Wrong EPF income in ITR; employee wins case

By Sohail Khan 4 September 2026, 8:27 am

Synopsis

Income Tax Dept sent tax notice for Rs 9.6 lakh EPF interest which employee never received but erroneously shown in ITR as received; he fights and wins case in ITAT Mumbai. This judgement was delivered by Challa Nagendra Prasad, the Judicial Member, and Makarand Vasant Mahadeokar, the Accountant Member of ITAT Mumbai.

Image for Employee showed Rs 9.6 lakh EPF interest in ITR by mistake, got income tax notice: He fought and got full relief in ITAT Mumbai — Rs 9.6 Lakh EPF interest was never received but shown in ITR due to clerical error: ITAT Mumbai cancels tax demand

ITAT Mumbai, recently ruled that a Rs 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.

This ruling came about in a case where Mr Gole from Belapur Road, Mumbai, filed his income tax return (ITR) on July 25, 2022, declaring a total salary income of Rs 28.25 lakh. However, due to a mistake made by the person who helped Mr Gole with his ITR filing, he incorrectly reported Rs 9.6 lakh as exempt income under Section 10(11). This Section deals with payments from a statutory provident fund covered by the Provident Funds Act, 1925, or certain notified Central Government PFs.

Mr Gole worked as a plant manager in a private company in Gujarat, India. So, first off, he was under the Employee Provident Fund Organisation (EPFO) and not central government PF. Secondly, he didn’t withdraw any money from his EPF, nor got Rs 9.6 lakh interest from EPFO. Nevertheless, the Income Tax Department sent Gole a tax notice and asked him to back up his claim and provide 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 Gole had disclosed the PF amount in the ITR but failed to substantiate the claim of tax exemption, the amount should be taxed.

On March 11, 2024, while completing the assessment under Section 143(3) read with Section 144B, the AO made an addition of Rs 9.6 lakh to Gole’s tax liability. The Commissioner of Appeals (CIT A) upheld this addition, prompting Gole to file an appeal in ITAT Mumbai.

Chartered Accountant Tarun Gupta represented him in ITAT Mumbai and on June 19, 2026, Gole won the case.

Also read: ITR filing difficult for taxpayers whose EPF interest is taxable: EY

How did Gole win this case?

Chartered Accountant Suresh Surana explained to ET Wealth Online that Gole explained to ITAT Mumbai that the Section 10(11) PF disclosure was merely a clerical and data-entry error committed while preparing the return and that no such amount had ever been received.

In support of this contention, Gole submitted many comprehensive documentary evidences, including Form No. 16, Form 26AS, bank statements, EPFO account statements showing nil withdrawal during the relevant financial year, detailed bank reconciliations and a sworn affidavit affirming that no provident fund withdrawal or any other receipt of Rs 9.6 lakh had been made.

Surana says that Gole also pointed out that Rs 9.6 lakh had never been deducted from his salary income while computing the taxable income which he reported in the ITR and, thus this incorrect disclosure had not resulted in any tax advantage.

ITAT Mumbai accepted Gole’s contentions and observed that the Income Tax Department had failed to produce any evidence proving actual receipt of Rs 9.6 lakh.

Surana says: “There was no evidence of withdrawal from the EPFO account, no payment by any provident fund authority and no corresponding credit in any of the assessee's bank accounts.”

Also read: Tax on EPF interest will not impact these salaried people

On the contrary, the documentary evidence produced by Gole consistently proved that the amount disclosed in the ITR did not represent any real income.

ITAT Mumbai also observed that Gole’s affidavit cannot be ignored unless the Income Tax Department has evidence to prove that it is incorrect.

Surana says: “Mere assumptions or suspicions are not enough to reject it.”

According to Surana, another important aspect highlighted by ITAT Mumbai was that Section 10(11) itself was factually inapplicable, since Gole was employed in the private sector and covered by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Section 10(11) relates to payments received from a Statutory Provident Fund governed by the Provident Funds Act, 1925 or other notified funds.

Surana says: “Thus, even the premise on which the AO proceeded was found to be misconceived.”

So, ITAT Mumbai ultimately ruled that a mistaken disclosure in the ITR, by itself, cannot constitute evidence of receipt of income.

Once Gole discharged the initial burden by producing credible documentary evidence demonstrating that no such income had been received, the burden shifted to the Income Tax Department to establish otherwise.

Surana says: “In the absence of any positive evidence, the addition could not be sustained merely because an incorrect entry appeared in the ITR. ITAT Mumbai accordingly directed deletion of the addition of Rs. 9.60 lakh.”