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Pravesh Aggarwal Income Tax Penalty: Why ITAT Delhi Cancelled INR 3.74 Lakh Penalty
In a major relief for salaried individuals, the Income Tax Appellate Tribunal (ITAT) Delhi bench has set aside a INR 3.74 lakh penalty imposed on an employee who failed to file his original Income Tax Return (ITR) after switching jobs, despite having earned over INR 30 lakh in salary.
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New Delhi, August 23: In a major relief for salaried individuals, the Income Tax Appellate Tribunal (ITAT) Delhi bench has set aside a INR 3.74 lakh penalty imposed on an employee who failed to file his original Income Tax Return (ITR) after switching jobs, despite having earned over INR 30 lakh in salary.
The tribunal ruled that where an employer has already deducted Tax Deducted at Source (TDS) and the taxpayer’s reported income is accepted without alteration, penalizing a genuine salaried individual under Section 270A for "under-reporting of income" is unsustainable.
Background of the Dispute
The case pertains to Pravesh Aggarwal, a resident of Indirapuram, Ghaziabad, who switched jobs during the financial year 2018–19. During that assessment year, Aggarwal earned a total salary of approximately ₹30.22 lakh from his employers.
Due to the transition between jobs, he was unable to obtain his Form 16 from his previous employer before the prescribed ITR filing deadline. However, his Form 26AS accurately reflected the entire tax deducted at source by both employers. Under the bona fide belief that the deduction and reflection of TDS in government records fulfilled his primary tax obligations, Aggarwal did not submit his original ITR. ITR Penalty Viral Post: Woman Claims Taxpayer Fined INR 5,000 for 2.5-Hour Delay in Filing Income Tax Returns; Netizens React.
Notice and Penalty under Section 270A
The Income Tax Department subsequently reopened the assessment under Section 147 and issued a notice under Section 148. In response to the statutory notice in May 2023, Aggarwal filed his return declaring the total income of ₹30.22 lakh, fully matching his Form 26AS data.
While the Assessing Officer (AO) accepted the declared income figure without making any additions, the department initiated penalty proceedings under Section 270A of the Income-tax Act, 1961, alleging "under-reporting of income" because no return had been filed by the original due date. ITR Filing 2026: Who Needs To File ITR-3, ITR-4, ITR-5 or ITR-7 by August 31?
The Assessing Officer levied a penalty of ₹3.74 lakh (calculated at 50% of the tax payable on the income). The Commissioner of Income Tax (Appeals) [CIT(A)] subsequently upheld the assessing officer's decision, prompting Aggarwal to approach the ITAT.
The Tribunal’s Ruling
A Delhi ITAT bench comprising Judicial Member Anubhav Sharma and Accountant Member Manish Agarwal ruled in favor of the taxpayer, setting aside the penalty order.
The tribunal observed that under Section 270A(2), under-reporting occurs when a taxpayer discloses an income lower than the actual assessed income. In Aggarwal's case:
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The entire income declared in response to the notice was accepted as-is by the Assessing Officer.
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The taxes due on the salary had already been deducted at source by the employers.
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The delay and initial omission were attributable to transitional issues regarding Form 16 and a lack of procedural awareness, rather than a deliberate intention to conceal income or evade taxes.
The tribunal emphasized that bona fide salaried employees should not face harsh penalties under under-reporting provisions when the full tax liability has been collected via TDS and there is no suppression of income.
What Salaried Employees Must Keep in Mind
While the tribunal’s decision provides relief against aggressive penalty proceedings, tax experts caution that filing an ITR remains legally mandatory for any individual whose gross total income exceeds the basic exemption limit, regardless of whether full TDS has already been deducted by employers.
When switching jobs mid-year, employees should also ensure they submit Form 12B to their new employer to avoid mismatched tax brackets, and verify that all earnings and deductions are reconciled through Form 26AS and the Annual Information Statement (AIS).
(The above story first appeared on LatestLY on Aug 23, 2026 03:10 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).
