to the Income Tax Department, as a taxpayer, you are responsible for filing an accurate and timely ITR. Considering this, if there is a mistake made by your CA, then you will still be accountable for it. 

However, not directly, but you do have recourse against a negligent CA. Want to know how you can do so and how you can avoid mistakes when filing your ITR? Read the blog and get your answers. 

What Does the Government Say About ITR Filing Mistakes?

The Income Tax Department generally does not require taxpayers to upload supporting documents while e-filing ITRs. However, taxpayers must preserve these documents for future verification or scrutiny, if required. Considering this, taxpayers are expected to keep the supporting documents by their side when claiming deductions. 

Therefore, the responsibility of filing correct and timely ITR is with taxpayers. So, even if an ITR filed by a CA is wrong, the taxpayer is responsible. In simple terms, the Income Tax Department views your ITR as your declaration. The CA is your authorised representative. When you e-verify your tax returns or sign your physical return, legally, you are confirming that the mentioned information in the ITR is accurate to the best of your knowledge. 

Although the government and ICAI do consider that CAs carry professional responsibility too. However, under the Income Tax Act, the primary legal liability is completely yours. 

So, from the above information, it is clear that a taxpayer is responsible for ITR filing mistakes in India. Here, the CA carries only professional responsibility. Both things are different and lead to different consequences. Want to know what they are? Read the next section.

Who is Accountable for Mistakes in an ITR Filed by a CA?

"Who is responsible for mistakes in the ITR filed by the CA?" Depends on where the mistakes happen. There are two types of errors that occur in this situation.

Type 1: Mistake Due to Wrong Information Provided by the Taxpayer

If you provide incorrect documents, don't disclose your foreign assets, or fail to share an income source with your CA, then the ITR mistake responsibility is completely yours. It is because here the CA filed your ITR based on your shared information. Additionally, the CA is only working with what they are given. Common examples of it include:

• Not mentioning the interest you earned in your NRO account.
• Forgetting to inform the CA about your rental income from an Indian property. 
• Not disclosing foreign bank accounts or assets.
• Failing to share capital gains statements from shares or mutual funds. 

In this scenario, under the Income Tax Act, the penalty for wrong ITR filing and interest applies to you, and the CA is not accountable for this. 

Type 2- Mistakes Due to CA Negligence in ITR Filing

Now just reverse the situation. If you have provided correct and complete information to your CA, and they still make a mistake. For instance, claimed incorrect deduction, applied wrong residential status (for example, mentioning your Residential Status as Resident instead of NRI). Here, due to CA negligence in ITR filing professionally, the responsibility lies with the CA.

However, even if this is the scenario, as a taxpayer in the eyes of the Income Tax Department, you are liable for the interest, tax, and penalties. Considering this, your recourse against your CA is a different matter. This will be handled by the disciplinary process of ICAI or the civil court.

Remember, whether the ITR filing mistakes in India were made by you as a taxpayer or your CA, you are responsible. What happens between you and your CA is not the concern of the Income Tax Department. Moving ahead, let's know the penalties for incorrect ITR. 

What Are the Penalties for Incorrect ITR?

In most cases, a penalty for wrong ITR filing is imposed on the taxpayer. Here is how penalties generally work for ITR errors:

If you are facing the tax penalties due to CA negligence in ITR filing, you can consider the following options:

• You may file a complaint with ICAI against your CA, following which disciplinary action may be initiated.
• If due to their error, you suffered a financial loss, you can pursue civil recovery.
• Moreover, exactly for this reason, some CAs carry professional indemnity insurance. So it is advisable, before hiring a CA, to first cross-check the CA's provided taxation services.

Although none of this happens quickly, and none of them stop the CA ITR filing mistake penalty from being imposed on you. But does it mean then CA will not be penalized for wrong ITR filing? Read the next section to get your answer.

Can a CA be Penalized for Wrong ITR Filing?

Yes, a CA can be penalized for wrong ITR filing. However, for this, you need to follow a different route. As mentioned earlier, for wrong ITR filing, a CA is not directly penalized by the Income Tax Department. However, they can be penalized. Here is how you can do so:

• Section 278 of the Income Tax Act: Under section 278 of the Income Tax Act, a CA who induces or abets a client to make a false tax return can face prosecution. This applies to deliberate fraud, not to honest mistakes.
• ICAI Disciplinary Action: If ICAI finds a CA to have been negligent, acted against the professional standards, or issued incorrect certificates, they can cancel or suspend their licence.
• Section 271J: This section was introduced in the Finance Act 2017. It allows the Income Tax Department to impose a penalty of INR 10,000 per incorrect report or certificate furnished by a merchant banker or accountant. It helps in directly penalizing CA for furnishing inaccurate details in the reports they certify, such as Form 15CB or audit reports.

So, while the responsibility for ITR mistakes primarily rests with the taxpayer, a CA is not completely out of the situation, especially when there is a certified document that was not correct or they engage in deliberate wrongdoing.

Moving further, now let's know the important things NRIs should consider before filing ITR.

Important Things NRIs Should Check Before Filing ITR

Generally, in the case of NRIs, the mistakes in ITR filing do not happen because of CA negligence but because of sharing incomplete information. To help you out, here is a checklist you should go through before hiring a CA to file your returns.

• Documents that You Need to Share with Your CA
  • Bank statement of NRE and NRO accounts for the full financial year.
  • Foreign income details such as business, salary, and freelance.
  • Capital gains from stocks, mutual funds, or property sales.
  • Property purchase or sale documents.
  • Under Schedule FA, details of foreign bank accounts.
  • Details of any rental income from Indian property.
  • DTAA residency certificate (tax residency certificate (TRC) from your country of residence).
• Questions to Ask Your CA Before Filing ITR
  • Have you mentioned the correct residential status, i.e., NRI, RNOR, or Resident and Ordinarily Resident (ROR)?
  • If I hold foreign assets or accounts, do I need to file Schedule FA (Foreign Assets)?
  • For any remittances this year, do I need Form 15CA/ 15CB?
  • If applicable, have you applied the correct DTAA treaty?
  • Are there any disclosures I might be missing?
• After ITR Filing- Always Check:
  • E-verify your ITR within the prescribed timeline applicable for the relevant assessment year.
  • Check the general details and download the ITR-V acknowledgment.
  • Confirm your name, assessment year, PAN, and income figures are right.
  • For at least six years, keep all your documents by your side, as the tax department can reopen assessments.

Furthermore, e-verification is your legal sign-off. Considering this, once you e-verify, you are confirming your income tax return. In case, after filing your tax return, before the ITR deadline, you find an error, under section 139(5), you can file a revised ITR filing. Additionally, after the ITR deadline, corrections are very limited.

Final Thoughts

Lastly, the answer to the question, "Who is responsible for mistakes in an ITR filed by a CA?" is the taxpayer. It is because filing your ITR correctly and on time is your responsibility, not that of the CA. Considering this, even when you hire a CA for your tax filing, it is your moral duty to cross-check every piece of information and accurately file to avoid any complications.

Furthermore, if you are looking for a reliable tax expert to fulfill your NRI tax obligation, connect with Savetaxs. The experts in our team have years of experience in cross-border transactions. They will help you at every step of your ITR filing and help you in maximizing your returns.