Filing your own income tax return can be a daunting and tedious process for many. That’s when you hire a consultant. But, what if the consultant mixes up your ITR between the new and old income tax regime? You may get a tax notice, and that’s exactly what happened with Mr Shah from Bengaluru.A resident of Ali Asker Road, Bengaluru, Mr Shah filed his income tax return (ITR) under the new tax regime and reported a total income of Rs 32.55 lakh. However, on September 30, 2025, his tax consultant inadvertently filed Form No. 10-IEA, effectively exercising the option to move him out of 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 his income tax liability would instead be determined under the old income tax regime, which resulted in a much higher tax outgo.
Tax notice for old vs new tax regime confusion
Shah told the tax authorities that the Form 10-IEA had been filed by his consultant by mistake as part of routine compliance work. He maintained that the form did not represent his actual choice. His ITR, he pointed out, clearly showed that he intended to continue under the new income tax regime rather than switch to the old regime.The mistake subsequently translated into an additional tax demand. The Centralised Processing Centre (CPC), Bengaluru, processed Shah’s ITR on January 29, 2026 under the old income tax regime.The CPC, on its part, relied on the Form 10-IEA filed in Shah’s case and treated it as an indication that he had chosen to opt out of the new income tax regime.As a result, Shah faced an additional tax liability of Rs 1.23 lakh because of the form mistakenly filed 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 tribunal ruled in his favour on August 17, 2026.
Why ITAT Bangalore ruled in taxpayer’s favour
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 filing 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 did subsequently, as well as the contents of the ITR he actually filed, while determining which tax regime he genuinely intended to follow.Surana said the tribunal observed that the income tax return is the statutory document through which a taxpayer declares income, determines the tax payable and indicates the tax regime being followed.Because Shah’s ITR, filed after Form 10-IEA had been submitted, clearly calculated his tax liability under the New Income Tax Regime, the ITAT Bangalore held that this later and unambiguous expression of choice could not simply be disregarded because an earlier form had been filed incorrectly due to an explained inadvertent error.The tribunal also took note of the fact that Shah had not tried to take advantage of both tax regimes. He had neither claimed deductions, exemptions nor allowances that were available only under the Old Tax Regime while at the same time seeking the lower tax rates offered under the New Tax Regime.The issue before the tribunal was therefore about determining which tax regime Shah had actually intended to choose. It was not a case where the taxpayer was attempting to claim tax benefits inconsistently under both regimes.While arriving at its decision, the ITAT Bangalore relied on the Pune Tribunal’s ruling in Akshay Nitin Malu v. ITO [2025] 173 taxmann.com 684.In that case, the taxpayer had first submitted Form 10-IE to opt for the New Tax Regime but later filed the income-tax return under the Old Tax Regime. The Pune ITAT held that the choice indicated in the subsequently filed return should be given effect.Surana said the Bangalore ITAT found that the same principle could be applied to Shah’s case, even though the change in tax regime was in the opposite direction.Surana said: “Thus, a bona fide procedural mistake in filing the prescribed option form should not, in the particular facts of the case, result in Shah’s being subjected to a tax regime contrary to the clear choice reflected in the subsequently filed ITR.”The ITAT Bangalore also clarified that while digital verification of Form 10-IEA establishes that the form was submitted and authenticated, it does not by itself prove that the form represented the taxpayer’s final and conscious decision. This is particularly so where the subsequently filed ITR consistently shows a different choice.The tribunal therefore accepted the New Tax Regime stated in Shah’s subsequently filed ITR as reflecting his actual choice. It also took into account that the earlier Form 10-IEA had been explained as an inadvertent filing and that Shah had not sought any contradictory tax benefit.The CIT(A)’s order was accordingly set aside. The AO/CPC was directed to process Shah’s return under Section 115BAC(1A) and recalculate his tax liability on that basis.The additional demand that arose solely because the Old Tax Regime had been applied was also ordered to be deleted, subject to the revised computation.Form 10-IEA is no longer required from April 1, 2026, with the change applying from Tax Year 2026-2027 onwards.Surana said that under 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 choose the Old Tax Regime, or withdraw an earlier choice, directly through their income-tax return.However, the restriction applicable to taxpayers earning business or professional income continues as aforementioned.
