Failure to file Form 10-IE within prescribed due date does not invalidate claim of New Tax Regime: ITAT

The fact on the record is that form no.10-IE was not filed by the assessee in the impugned year. The same was filed by the assessee in the preceding year along with his return of income, but the said form having not been filed within the prescribed time, the assessee had not been granted the benefit of paying taxes in the new regime in the preceding year

The ld. counsel for the assessee pointed out that the short issue in the present appeal related to the assessee being denied the benefit of paying taxes under the new regime as provided under section 115BCA of the Act. The ld. counsel for the assessee pointed out that the assessee had been denied this benefit in the intimation made to it by the CPC, Bangalore, under section 143(1) of the Act. It was contended that the assessee had opted for the new regime and computed its income and paid taxes in accordance with the provisions of section 115BCA of the Act. He pointed out that the assessee had opted for the new regime in the preceding year also i.e. Asst. Year 2023-24 and had deposited the prescribed Form No.10-IE in the said year. That despite all these facts on record, the CPC had rejected the assessee’s claim of returning its income to tax under the new regime and had computed the taxes to be paid by it, as per the old regime.

The ld. DR however, pointed out that the ld.CIT(A) had clearly brought out reasons for the assessee not being entitled to pay taxes on its income as per section 115BCA of the Act for the reason that in the preceding year, when the assessee had opted for the new regime and filed form no.10-IE, the same had not been accepted by the CPC for the reason that the return has not been filed in time; that in the impugned year no Form No.10-IE had been filed by the assessee, which it was required to do, since the exercise of option in the impugned year was the first time when the assessee was opting to do so and it was required to file the form no.10-IE for claiming the benefit, which it had failed to do so. That the ld.CIT(A), therefore, was right in upholding the denial of benefit of paying taxes as per the new regime under section 115BAC of the Act to the assessee, since the assessee has failed to comply with the necessary conditions prescribed therein.

The issue for adjudication is, whether the assessee despite having opted to pay taxes under the new regime as prescribed under section 115BCA of the Act in its income tax return, was rightfully denied the same by the CPC, Bangalore ?

ITAT Order:

12. As is evident from the bare perusal of the above, individuals and HUF have been given option for paying taxes at the rates prescribed in section 115BAC of the Act w.e.f. 1st April, 2021 subject to the condition that their income is computed as prescribed under sub-section (2), which says that the income is to be computed without claiming any exemption or deductions, loss or depreciation as specified in the said sub-section. The first proviso to section 115BAC states that the option exercised by the assessee shall be invalid, if the assessee fails to satisfy the conditions mentioned in sub-section (2). That is the only prescription in law for treating the option to have been invalidly exercised. Sub-section (5) prescribes that for claiming the benefit of option, the assessee having income from business or profession needs to file prescribed form by the due date prescribed in the said section initially and such option exercised would thereafter be applicable for subsequent years. The prescribed form as per the Rule is form no.10-IE. The assessees in the present case have returned income from business and profession which is reflected in the intimation made u/s 143(1) of the Act.

12.1 As is evident from the literal reading of the section itself, the assessee’s option is treated as invalid only if it does not fulfil the conditions prescribed under sub-section (2) of section 115BAC of the Act, which is of computing its income without claiming any exemption, deduction, loss or depreciation specified in sub-section (2). The failure to file Form No.10-IE within the prescribed due date as per sub-section (5) does not invalidate the assessee’s claim of the option. The mandate of filing the Form No.10-IE is only directory. What invalidates the exercise of option has been clearly mentioned in the first proviso to section 115BAC of the Act.

12.2 Therefore, in the facts of the present case, in the preceding year when the assessee had filed Form No.10-IE while exercising its option of paying taxes as per the new regime, the option was not invalidated as per sub section (2) to section 115BAC of the Act. The option though was denied to the assessee for the reason that the Form No.10-IE was not filed within the prescribed time, clearly the assessee’s exercise of option in the preceding year was not invalid. That therefore, when the assessee again opted paying taxes under the new regime in the impugned year, there was no requirement for the assessee to file a fresh Form No.10-IE at all, as per sub section (5) to section 115BAC of the Act. It is only if the earlier option is treated as invalid that the assessee has to go about exercising the option afresh in the succeeding years.

12.3 In the light of the same, and in view of the fact that the assessee had filed Form No.10-IE in the preceding year, when it exercised its option of paying taxes under the new regime for the first time, the denial of exercise of this option in the impugned year for failure to file Form No.10-IE, we hold, is not accordance with law.

13. The order of the ld.CIT(A), upholding the intimation made on the assessee, computing its taxability as per the old regime, is therefore set aside, and the AO is directed to allow the assessee’s option of paying taxes as per the new regime under section 115BAC of the Act.