look news india
Pune/Lucknow. Even a small carelessness or reporting mistake while filing Income Tax Return (ITR) can lead to huge financial losses for taxpayers and lengthy legal disputes. But, a very important case that recently came before the Pune Income Tax Appellate Tribunal (ITAT) has given a big legal lifeline to lakhs of taxpayers in the country. ITAT, while giving a historic verdict in favor of an employee, has made it clear that if a person is legally entitled to tax exemption, then his legitimate right cannot be taken away merely on the basis of any human or technical error in filling the form. After this decision, the aggrieved employee has been provided full tax relief on the huge amount of ₹ 65.21 lakh received under the Voluntary Retirement Scheme (VRS).
VRS package was received after the closure of the company, a big mistake was made unknowingly
This sensitive matter is related to an employee whose manufacturing plant was suddenly closed by the company. After this, a total lump sum payment of ₹ 65.21 lakh was made to the employee by the management as VRS package. This total fund included ex-gratia, notice period pay and other important retirement benefits. Under the special provisions of the Income Tax Act, this entire amount was tax-free or tax exempt. But, while filing his annual assessment and ITR, the employee unknowingly entered this entire amount in the ‘Taxable Income’ column, due to which the legitimate tax benefit he was getting was stopped and the department created a tax liability on him.
Important decision of ITAT: Technical error cannot stop the path of justice
After a detailed legal review of the case and hearing arguments from both sides, the ITAT Pune Bench made a very progressive observation rejecting the stand of the Income Tax Department. The tribunal said, “If a taxpayer is eligible to avail of any particular tax benefit or exemption as per the established laws of the country, it is not justifiable to deprive him of his fundamental right merely because of some reporting error or technical omission in the return form.” The Tribunal held that the employee did not intend to cause any tax evasion or furnish false information, but it was purely an inadvertent clerical error. After this, the court considered the amount of ₹ 65.21 lakh completely tax free and ordered the department to start the tax refund and relief process.
Tax experts’ opinion: Example for other taxpayers, but be careful
Tax Consultants and Chartered Accountants (CAs) believe that this decision of Pune Tribunal will prove to be a big example for all those taxpayers who often unknowingly make mistakes in the form while filing ITR. However, experts have also cautioned that this decision should not be taken to mean that the department will get an apology for every type of wrong filing. This tax relief will be available only if the taxpayer can irrefutably prove through relevant documents that he was legally entitled to the tax relief and the mistake committed was only on a technical level.
To avoid unnecessary income tax notices, keep these things in mind while filing ITR:
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Deep matching of documents: Taxpayers should thoroughly cross-verify their Form-16, Salary Slips, AIS and TIS data before submitting their final ITR.
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Correct entry of special fund: While entering large funds like Voluntary Retirement (VRS), Gratuity, Leave Encashment, Pension or Capital Gains, take special care of the relevant Income Tax sections.
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Expert advice: If there is even the slightest doubt in your mind regarding any complex Income Tax rule or exemption column, taking the professional help of a certified tax consultant or CA instead of filling the form yourself is the safest and only way to stay free from legal disputes.