Old Tax Regime Chosen Mistakenly For Which Received Additional Tax Demand

A taxpayer from Bengaluru prepared his ITR and wanted to file his ITR under the new tax regime. His total income was Rs 32.55 lakh and clearly intended to stick with the new regime while filing his ITR.

Filling Mistake By Tax Consultant

His tax consultant made an mistake while filing ITR. The consultant submitted Form 10-IEA on 30th September 2025 which is used to opt out of the new tax regime. This single mistake meant taxpayer's return got processed under the old tax regime instead.

As, the Centralised Processing Centre (CPC), Bengaluru, relied on the form and processed his ITR under the old tax regime on 29th January 2026, taxpayer ended up facing an additional tax demand of Rs 1.23 lakh.

Taxpayer Approach ITAT

Taxpayer explained that the form had been filed by his consultant by mistake and did not reflect his real choice. 

But the Commissioner of Income Tax (Appeals) [CIT(A)] rejected his explanation and upheld the demand, leaving him no option but to approach the Income Tax Appellate Tribunal (ITAT).

What the ITAT Decided?

The ITAT's Bangalore Bench, hearing the appeal, ruled in taxpayer's favour on 17th August 2026.

• The tribunal noted that the ITR is a statutory document where a taxpayer declares income and states which tax regime they choose. 
• The tribunal clarified that just because Form 10-IEA was digitally verified doesn't automatically mean it reflected the taxpayer's conscious, final decision - especially when the ITR filed afterward showed something different.
• The tribunal also found that taxpayer had not claimed benefits under both tax regimes. He had neither claimed deductions, exemptions nor allowances that were available only under the Old Tax Regime while at the same time seeking the lower tax rates offered under the New Tax Regime.
• The issue was only which regime he actually intended to choose, not an attempt to claim tax benefits inconsistently. 
• The tribunal held that a bona fide procedural error while filing a form should not force a taxpayer into a tax regime that goes against what they clearly intended.

The Final Order

The ITAT set aside the CIT(A)'s order and directed the tax officer to:

• Reprocess the ITR under the new tax regime (under Section 115BAC(1A))
• The additional demand arising solely because the old tax regime had been applied was also directed to be deleted, subject to the revised computation.