A Bengaluru-based business consultant received an Income Tax Department intimation despite correctly filing his ITR and legally switching from the new to the old tax regime. The case highlights how automated mismatches linked to Form 10-IE and past filings can sometimes trigger notices even when taxpayers fully comply with the rules.
Old vs new regime switch triggers tax notice for taxpayer (AI-generated image)
Choosing between the old and new income tax regimes is an annual decision for many people. But what happens when you follow the rules perfectly and still get flagged by the tax department? A Bengaluru-based independent business consultant recently found himself in exactly this situation.
After correctly filing his returns and legally switching his tax regime, he received an unexpected intimation notice from the Income Tax Department. His case shows that sometimes, even when you follow every step correctly, automated system mismatches can still trigger a tax notice.
Finding the root cause
Receiving an income tax intimation can be confusing, especially when your income calculations are perfectly accurate and you filed before the deadline. Unsure of what went wrong after submitting his filing, the taxpayer reached out to ClearTax for expert assistance.
ClearTax Senior CAs Harsh Raj Gupta and Anand M took over the case and conducted a complete analysis of the return. Because there was no actual error in the tax calculations or income reporting, identifying the problem required a deep dive into the taxpayer’s past compliance records.
The Senior CAs decoded the issue by looking at his multi-year filing history. The previous year, the taxpayer had filed ITR-2 under the new tax regime and submitted the mandatory declaration document, known as Form 10-IE. This year, his income profile changed due to his consulting business. This prompted him to file ITR-3, which is the specific form used by professionals and business owners, and legally switch back to the old tax regime.
To resolve the issue, the Senior CAs took immediate action to protect the taxpayer’s interests. Since the consultant had complied with all rules, the CAs guided him to formally disagree with the intimation. They helped him file a targeted grievance through the e-filing portal and drafted a detailed technical representation to submit to the jurisdictional Assessing Officer. This structured approach ensured his correct filing status was officially registered and defended without him having to pay an unjust tax demand.
Why switching tax regimes can cause delays
Although the taxpayer’s intent and filing were completely lawful, his shift between regimes created a structural mismatch in the backend. But why would a legal switch trigger a flag?
Section 115BAC of the Income Tax Act governs the new tax regime. When taxpayers with business or professional income want to opt in or out of this regime, they are required to file Form 10-IE to notify the government of their choice.
During their investigation, the Senior CAs noticed that the income tax portal was actually giving the taxpayer the option to re-enter the new regime for future filings. This proved that the government’s system had successfully acknowledged his previously filed Form 10-IE. However, the automated backend still generated a mismatch intimation when comparing his current ITR-3 filed under the old regime against his previous ITR-2 filed under the new regime.
It was a technical misinterpretation by the automated processing system, not a compliance failure by the taxpayer.
Why smart filing helps
While getting an unjust notice is stressful, having the right support makes all the difference when dealing with government portals.
“Cases like this show that tax compliance is a multi-year journey, not just a single-year filing,” the ClearTax team explained. “This is where expert tax platforms help. When a system-generated notice is issued by mistake, having a clear, accessible trail of your past filings and access to professionals who know how to challenge the automated system is crucial to resolving the issue quickly.”
Lessons for taxpayers
This experience is a helpful reminder that you do not always have to accept an automated tax demand if you know your data is correct. Here is what taxpayers should keep in mind:
Keep track of Form 10-IE: If you have business income and are switching between the old and new tax regimes, keep a strict record of the specific forms you submit. Having the acknowledgment number handy is critical if the system fails to recognize your choice.
Maintain your filing history: Automated systems often compare your current return with your past filings. Having a consistent, well-documented record helps prove your case if a year-on-year mismatch occurs.
You can disagree with a notice: If you are certain your filing is correct, you have the right to formally disagree with a tax department intimation. Reaching out to an expert to file a structured grievance can help clear your name without paying unnecessary demands.
(The author is founder and CEO of ClearTax)
Disclaimer: The views expressed in this article are solely those of the author and do not reflect the official policy, editorial position or views of Financial Express. The article is intended for informational purposes only and should not be construed as tax, legal or financial advice.
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