Consultant mistakenly opted taxpayer for old tax regime, triggering ₹1.23 lakh demand: ITAT gives relief

A Bengaluru taxpayer faced an additional tax demand of about ₹1.23 lakh after his tax consultant mistakenly filed Form 10-IEA, indicating that he had opted out of the new tax regime. The Income Tax Appellate Tribunal (ITAT), Bangalore, has now allowed his appeal and directed the tax authorities to process his return under the new tax regime, according to an ET report.

The taxpayer, identified as Mr Shah of Ali Asker Road, Bengaluru, had declared total income of ₹32.55 lakh. He had prepared his income-tax return under the new tax regime. However, on 30 September 2025, his consultant filed Form 10-IEA, which indicated that Shah had opted out of the new regime and chosen the old tax regime.

Shah explained that the form was filed inadvertently by his consultant during routine compliance work and did not reflect his actual intention. His subsequent ITR, filed on 24 October 2025, computed his entire tax liability under the new tax regime under section 115BAC(1A).

CPC processes ITR under old tax regime

The Centralised Processing Centre (CPC), Bengaluru, relied on the Form 10-IEA while processing Shah's return. On 29 January 2026, it processed his ITR under the old tax regime, resulting in an additional tax demand of about ₹1.23 lakh.

Shah challenged the tax demand before the Commissioner of Income Tax (Appeals), but the CIT(A) dismissed his appeal. He subsequently approached the ITAT Bangalore, where he was represented by Varun S.

The tribunal allowed his appeal on 17 August 2026, according to ET Online. The case centred on whether the earlier Form 10-IEA should override the tax regime clearly selected in the subsequently filed ITR.

ITAT accepts new regime choice reflected in ITR

The Bangalore ITAT accepted the new tax regime reflected in Shah's ITR. The return had consistently computed his tax liability under section 115BAC(1A), despite the earlier Form 10-IEA indicating the old regime.

The tribunal also took into account that Shah had not attempted to claim benefits under both regimes. He had not claimed deductions, exemptions or allowances available specifically under the old tax regime while simultaneously seeking taxation under the new regime.

The Bangalore ITAT relied on the Pune ITAT's ruling in Akshay Nitin Malu v. ITO, reported at [2025] 173 taxmann.com 684. In that case, the taxpayer had initially filed Form 10-IE opting for the new tax regime but subsequently filed the ITR under the old tax regime. The Pune tribunal held that the choice reflected in the subsequently filed ITR should be respected.

In Shah's case, the circumstances were reversed. The earlier Form 10-IEA indicated the old regime, while the subsequently filed ITR adopted the new regime. The Bangalore tribunal applied the same principle and accepted the regime selected in the ITR.

The CIT(A)'s order was consequently set aside. The AO/CPC was directed to process Shah's return under section 115BAC(1A) and recompute his tax liability. The consequential demand arising from processing the return under the old tax regime was directed to be deleted, subject to the revised computation.

The ruling highlights the importance of checking the tax regime selected in the final ITR, particularly when tax compliance is handled by a consultant.