A recent ITAT ruling in [2025] 177 taxmann.com 369 (Ahmedabad – Trib.)[08-08-2025] has clarified an important principle in taxation: entries in Form 16 and Form 26AS cannot override the substantive provisions of the Income-tax Act. This ruling raises a basic question whether clause (vi) in section 143 (1) (a) for addition on the basis of income appearing in Form 26AS or Form 16A or form 16 bear an ultra vires character and also more particularly for its omission in the new Income tax Act, 2025.
In the case at hand, under a severance package the employer contributed ₹20 lakhs to LIC to purchase an annuity for the future benefit of the employee. The employer, treating it as perquisites under section 17 (2) (v), included the amount in Form 16. The employee, however, did not offer this sum in the return of income but instead chose to tax the annuity receipts as and when they accrued—beginning four years later. The employee contended that taxing the upfront contribution as well as the subsequent annuity receipts would amount to double taxation.
Relying on L.W. Russel [1964] 53 ITR 91 (SC), the ITAT held that since the employee had not acquired any vested or enforceable right in the present over the ₹20 lakhs in the relevant year, the amount was not taxable then. Consequently, the addition was deleted.
Significantly, the Tribunal emphasized that Form 16 and Form 26AS are merely evidentiary tools and not conclusive for determining tax liability. What governs is the substantive law, not clerical entries or employer reporting. This case serves as a reminder that while Form 16, 16A and 26AS guide return filing and reconciliations, they cannot substitute statutory interpretation. Taxpayers must look beyond such reporting documents to the legal substance of income accrual and taxation principles