Kusharaj Madhav Bhandary Vs ITO (Bombay High Court)
In the case of Kusharaj Madhav Bhandary vs. ITO, the Bombay High Court reviewed an appeal by the petitioner, a salaried individual, regarding his 2017-18 income tax assessment. The issue began when Bhandary’s employer deducted ₹26,43,323 as TDS, shown in his Form 16 and Form 26AS. Despite this, the Income Tax Department’s assessment order, issued on March 30, 2022, failed to account for the TDS, resulting in an inflated tax liability and an interest charge of ₹29,00,303. Additionally, a demand of ₹55,43,799 was raised, followed by a penalty notice under Section 270A of the Income Tax Act. In response, Bhandary sought rectification under Section 154, asserting that the omission of TDS was a clear, correctable error. After delays in rectification due to technical and procedural issues, he ultimately filed a grievance, which led to his penalty proceedings being further challenged in court.
On January 3, 2023, following interim orders from the court, the Income Tax Department acknowledged the TDS credit, rectifying the demand to a mere ₹303, which Bhandary promptly paid. The court further ruled that with the rectification order in place, the original assessment order had essentially lost validity, thereby nullifying any related penalty under Section 270A. The court concluded that Bhandary’s application under Section 270AA for immunity from penalty need not proceed, as the rectification order made any further assessment actions unwarranted. The penalty order from September 27, 2022, was quashed, and the petition was resolved in Bhandary’s favor.
