Job Switch, Missing Form 16 Led To ITR Default; ITAT Scraps Rs 3.74 Lakh Penalty

Pravesh Aggarwal changed jobs during financial year 2018-19. Along with the move came a paperwork problem: he could not collect Form 16 from his employers before the income tax return (ITR) deadline. The due date passed without him filing his return.

This was not a minor omission. Aggarwal had earned salary income of more than Rs 30 lakh and was required to file an ITR. However, both employers had tax deducted at source (TDS), and the entries were showing in his Form 26AS.

Aggarwal assumed that since the tax had already been deducted and deposited, there was nothing more for him to do. That assumption eventually landed him with a penalty of Rs 3.74 lakh.

When The Old Filing Lapse Surfaced

The tax department reopened Aggarwal’s case under Section 147 of the Income-tax Act, 1961. The tax department reopened the matter in April 2023. The Section 148A(d) order came on April 19, and a notice under Section 148 followed, according to a recent report by The Times of India.

Aggarwal eventually filed his ITR on May 8, 2023, declaring a total income of Rs 30,22,900. The AO did not dispute the amount and assessed him on the same income.

The matter did not end there. The AO began penalty proceedings under Section 270A because Aggarwal had failed to file his original return under Section 139(1). The officer treated the entire income disclosed later as under-reported and imposed a penalty of Rs 3,74,072. This worked out to 50 per cent of the tax payable on the income in question. Aggarwal challenged the penalty, saying the default was not intentional.

The Commissioner of Income Tax (Appeals), however, agreed with the AO. He then took the dispute to the Delhi bench of the Income Tax Appellate Tribunal (ITAT).

No Income Was Left Out, Says ITAT

Before the tribunal, the tax department argued that Aggarwal might never have filed his return had the reopening notice not been issued. His salary and interest income, it said, would otherwise have escaped assessment.

The ITAT looked at what happened after the return was filed. The income declared by Aggarwal was accepted as it was. The AO neither discovered any additional income nor increased the amount offered to tax.

The tribunal also took note of Aggarwal’s explanation. His employers had deducted TDS, and the salary details were recorded in Form 26AS. The information was, therefore, already available on the department’s portal.

Finding no concealment, misrepresentation or suppression of facts, the ITAT accepted that Aggarwal had acted under a genuine belief that his tax obligation had been completed. It deleted the Rs 3.74 lakh penalty on May 13, 2026.

The relief was based on the circumstances of this case. However, TDS on salary does not take away a taxpayer’s obligation to file an ITR where filing is mandatory.

FAQs

1. Is filing an ITR necessary if the employer has deducted the entire tax?
Yes. TDS does not replace the requirement to file an ITR when a taxpayer’s income crosses the prescribed limit.

2. Why did the ITAT cancel the Rs 3.74 lakh penalty?
Aggarwal’s declared income was accepted without any addition, while his salary and TDS details were already reflected in Form 26AS.

3. Does this ruling protect every taxpayer who misses the ITR deadline?
No. The relief was based on the specific facts of the case and the tribunal’s finding that there was no concealment or misrepresentation.