ITAT Shields Taxpayer From Consultant's Regime Error

Bengaluru ITAT deleted a Rs 1,23,770 tax demand caused when a consultant mistakenly filed Form 10-IEA, wrongly pushing a taxpayer's return into the Old Tax Regime despite his consistent intent to be taxed under Section 115BAC(1A).

A tax filing mix-up that could easily happen to any salaried professional or business owner has just received important clarity from the Income Tax Appellate Tribunal's Bengaluru bench. In an order pronounced on August 17, 2026, the tribunal ruled that a genuine clerical error by a tax consultant cannot override the tax regime a taxpayer actually chose while filing his return.

A form filed by mistake, a demand that followed

The dispute traces back to a routine compliance step gone wrong. The taxpayer's consultant filed Form 10-IEA on September 30, 2025, a declaration used to opt out of the New Tax Regime. According to the taxpayer, this was filed inadvertently, without any intention of switching away from the New Regime.

Weeks later, on October 24, 2025, the taxpayer's actual income tax return for Assessment Year 2025-26 was filed. This return told a completely different story. It computed the entire tax liability under the New Tax Regime, with no deductions or exemptions claimed that are exclusive to the Old Regime.

Despite this, the Centralised Processing Centre (CPC), while processing the return under Section 143(1), relied on the earlier Form 10-IEA and taxed the individual under the Old Regime. The taxpayer, who had declared a total income of Rs 32.55 lakh, was slapped with an additional tax demand of Rs 1,23,770.

Why the first appeal failed

The taxpayer first challenged this at the Commissioner of Income Tax (Appeals) level, arguing that the Form 10-IEA filing was a genuine error and should not dictate his final tax treatment. The CIT(A) was not convinced.

It held that since Form 10-IEA had been digitally verified, it could not simply be dismissed as invalid or "non-est" merely because the taxpayer later claimed it was filed by mistake. On this reasoning, the CPC's demand was upheld, leaving the taxpayer to escalate the matter to the ITAT.

What tipped the scales at ITAT

The tribunal took a materially different view of the facts. It observed that digital verification of a form only confirms who filed it and that it was authenticated. It does not, by itself, prove that the form reflected the taxpayer's deliberate and final choice of tax regime.

More importantly, the ITAT looked at what happened after the form was filed. The taxpayer's actual return, filed nearly a month later, computed tax entirely under the New Regime and claimed none of the Old Regime's exclusive benefits. For the tribunal, this consistent conduct was strong evidence that opting out of the New Regime had never been the taxpayer's real intention.

This reasoning drew support from an earlier ruling by the Pune bench of ITAT, involving the reverse situation. In that case, a taxpayer had filed Form 10-IE indicating a preference for the New Regime, but the actual return was filed under the Old Regime. The Pune bench held that the regime reflected in the return filed should prevail over an earlier, potentially mismatched form. The Bengaluru bench applied the same logic here, reinforcing a broader tribunal position: the return itself, not a preliminary declaration, carries the taxpayer's real, final word.

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ITAT's final order: demand deleted

Citing the taxpayer's consistent conduct and the precedent supported by rulings such as Akshay Nitin Malu v. ITO, the ITAT set aside the CIT(A)'s order. It directed the Assessing Officer and CPC to process the return afresh under Section 115BAC(1A), as originally intended in the ITR, and to recompute the tax liability accordingly. This effectively wiped out the Rs 1,23,770 demand that had arisen solely because of the Old Regime processing.

Case timeline at a glance

A cautionary tale for return filers

The case is a timely reminder for individual taxpayers relying on consultants or chartered accountants during the compliance process, especially with the assessment cycle for AY 2025-26 still active and the September 15 advance tax deadline drawing attention to tax planning. Form 10-IEA plays a specific but consequential role: it is meant to record a genuine choice to move out of the default New Tax Regime, not a routine formality to be filed without cross-checking against the intended tax computation.

This ruling does not change how Form 10-IEA works, but it establishes that CPC and assessing authorities cannot mechanically enforce an earlier form when the return itself demonstrates a clear, consistent, and different intent. For taxpayers who discover a similar mismatch between a filed form and their actual return, this ITAT order offers a documented precedent that genuine errors, when supported by consistent subsequent conduct, can be corrected through appeal.