Consultant’s Filing Error Led To Rs 1.23 Lakh Tax Demand; ITAT Grants Relief

A Bengaluru taxpayer who chose the new income tax regime found himself facing an additional demand of Rs 1,23,770 after his consultant mistakenly filed a form opting for the old tax regime (OTR).

The Income Tax Appellate Tribunal (ITAT), Bangalore, has now directed the tax authorities to process his income tax return (ITR) under the new regime. The tribunal accepted that the earlier filing was an inadvertent procedural error and did not reflect the taxpayer’s actual choice.

The case concerned a practising lawyer who declared a total income of Rs 32.55 lakh for assessment year 2025-26. His return calculated the entire tax liability under the new tax regime specified under Section 115BAC(1A).

How The Wrong Form Created A Tax Demand

Before the ITR was filed, the taxpayer’s consultant submitted Form 10-IEA on September 30, 2025. For taxpayers having income from business or profession, the form was used to exercise the option to move out of the new tax regime, according to a recent report by The Times of India.

The taxpayer, however, maintained that the form was filed mistakenly during routine compliance work. He said it did not represent his intention because the ITR subsequently filed on October 24, 2025 clearly calculated the tax payable under the new regime.

However, the Centralised Processing Centre (CPC), Bengaluru, went by Form 10-IEA and processed his return under the old tax regime on January 29, 2026. This resulted in the additional demand of Rs 1.23 lakh.

The Commissioner of Income Tax (Appeals) did not accept the taxpayer’s contention, following which he approached the ITAT.

Why ITAT Accepted The Taxpayer’s Claim

The tribunal examined the taxpayer’s conduct as well as the tax treatment adopted in his return. It observed that the ITR is the statutory document through which a taxpayer reports income, calculates tax, and indicates the regime under which the liability has been determined.

Since the return was filed after Form 10-IEA and consistently computed the liability under the new regime, the tribunal found that this clear choice could not be ignored merely because an inconsistent form had been filed earlier by mistake.

The bench also noted that the taxpayer had not attempted to combine the advantages of both regimes. He had not claimed deductions, exemptions or allowances available exclusively under the old regime while simultaneously seeking the new regime’s tax rates.

The ITAT relied on an earlier Pune tribunal ruling in which the choice reflected in the subsequently filed return was given effect over an inconsistent option form.

What The Tribunal Directed

The tribunal set aside the appellate authority’s decision and instructed the tax authorities to process the return under the new tax regime. The tax liability must be recalculated accordingly, and the demand arising solely from applying the old regime must be removed.

The case is also a reminder to review the ITR and all related forms before filing them. Even a small mismatch can result in the wrong tax calculation and a lengthy dispute.

FAQs

1. Why did the taxpayer receive an additional tax demand?
His consultant mistakenly filed Form 10-IEA, opting him out of the new tax regime. Consequently, his return was processed under the old regime.

2. Why did the ITAT rule in the taxpayer’s favour?
The ITR filed later clearly calculated tax under the new regime, showing the taxpayer’s actual choice. He had also not claimed benefits available under both regimes.

3. What relief did the ITAT provide?
The tribunal directed the tax authorities to process the ITR under the new regime and remove the demand arising from the application of the old regime.