HC Condones Delay in Filing Income Tax Form 10-IC Due to Bona Fide Error, Upholds Liberal Interpretation of “Genuine Hardship” Under Section 119(2)(b)

Form 10-IC is filed if a Domestic Company opts to pay tax at a concessional rate of 22% under Section 115BAA of the Income Tax Act, 1961. By filing this form, the company can pay the income tax at a reduced rate of 22%. However, what happens if you do not file Form 10-IC on time? Would you still get the tax benefit under this section? The High Court of Gujarat has ruled in a recent similar case where the petitioner company missed the filing of Form 10-IC on the due date.

The petitioner company, Shree Colosperse Pvt Ltd, filed its ITR for AY 2020-21 declaring income of Rs 17,08,980. The company used the option under Section 115BAA of the Act while filing ITR to pay a reduced rate of tax at 22% (excluding surcharge and education cess), which requires filing Form 10-IC on or before the due date of ITR filing. The chartered accountant of the company mistakenly thought that this form was filed, but after realising that it was not filed in actuality, the CA filed Form 10-IC two and a half months after the due date of filing ITR.

The company realised that the Income Tax Department has rejected the benefit of the reduced rate due to the non-filing of Form 10-IC on time. Therefore, it filed an application under the provisions of Section 119(2)(b) of the Income Tax Act to condone the delay. However, the tax officer rejected their request, saying that under CBDT Circular No. 6/2022, the company had no authority to condone the delay. The petitioner stated that it was a bona fide mistake and was unintentional. As per the company, there was genuine hardship which should have been considered under Section 119(2)(b) of the Income Tax Act, and that condonation of delay in filing Form 10-IC should have been allowed.

Therefore, the petitioner company approached the Gujarat High Court to appeal for the same.

The Gujarat High Court observed that this was a genuine and bona fide error, and the company also paid taxes at the concessional rate of 22%. This proves that the company made a genuine mistake. The court stated that the impugned order is required to be quashed and set aside, as it violates Section 119(2)(b) of the Act, which empowers the authority to condone such delay in genuine cases.

Therefore, the court allowed the company to obtain Form 10IC for Assessment Year 2021, and after this, it must make a new application to condone the delay. The court directed that the Income Tax Department must reconsider the company’s application within 12 weeks.