The taxpayer chose a new tax regime, but the consultant submitted the wrong form, triggering the old regime and a demand of Rs 1.23 lakh; ITAT orders the ITR to be processed under the new tax regime and gives relief to the tax demand

Filing your own taxes can be a daunting and tedious process for many. That’s when you hire a consultant. But what happens if the consultant confuses your ITR between the new and the old Income Tax regime? You may receive a tax notice, and that’s exactly what happened to Mr. Shah from Bengaluru.Shah, a resident of Ali Asker Road, Bengaluru, filed his income tax return (ITR) under the new tax regime and declared a total income of Rs 32.55 lakh. However, on September 30, 2025, his tax advisor inadvertently filed Form No. 10-IEA, effectively exercising the option to remove him from the new income tax regime.This created a problem for Shah because his ITR had been prepared on the basis of the new income tax regime. But filing Form 10-IEA meant that your income tax liability would be determined under the old income tax regime, resulting in a much higher tax expense.

Tax notice due to confusion between the old and new tax regime

Shah told tax authorities that his consultant had mistakenly filed Form 10-IEA as part of routine compliance work. He maintained that the form did not represent his actual choice. He noted that his ITR clearly showed that he intended to continue under the new income tax regime instead of switching to the old regime.The error later resulted in an additional tax requirement. The Centralized Processing Center (CPC), Bengaluru, processed Shah’s ITR on January 29, 2026 under the old income tax regime.The CPC, for its part, relied on Form 10-IEA filed in Shah’s case and treated it as an indication that he had opted out of the new income tax regime.As a result, Shah faced an additional tax liability of Rs 1.23 lakh due to the form submitted mistakenly by his consultant, according to an ET report.The Commissioner of Appeals (CIT A) did not accept Shah’s arguments. He then challenged the decision before the ITAT Bangalore, where he was represented by Mr. Varun S. The court ruled in his favor on August 17, 2026.

Why ITAT Bangalore ruled in favor of taxpayers

Chartered accountant Suresh Surana told ET that Shah had explained that his consultant mistakenly submitted Form 10-IEA during routine compliance work and that the submission did not represent his actual intention.Shah subsequently filed his income tax return on October 24, 2025, calculating his entire tax liability under the New Tax Regime in accordance with Section 115BAC (1A).The ITAT Bangalore took into account what Shah subsequently did, as well as the contents of the ITR he actually filed, in determining which tax regime he actually intended to follow.Surana said the court observed that the income tax return is the legal document through which a taxpayer declares income, determines the tax payable and indicates the tax regime followed.Since Shah’s ITR, filed after the filing of Form 10-IEA, clearly calculated his tax liability under the New Income Tax Regime, the ITAT Bangalore held that this subsequent and unambiguous expression of election could not simply be ignored because an earlier form had been incorrectly filed due to an explained inadvertent error.The court also took note of the fact that Shah had not attempted to take advantage of both tax regimes. He had not claimed deductions, exemptions or bonuses that were only available under the Old Tax Regime and at the same time sought the lowest tax rates offered under the New Tax Regime.The question before the court was therefore to determine which tax regime Shah had actually intended to choose. This was not a case where the taxpayer attempted to claim tax benefits inconsistently under both regimes.In arriving at its decision, the ITAT Bangalore relied on the judgment of the Pune Court in Akshay Nitin Malu vs ITO [2025] 173 taxmann.com 684.In that case, the taxpayer had first filed Form 10-IE to opt for the New Tax Regime but then filed the income tax return under the Old Tax Regime. The Pune ITAT held that the election indicated in the return filed subsequently should be given effect.Surana said the Bengaluru ITAT concluded that the same principle could be applied in Shah’s case, although the change in the tax regime was in the opposite direction.Surana said: “Therefore, a bona fide procedural error in filing the prescribed option form should not, in the particular facts of the case, result in Shah being subjected to a tax regime contrary to the clear choice reflected in the ITR subsequently filed.”The ITAT Bangalore also clarified that while the digital verification of Form 10-IEA establishes that the form was submitted and authenticated, it does not alone prove that the form represented the final and conscious decision of the taxpayer. This is especially true when the subsequently submitted RTI consistently shows a different choice.Therefore, the court accepted that the New Tax Regime set out in the ITR subsequently filed by Shah reflected his actual choice. It also took into account that the previous Form 10-IEA had been explained as an involuntary filing and that Shah had not claimed any contradictory tax benefits.Accordingly, the order of the CIT(A) was set aside. The AO/CPC was directed to process Shah’s return under Section 115BAC(1A) and recalculate his tax liability on that basis.It was also ordered to suppress the additional claim that arose solely because the Old Tax Regime had been applied, subject to the revised calculation.Form 10-IEA is no longer required as of April 1, 2026, and the change applies from fiscal year 2026-2027 onward.Surana said that as per Section 202 (4) of the Income Tax Act, 2025, read with Rule 136 of the Income Tax Rules, 2026, taxpayers must exercise the option to elect the Old Tax Regime, or withdraw an earlier election, directly through their income tax return.However, the restriction applicable to taxpayers who obtain business or professional income continues.