A Gurugram senior citizen successfully secures a ₹9.91 lakh refund from the Income Tax Appellate Tribunal after mistakenly paying tax on interest from tax-free bonds, highlighting the importance of correct tax filings and record-keeping.
A senior citizen from Gurugram has won relief from the Income Tax Appellate Tribunal after inadvertently paying tax on interest from tax-free bonds, a mistake that left him out of pocket by ₹9.91 lakh. According to a report by LiveMint, the tribunal said the error was not a fresh claim for exemption but a correction of an obvious misclassification in the return, and it ordered the tax department to process a refund with interest.
Ajay Kumar Bakaya had invested ₹3 crore in tax-free bonds in February 2013, splitting the money between bonds issued by India Infrastructure Finance Company Ltd and Rural Electrification Corporation. Interest on those instruments is exempt under section 10(15)(iv)(h) of the Income Tax Act, and he had consistently treated the income as exempt in earlier years. But for assessment year 2022-23, he mistakenly entered ₹25.42 lakh of bond interest as taxable income under “Income from Other Sources”, which triggered the extra tax payment.
By the time the error was noticed, the window for filing a revised return had already closed. He then sought rectification under section 154, but the assessing officer refused, relying on the Supreme Court’s ruling in Goetze (India) Ltd v. CIT. That view was later upheld by the Commissioner of Income Tax (Appeals), before the matter reached the tribunal. The ITAT, in an order pronounced on 23 September 2026, concluded that the case involved a disclosed item being placed in the wrong tax bucket, not a new exemption plea, and said the Goetze ruling did not block relief on those facts.
The tribunal relied on earlier case law, including Kapil Dev Nikhanj v. ACIT, to underline that tax recovery must follow the law and cannot rest on an error that is apparent from the record. For taxpayers, the case is a reminder to keep interest certificates and other supporting papers, to check that exempt income is mapped to the correct fields in a return, and to act quickly if a mistake is discovered. It also shows that, where the underlying income was always exempt and properly disclosed, the tax authorities may be required to correct the return and return money paid in error.
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