Employee switched job and got Rs 30 lakh salary on which TDS was deducted, forgot to file ITR, Tax dept sent notice and imposed Rs 3.74 lakh penalty, he fights and wins case in ITAT Delhi
When Mr Pravesh Aggarwal from Indrapuram, Ghaziabad, Uttar Pradesh switched jobs and got Rs 30 lakh salary he did not file an income tax return by the due date as he could not get the Form 16 in time from his past employer. However, this mistake costed him Rs 3.74 lakh penalty as the Income Tax Department looked strictly at this and opined that if they had not caught this Aggarwal would not have filed the ITR and thus his salary and interest income would not have got reported.
Ultimately, after a long fight, Aggarwal won the case in ITAT Delhi. Anubhav Sharma, Judicial Member and Manish Agarwal, Accountant Member of ITAT Delhi, said that a genuine salaried employee should not be heavily penalised for not filing ITR, especially if his employer has deducted TDS from salary and no under-reporting of income has taken place.
Keep reading to know the full details of this case and how Aggarwal won the fight.
Why was Mr Aggarwal sent a tax penalty notice?
To tell you briefly, Mr Aggarwal had changed jobs in FY 2018-19 during the middle of the year. He got a salary of Rs 30.22 lakh from this job, but due to the job switch transition phase, Aggarwal was unable to obtain relevant documents like Form 16 from his employer, before the due date of ITR filing.
Even though Aggarwal could not get his Form 16, his Form 26AS correctly showed the TDS amount deducted by his employers. This made Aggarwal believe that if everything is reported and shown in Form 26AS then there would be no problem in not filing an ITR. So he did not file the ITR.
However, for this no ITR filing mistake, Aggarwal’s tax file was re-opened as per Section 147 after passing a Section 148A(d) order on April 19, 2023. In response to the tax notice, Aggarwal filed an ITR on May 8, 2023 declaring a total income of Rs 30.22 lakh.
The Income Tax Assessing Officer (AO) read his filed ITR (in response to the tax notice) and then started initiating tax penalty proceedings for under-reporting of income as no ITR was filed.
During the course of such penalty proceedings, Aggarwal argued that he was under the bona fide belief that since both the employers had deducted TDS, his tax obligation was discharged, so he does not need to file an ITR.
However, the Income Tax Assessing Officer rejected his contentions and levied the penalty of Rs 3.74 lakh being 50% of the tax on concealed income by holding that Aggarwal has under reported his income and no original ITR was filed by the due date.
The Commissioner of Appeals (CIT A) also rejected his contentions thus confirming the tax penalty of Rs 3.74 lakh. Still aggrieved, Aggarwal filed an appeal in ITAT Delhi.
Jitendra Singh, the Income Tax Department representative, supported the orders of the lower authorities and submitted that in case a notice under Section 148 had not been issued to Aggarwal, then clearly this amount would have escaped taxation and Aggarwal would never have filed his ITR and reporting such salary and interest income.
On May 13, 2026, Aggarwal won the case in ITAT Delhi.
How did Aggarwal win this tax penalty case?
Chartered Accountant Ashish Niraj, Partner, A S N & Company, said to ET Wealth Online that he has observed that many salaried employees are under the impression that as TDS has already been deducted by their employer, no ITR is required to be filed. This is mainly due to lack of knowledge.
Niraj says: “When we meet any such taxpayer we let them know that ITR filing is compulsory if income exceeds basic exemption limit irrespective of TDS deducted or not.”
In the above case Aggarwal was under impression that ITR filing was not compulsory but filed when he got notice. As he had not filed his ITR so initiation of penalty proceedings under Section 270A for under-reporting of income was unjustified.
Niraj says: “This section would have applicable had taxpayer filed income with lower income particulars. Question of Under reporting not arises if return itself has not been filed. ITAT is correct in giving relief to the taxpayer as his non filing was due to lack of knowledge and not due to intention to evade tax.”
ITAT Delhi order
Anubhav Sharma, Judicial Member and Manish Agarwal, accountant member of ITAT Delhi said that sub-section 2 to section 270A says that ‘under-reporting income’ occurs when a person discloses a smaller amount than his actual income.
In the present case, whatever income reported/declared by Aggarwal has been accepted by the Income Tax Department, therefore, ITAT Delhi said that it is not the case of reporting smaller amount than their actual income.
Further Aggarwal, was, under a bona fide believe that due taxes on the salary income has already been deducted at source by the respective employer and is appearing in Form 26AS, thus he has fulfilled all the tax obligations of disclosing the income earned during the year.
Since Aggarwal was under bona fide and genuine belief that there is no misrepresentation or suppression of facts, and the income was duly reflecting in Form No. 26AS on the portal of the Department, which was within the knowledge of the Income Tax Department, therefore, ITAT Delhi said that there is no question as regards to any under-reporting of income.
ITAT Delhi explained that as per section 270A(2), under-reporting of income can arise only when the income reassessed is higher than the income determined and assessed earlier.
In the present case, atleast prima facie, the assessed income under Section 148 is not greater than the income declared. Thus, ITAT Delhi said that it is not a case of misrepresentation also.
Therefore, ITAT Delhi ordered to delete the Rs 3.74 lakh penalty levied under 270A and allowed all the grounds of appeal raised by Aggarwal.
