New Delhi, Oct. 2 -- In a landmark decision, the Mumbai bench of the Income-tax Appellate Tribunal (ITAT) has established that making an error in an income tax return does not forfeit a taxpayer's entitlement to interest on tax refunds.

The case stems from Assessment Year 2012-13, where a taxpayer initially reported capital gains from an apartment sale as short-term gains. The taxpayer later revised this position, claiming the property as a long-term capital asset eligible for a 20 per cent tax rate under Section 112. The ITAT validated the revised claim, which generated a substantial tax refund.

The tax authority had refused to grant interest under Section 244A on part of the refund, arguing that the taxpayer selected a higher tax brac...