Income Tax: High Court Condones Delay in Form 10-IC Filing Due to Bona Fide Mistake of Chartered Accountant

The Gujarat High Court has allowed tax relief to Camino Herbal Remedies Private Limited, a company that missed a deadline while filing Form 10-IC. The court ruled that the Income Tax Department should have taken a more practical and fair approach instead of rejecting the company’s request just because it filed the return a few days after the official deadline.

Camino Herbal Remedies Private Limited filed its income tax return (ITR) for Assessment Year 2020-21 (financial year 2019-20) under Section 115BAA of the Income Tax Act to pay the reduced rate of tax at 22%, excluding the surcharge and education cess. In order to officially claim this reduced tax rate, companies are required to file Form 10-IC before the deadline of filing the return.

However, Form 10-IC was filed along with the return due to a genuine mistake by a Chartered Accountant of the company. The CA felt that the form was submitted correctly; however, in reality, it was not. The form was in fact submitted in September 2022, which is almost two months after the due date as set by CBDT’s circular, i.e., June 30, 2022.

When the company realised their mistake, they approached the Principal Commissioner of Income Tax in Vadodara, requesting them to forgive their delay under Section 119(2)(b) of the Act.

However, the tax department rejected their application request, saying that they had no power to forgive the delay as per CBDT‘s official circular. The company on this point argued that the mistake was unintentional and happened because of a human error by their CA. The company had fulfilled all other requirements and had clearly opted for the reduced tax rate in its tax return, Form 10-IC. Further said, the authorities should adopt a liberal approach and consider the delay as a case of “genuine hardship”. A similar case was also heard in the Gujarat High Court regarding the same issue in the past.

The lawyer of the tax department argued that filing Form 10-IC was mandatory within the due date. Since the form was submitted late, the company could not claim the benefit of the lower tax rate. The department was only following the rule as per a Supreme Court decision in Wipro’s case, which highlighted timely filings.

The high court, when examining the entire case and listening to both the company and the tax department, noted that the company had made it clear in its return that it wanted to opt for the 22% tax rate. The CBDT had issued Circular No. 6/2022 to allow companies more time to file Form 10-IC due to earlier technical issues. Further said, just because the form was filed slightly late due to a genuine error, the company should not be punished.

Additionally, the court highlighted Section 119(2)(b) that provides relief in deadlines in such genuine cases and avoids hardship. The court said the tax authority was being too strict and focused too much on technical details, even though the mistake was unintentional.

In its final order, the Gujarat High Court directed the tax department to accept the delayed Form 10-IC and grant the company the 22% tax rate relief for Assessment Year 2020-21.