Small trader’s mistake in choosing the wrong income tax return form results in a tax claim ₹26.69 lakhs after the tax department considered the commission income already included in his business income as additional income. The Income Tax Appellate Tribunal (ITAT), Chandigarh, has completely removed this addition.
The case pertained to the assessment year 2017-18 and related to the commission received by the taxpayer from the sale of mobile recharges and SIM cards. When declaring your income from business activities, taxpayer filed ITR-4 instead of applicable ITR-3.
How ₹Double taxation issue of Rs 26.69 lakh has arisen.
The dispute began when the Central Processing Center (CPC) processed the taxpayer’s return under Section 143(1) of the Income Tax Act.
As per Form 26AC, the taxpayer had gross commission income of ₹26,69,319. The amount has been stated by the telecom operators after deduction of tax at source under section 194H.
The tax authorities subsequently reviewed all ₹26.69 lakhs are reported in Form 26AS as additional income without determining whether these receipts have already been included in the computation of business income disclosed in the return.
taxpayer contended that the commission income shown in Form 26AS was the same income on the basis of which his business income was calculated. Therefore, adding the full amount again meant that the same income was effectively taxed twice.
Request for correction rejected, CIT(A) also upholds addition
The taxpayer first approached the CPC by filing a remedy application under Section 154. However, the application was rejected.
He then challenged the adjustment before the Commissioner of Income Tax (Appeals). The CIT(A) also upheld this addition, with the proceedings largely focusing on the fact that the taxpayer had used the wrong ITR form.
The Appellate Authority observed that ITR-3 should have been filed and not ITR-4. He also noted that the assessee had not filed a revised return before the CIT(A) to substantiate its contention.
However, no specific conclusions have been drawn that ₹26.69 lakhs reported in Form 26AS is the income received in addition to the business income already declared by the taxpayer.
ITAT Says Incorrect ITR Form Fails to Establish Undisclosed Income
Chandigarh ITAT has a different view on this issue. He noted that the taxpayer did not seek a new deduction or make a new claim. His argument was that income already offered for taxation was added again.
During the proceedings before the Tribunal, the taxpayer filed an amended return along with supporting documents showing that the commission income reported in Form 26AS had already been included in the income disclosed in his original return.
The ITAT considered this evidence to be substantial and held that mere filing of an incorrect ITR form cannot by itself prove that the relevant income was not disclosed.
Accordingly, the Tribunal set aside the order of the CIT(A) and deleted in its entirety the added ₹26,69,319.
The ruling reinforces an important tax principle: a procedural error in filing the appropriate return form cannot, by itself, give rise to double taxation of income when the taxpayer can prove that the proceeds were already included in the income originally proposed for taxation.