ITAT Delhi Deletes Rs. 7.08 Crore Demand due to Simple ITR Typing Error

The assessee made a simple typing mistake while filing the return, causing a faulty tax demand under Section 143(1). Even after completing scrutiny under Section 143(3), the AO didn’t correct this mistake. CIT(A) refused to decide the issue, but ITAT held that the earlier 143(1) order merges into the 143(3) assessment, so the AO must rectify the error and delete the incorrect demand. The assessee won the case.

The appeal has been filed by a company named Standard Castings Private Limited, against the ITO, Ward 24(1), Delhi, in the Income Tax Appellate Tribunal Delhi (ITAT) Bench ‘B’: New Delhi, before Shris. Rifaur Rahman, (Accountant Member) and Shri Vimal Kumar, (Judicial Member). The final decision on the matter was announced on November 19, 2025. The assessee challenged an order dated June 17, 2025, passed by the CIT(A). 

On September 21, 2018, the assessee filed its income tax return (ITR) for the assessment year 2018-19, declaring total taxable income at zero under the normal provisions and declaring profit of Rs. 5,57,01,251 (MAT) under section 115JB of the Income-tax Act, 1961. On December 21, 2019, the return was successfully processed under section 143(1). While filing the return, the assessee made a small mistake; it accidentally entered capital gains income in the wrong row. It had to enter it in the “capital gains” section, instead of putting it in “other sources.” 

This mistake led the Central Processing Centre (CPC) to treat the income incorrectly and not allow the set-off of past business losses. This ultimately led to an increment in taxable income, reported at Rs. 7.08 crore, instead of NIL. Considering this, the assessee filed a rectification request, but CPC said that the matter has been transferred to the Jurisdictional AO.

Later, the assessing officer (AO) chose the case for scrutiny under Section 143(3), checked all the details and accepted the capital gains declared by the assessee, and concluded with no additions to the income.  But still kept the wrong figures from the earlier 143(1) processing, even after being aware of the mistake that was already brought the notice earlier. This resulted in continuing incorrect tax demands.

Thereafter, the assessee approached the CIT(A). CIT(A) also dismissed the assessee’s appeal, saying the grievance relates to the earlier 143(1) intimation, not to the later 143(3) assessment. Hence, the appeal is “not maintainable”.  When the case was taken before the tribunal, the tribunal disagreed with the ruling of CIT(A) and held that once a scrutiny assessment under 143(3) is completed, the earlier 143(1) order automatically gets merged. Therefore, the assessing officer (AO) should have corrected the mistake when passing the 143(3) order. The mistake was clearly visible. The capital gains were entered into the wrong head, i.e., under “other sources”.  AO ignored the rectification request even after the CPC transferred rectification rights to him.

Therefore, considering the above findings, the tribunal directed the AO to correct the mistake and also delete the tax demand created due to a wrong entry in the 143(1) order. The assessee’s appeal has been allowed.