A ₹9.6 lakh addition to an individual’s taxable income can be burdensome, especially when the amount stems from something as simple as an incorrect entry in an income tax return (ITR). In a recent ruling, the ITAT Mumbai came to the relief of a salaried employee, holding that an EPF amount mistakenly reported in the ITR cannot by itself be treated as taxable income.
The tribunal noted that there was no evidence that the employee had actually received the money from EPFO, withdrawn it from his EPF account or that the amount was credited to his bank account.
The dispute came to light after a Mumbai resident named Manik Pratap Gole, filed his ITR on July 25, 2022, declaring a total salary income of ₹28.25 lakh. However, the person who helped him in making the submission, incorrectly reported ₹9.6 lakh as exempt income under Section 10(11).
Section 10(11) of the Income-tax Act exempts payments and accumulated balances received from a statutory PF under the Provident Funds Act, 1925, or certain notified provident funds set up by the central government.
ITR error triggered a ₹9.6 lakh tax addition
Gole worked as a plant manager at a private company in Gujarat, India. As a salaried employee, he was covered under the Employee Provident Fund Organisation (EPFO) and not the central government’s PF scheme. So the exemption claim did not make sense in the first place.
More importantly, the aggrieved employee had neither withdrawn any money from his EPF account nor received ₹9.6 lakh as interest from EPFO. Despite this, the income tax department issued him a notice, asking him to to substantiate the claim with supporting documents.
According to the Income Tax Assessing Officer (AO) from Kautilya Bhavan, Mumbai, Gole failed to provide satisfactory documentary evidence for the amount he claimed as exempt under Section 10(11).
The AO believed that since the taxpayer had disclosed the PF amount in the ITR but failed to substantiate the claim of tax exemption, the amount should be added back to his income and taxed accordingly.
On March 11, 2024, while completing the assessment under Section 143(3) read with Section 144B of the Income-tax Act, the AO added ₹9.6 lakh to Gole’s taxable income. The Commissioner of Appeals (CIT A) upheld this decision, prompting Gole to challenge the order before the ITAT Mumbai.
Chartered Accountant represented the aggrieved employee in ITAT Mumbai and on June 19, 2026, he finally won the case.
ITAT Mumbai ruled that a ₹9.6-lakh tax addition based solely on an incorrect ITR entry showing EPF money received is not valid. This is especially true when there is no evidence that the salaried employee actually received the money from EPFO, withdrew it from his EPF account, or had any corresponding bank credit.
“Income-tax can be levied only on real income and not on a purely notional or non-existent receipt. A mistaken disclosure in a return of income, by itself, cannot constitute evidence of receipt of income when all surrounding facts and documentary evidence demonstrate that no such receipt ever came into existence,” the judgement read.
