He received a salary of Rs 30 lakh but failed to file ITR after changing jobs due to delay in Form 16; Income Tax Department imposed a fine of Rs 3.74 lakh, how the taxpayer got relief from ITAT

Changing jobs comes with the need for greater vigilance on the income tax front. But what happens if your Form 16 is late and you are unable to file your tax return on time and the Tax Department imposes a penalty on you?That’s what happened to Pravesh Aggarwal, a resident of Indrapuram in Ghaziabad, Uttar Pradesh. Aggarwal changed jobs and earned a salary of Rs 30 lakh; However, you did not file your tax return by the deadline. The reason was that he had not received Form 16 from his previous employer on time.What appeared to be a lapse in filing eventually turned into a tax penalty of Rs 3.74 lakh. The Income Tax Department took a strict view of the matter and held that if the non-filing had not been detected, Aggarwal might not have filed his ITR at all. This, in turn, would have meant that his salary and interest income would not have been declared.Aggarwal eventually contested the matter and after a protracted legal battle, managed to win the case before the Delhi bench of the Income Tax Appellate Tribunal (ITAT).

Why did the Income Tax Department send the penalty notice?

Aggarwal had changed jobs during the 2018-19 fiscal year, mid-year. From his new job, he earned a salary of Rs 30.22 lakh, according to an ET report. However, during the transition between your old and new employment, you were unable to obtain the necessary documents, including Form 16, from your employer before the deadline to file your ITR.Although Form 16 was not available to him, Aggarwal’s Form 26AS contained the details of TDS that had been deducted by his employers. Based on this, he believed that since the relevant income and TDS were already reflected in Form 26AS, there would be no problem if he did not file a separate ITR. Therefore, he did not submit his declaration within the stipulated period.The matter later resurfaced when the Income Tax Department reopened Aggarwal’s tax assessment under Section 147 after passing an order under Section 148A(d) on April 19, 2023.Following the tax notification, Aggarwal filed his ITR on May 8, 2023. In the return filed in response to the notification, he declared a total income of Rs 30.22 lakh.The Income Tax Assessing Officer (AO) examined this return and subsequently initiated penalty proceedings against Aggarwal for not declaring income, on the ground that he had not filed an ITR earlier.During the penalty proceedings, Aggarwal explained that he had acted in the good faith belief that his tax liability had already been discharged because his two employers had deducted TDS from his salary. On that basis, he believed that it was no longer necessary for him to file an RTI.The income tax assessing officer, however, did not accept Aggarwal’s explanation. The AO imposed a penalty of Rs 3.74 lakh, which was 50% of the hidden income tax, on the grounds that Aggarwal had not declared his income and had not filed his original ITR within the deadline.Aggarwal challenged the sanction before the Commissioner of Appeals (CIT A), but his arguments were rejected there too. Consequently, the fine of Rs 3.74 lakh was upheld, prompting Aggarwal to take the matter to ITAT Delhi.

Why ITAT Delhi ruled in favor of the taxpayer

Anubhav Sharma, Judicial Member, and Manish Agarwal, Accounting Member, of ITAT Delhi observed that a genuine salaried employee should not face a disproportionate penalty for not filing an ITR, particularly when the employer has already deducted TDS from the salary and there has been no underreporting of income.Representing the Income Tax Department, Jitendra Singh supported the decisions taken by the lower authorities. He argued that if Aggarwal had not been served with a notice under section 148, the income in question would have escaped tax. According to Singh, then Aggarwal would not have filed his ITR and salary and interest income would not have been declared.Aggarwal finally got relief from ITAT Delhi on May 13, 2026.Anubhav Sharma explained that subsection 2 of Section 270A states that “underreporting of income” arises when a taxpayer declares an amount less than the actual income earned.However, in Aggarwal’s case, the income he finally declared and declared was accepted by the Income Tax Department. Therefore, ITAT Delhi observed that the matter could not be treated as if a taxpayer had declared an amount less than his actual income.The Court also noted that Aggarwal was acting under the bona fide belief that his respective employers had already deducted at source the tax payable on his salary. The TDS details also appeared in Form 26AS, leading him to believe that he had fulfilled his tax obligation by disclosing the income earned during the year.According to ITAT Delhi, Aggarwal had a genuine and good faith belief that there had been no misrepresentation or suppression of facts. The income was duly reflected in Form No. 26AS on the Income Tax Department portal, and the Department was already aware of those details. In these circumstances, the Court held that this was not an under-reporting of income.The Court further explained that Section 270A(2) can give rise to an underreporting of income only when the reassessed income is higher than the income that had been previously determined and assessed.In this case, at least prima facie, the income assessed under section 148 was not more than the income declared by Aggarwal. Therefore, ITAT Delhi held that the case could not be considered as a case of misrepresentation either.Based on these findings, ITAT Delhi ordered that the fine of Rs 3.74 lakh imposed under Section 270A be removed. He also upheld all the grounds of appeal raised by Aggarwal.