ITAT Delhi scraps Rs 3.74 lakh tax penalty over missed ITR

A Ghaziabad man who missed his ITR after a job switch beat a Rs 3.74 lakh penalty. ITAT Delhi ruled his TDS-covered income was never under-reported.

A salaried professional from Ghaziabad who failed to file his income tax return on time after changing jobs has succeeded in overturning a penalty of Rs 3.74 lakh. The Delhi bench of the Income Tax Appellate Tribunal (ITAT) struck down the levy on May 13, 2026, ruling that the taxpayer had not concealed or under-reported any income.

The case involved Pravesh Aggarwal, a resident of Indrapuram in Ghaziabad, Uttar Pradesh. Aggarwal moved to a new job partway through the 2018-19 financial year and drew a salary of Rs 30.22 lakh from his new employer. He did not submit his return by the due date because his former employer had not handed over his Form 16 in time.

Without Form 16, Aggarwal turned to his Form 26AS, the statement on the tax department's portal that logs tax deducted at source. It already showed the TDS taken out by his employers. He concluded that because the income and the deducted tax were recorded there, filing a separate return would not be necessary. On that reasoning, he let the deadline pass without submitting a return.

How a filing gap became a penalty

The matter came back to the surface when the tax department reopened Aggarwal's assessment. It passed an order under Section 148A(d) on April 19, 2023, and proceeded to reassess him under Section 147. Aggarwal responded by filing his return on May 8, 2023, and declared a total income of Rs 30.22 lakh.

The Assessing Officer reviewed that return and opened penalty proceedings, treating the earlier non-filing as under-reporting of income. Aggarwal argued that he had acted in good faith, believing his liability was settled because both employers had already deducted TDS from his pay. The officer rejected the explanation and imposed a penalty of Rs 3.74 lakh, equal to half the tax on what was treated as concealed income.

The department's position throughout was firm. It held that if the omission had gone unnoticed, Aggarwal might never have filed at all, and his salary and interest income would have stayed outside the tax net. Representing the department before the tribunal, Jitendra Singh defended the orders of the lower authorities. He argued that without the notice served under Section 148, the income would have escaped assessment, and that Aggarwal would not otherwise have declared his salary and interest.

Aggarwal first contested the penalty before the Commissioner of Appeals, but that authority also turned him down and upheld the Rs 3.74 lakh demand. He then carried the dispute to ITAT Delhi.

Why the tribunal sided with the taxpayer

The bench of Anubhav Sharma, Judicial Member, and Manish Agarwal, Accountant Member, ruled in Aggarwal's favour. It held that a genuine salaried worker should not be hit with a heavy penalty for a late return when the employer has already deducted TDS and the income has not been understated.

Sharma pointed to sub-section 2 of Section 270A, which defines under-reporting as declaring an amount below the income actually earned. In Aggarwal's case, the tribunal noted, the income he eventually reported was accepted by the department. Because the figure he declared matched what was assessed, the bench found the case could not be classed as one where a taxpayer had shown less than his real income.

The tribunal also accepted that Aggarwal held a genuine belief that his tax had already been paid through deduction at source. Since the TDS figures were visible in Form 26AS, he assumed he had met his obligation by having the income on record. The bench observed that the details sat on the department's own portal and were already known to it, leaving no scope to claim suppression or misrepresentation of facts.

The tribunal added that Section 270A(2) can trigger an under-reporting finding only when the reassessed income exceeds what was previously determined. On the facts, the income assessed under Section 148 was not higher than the amount Aggarwal had declared, so the bench held there was no misrepresentation either.

On these grounds, ITAT Delhi ordered the Rs 3.74 lakh penalty imposed under Section 270A to be deleted and allowed every ground of appeal Aggarwal had raised. The ruling underscores the weight tribunals give to a taxpayer's bona fide belief when the income is fully captured by TDS and reflected in official records.

ITAT Delhi ruling, income tax penalty, Section 270A, Form 16 delay, missed ITR filing, Form 26AS TDS, under-reporting income, job switch tax