Procedural technicalities cannot override the determination

Procedural technicalities cannot override the determination of correct taxable income when a return contains genuine, inadvertent errors.

Issue

Whether the delay in filing an appeal should be condoned and the matter remanded to the Assessing Officer for a fresh determination of correct taxable income where an employee, out of confusion, made inadvertent reporting errors in their return of income, and their revised return and subsequent rectification applications were rejected without a consideration on merits.

Facts

The assessee, an individual employee, worked with two separate employers during the financial year 2016-17 and earned a total salary income of approximately Rs. 10.31 lakhs.
While filing the original return of income, the assessee got confused between “income from salary” and “gross total income.”
Due to this confusion, the assessee omitted to claim eligible exemptions, inadvertently included salary income belonging to the subsequent financial year, and erroneously claimed TDS credit pertaining to that subsequent year.
The Central Processing Centre (CPC) processed the original erroneous return and raised a tax demand of approximately Rs. 1.19 lakhs.
The assessee attempted to correct these errors by filing a revised return, but it was not accepted.
The assessee then filed two successive rectification applications under section 154, both of which were rejected by the tax authorities.
Consequently, the assessee filed an appeal before the CIT(A), which was dismissed in limine (at the threshold) because the CIT(A) refused to condone the delay in filing the appeal.

Decision

Held, yes: The delay in filing the appeal before the CIT(A) deserves to be condoned in the interest of substantial justice.
Remand for Fresh Consideration: The matter is restored and remanded to the jurisdictional Assessing Officer (AO) for a fresh consideration of the entire tax liability on its merits.
Revised Return to be Factored: The AO is directed to take the revised return filed by the assessee into account, notwithstanding its initial non-acceptance.
Verification of Supporting Documents: The AO is further directed to verify Form 26AS (tax credit statement) and Form 12BB (investment claims formulation) to accurately determine the correct taxable income and pass a fresh assessment order in accordance with the law.

Key Takeaways

Substantial Justice Over Technical Delay: Where an assessee has a strong case on merits and the tax demand arises out of a clear, inadvertent mistake, appellate authorities should take a liberal approach toward condoning procedural delays.
Duty to Collect Only Correct Tax: The tax department is constitutionally and statutorily bound to collect only the correct amount of tax legally due. It cannot capitalize on an employee’s bona fide filing confusion or clerical errors to retain taxes that were never due.
Mandatory Reliance on Form 26AS/12BB: When computing an individual’s final tax liability under assessment, the Assessing Officer must look at the substantive financial reality evidenced by standard information forms like Form 26AS and Form 12BB, rather than binding the taxpayer strictly to an erroneous line item in an initial return.

IN THE ITAT MUMBAI BENCH ‘K’ (SMC)

Krishnakant Kishore Palav

Income-tax Officer

Pawan Singh, Judicial Member
and MAKARAND VASANT MAHADEOKAR, Accountant Member

IT Appeal No. 8839 (Mum.) of 2025
[Assessment year 2017-2018]

JUNE 4, 2026

Shrujay Shah, CA for the Appellant. Bhagirath Ramawat, Sr. DR for the Respondent.

Order under section 254(1) of Income Tax Act

Pawan Singh, Judicial Member. – This appeal by assesseeis directed against the order of Ld. CIT(A)/NFAC dated 23.10.2025 for A.Y. 2017-18. The assessee has raised following grounds of appeal;

The Learned CIT(A) has erred in mentioning that there has been a delay of 1943 days in filing the appeal before his good self The Learned CIT(A) has ignored that the

The Demand was confirmed by Learned Jurisdictional Assessing Officer on 30th November 2023

Appeal filed before his good self on 11 January 2024

Further, the Covid-period has not been considered.

ii.

The Learned CIT(A) has not considered the facts and circumstances of the given case before dismissing the case in limine.

iii.

The action of the Learned CIT(A) are contrary to the view fortified by the judgment of Hon’ble Supreme Court in the case of CIT v. Shelly Products 261 ITR 367 (SC)) wherein the Court observed that, if any assessee on account of inadvertent mistake or ignorance included in his income any amount which is exempt from income-tax or is not income within the contemplation of the law, the assessee may bring this to the notice of the income-tax authorities, which if satisfied may grant relief and refund the excess taxes paid.

iv.

The CPC/ learned Assessing Officer has failed to act in accordance with CBDT Circular No. 14 dated 11 April 1955 which provides the following: “Officers of the department must not take advantage of ignorance of an assessee as to his rights. Although the responsibility for claiming refunds and reliefs rests with the assessee, on whom it is imposed by law; officers should-

draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reasons or other;

freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refund and reliefs.”

Tax cannot be levied on notional income. The action of Learned CIT(A) is contrary to Article 265 of the Constitution of India which provided that no tax shall be collected or levied except with the authority of law.

2. Rival submissions of both the parties have been heard and record perused. The Ld. Authorised Representative (in short ‘AR’) of the assessee submits that the assessee is individual and during financial year 2016-17, relevant to assessment year (AY) 2017-18, the assessee was employed with Capgemini India Private Limited from 01.04.2016 to 07.11.2016 and subsequently joined MSCI Services Private Limited where he served for remaining five months. The total salary from both the employer during the relevant financial year was Rs. 10,31,378/-. However, while filing return, the assessee got confused between income from salary and gross total income and forgot to claim certain exemptions. The assessee, inadvertently, declared salary income from next financial year instead of current assessment year thereby offered excess income and also claimed TDS credit of subsequent year. The return of income was processed by CPC and a demand of Rs. 1,18,640/- was created. The assessee filed revised return of income on 07.06.2018. The revised return of income was not accepted. The assessee filed application under section 154 on 19.12.2018 which was rejected vide order dated 17.08.2018. The assessee again filed rectification application on 15.03.2019 which was rejected also vide order dated 17.04.2019. Aggrieved by the action of AO/CPC, the assessee filed appeal before CIT(A) on 11.01.2024. The appeal of assessee was dismissed in limine by not condoning delay in filing appeal. Further aggrieved, the assessee has filed this appeal.

3. The Ld. AR of the assessee submits that the delay in filing appeal before Ld. CIT(A) is neither intentional nor deliberate. The assessee was pursuing alternative remedy by filing repeated application before CPC. The CPC/AO instead of considering the case of assessee sympathetically, has rejected for technical reasons. In fact, the assessee was pursuing alternative remedy under bona fide mistake. There was no intentional or deliberate delay in filing appeal. Substantial part of intervening period is covered by the Covid period, which has not been considered by ld CIT(A). The Ld. AR of the assessee submits that the assessee has good case on merits and is likely to succeed. On merit, the ld AR of the assessee submits that he has a very limited prayer to restored the matter back to the file of Jurisdictional AO to consider correct taxable income during the relevant financial year and to pass the order afresh. He undertakes on behalf of assessee to provide complete details of his salary income earned during the relevant financial year.

4. On the other hand, the Ld. DR for the revenue submits that the assessee has not explained the delay. The delay may not be condoned. The assessee is relying on self serving story, which is not sufficient to condone the delay in filing appeal before ld CIT(A).

5. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We find that the first appeal of assessee was dismissed by Ld. CIT (A) on the ground that the assessee failed to explain the delay in filing appeal. Before us, the Ld. AR of the assessee vehemently argued that there is no intentional delay and that the assessee was pursuing alternative remedy by filing application under Section 154. Considering the fact that the case of assessee is neither considered by AO/CPC on merit nor CIT(A) admitted the appeal for adjudication on merit. We find that the assessee is in fact interested in contesting its case on merit. Thus, considering the peculiar facts of the case, delay in filing appeal before CIT(A) is condoned. Further, considering the facts that the assessee has filed original return of income, which was revised by assessee. As per the stand of assessee, the assessee inadvertently not claimed certain exemption and also included certain income of subsequent year due to bonafide mistake. Therefore, matter is restored back to the file of Jurisdictional AO to reconsider the matter afresh and also consider revise return and pass the assessment order afresh and in accordance with law. The AO is further directed to consider the Form 26AS as well as Form 12BB while determining the correct taxable income. Needless to direct that before passing the order, the AO shall provide fair and reasonable opportunity to the assessee. The assessee is directed to be more vigilant in future and to provide complete details to the AO. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.

6. In the result, the appeal of the assessee is allowed for statistical purposes.