₹30 lakh salary, no ITR filed, ₹3.74 lakh penalty: Why this employee won against the income tax department?

Not filing income tax return (ITR) can prove costly, but a recent tax case shows that taxpayers may have a valid defence only when the delay is due to genuine circumstances. Pravesh Aggarwal, a salaried employee from Indirapuram, Ghaziabad, got a salary of ₹ 30 lakh after switching jobs but could not file his ITR on time because he did not receive Form 16 from his past employer.

The income tax department imposed a ₹ 3.74 lakh penalty, arguing that Aggarwal may not have reported his salary and interest income had the department not detected the lapse, according to a report by The Economic Times .

However, the taxpayer challenged the penalty and ultimately won the case before ITAT Delhi , which held that a genuine salaried employee should not be heavily penalised for not filing ITR, when TDS has already been deducted and there was no under-reporting of income.

Aggarwal changed jobs midway through FY 2018-19 and got a salary of ₹ 30.22 lakh, but due to the transition phase, he could not obtain relevant documents like Form 16 from his employer, before the ITR filing deadline . His Form 26AS, meanwhile, correctly reflected the TDS deducted by his employers.

Since the tax deducted at source (TDS) was already reported in Form 26AS, Aggarwal believed that he would not face any issue for not filing an ITR. He therefore did not file his return by the due date.

The income tax department later reopened his case under Section 147, after passing an order under Section 148A(d) on April 19, 2023. In response to the tax notice, Aggarwal filed his ITR on May 8, 2023 declaring a total income of ₹ 30.22 lakh for that financial year.

The Assessing Officer (AO) read his filed ITR (in response to the tax notice) and then initiated tax penalty proceedings against the employee for under-reporting of income as no ITR was filed within the prescribed deadline.

After the penalty proceedings were imposed, Aggarwal argued that he was under the bona fide belief that since both the employers had deducted TDS, his tax obligation was discharged, so he does not need to file an ITR.

However, the income tax AO rejected his argument and levied the penalty ₹ 3.74 lakh, equivalent to 50% of the tax on the alleged concealed income. The AO held that Aggarwal had under-reported his income by failing to file his original ITR by the due date.

The Commissioner of Appeals (CIT A) also rejected the employee's contentions and upheld the penalty. Aggrieved by the order, Aggarwal challenged it before the ITAT Delhi, seeking a resolution.

On May 13, 2026, Aggarwal won the case in ITAT Delhi, where it ruled that the sub-section 2 to section 270A says that ‘ under-reporting income ’ occurs when a person discloses a smaller amount than his actual income.

In the present case, however, whatever income was reported by Aggarwal has been accepted by the tax department. Hence, it is not the case of reporting smaller amount than their actual income, ITAT Delhi said.

Subsequently, ITAT Delhi ordered to delete the ₹ 3.74 lakh penalty levied under Section 270A and allowed all the grounds of appeal raised by Aggarwal.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025.