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Facts
The assessee, an individual, filed an income tax return for AY 2023-24 under the old tax regime. Despite having opted for the new regime in prior years, the assessee failed to file Form 10-IE to opt out of the new regime for AY 2023-24 due to an oversight. The CPC processed the return under the new regime, leading to a higher tax demand.
Held
The Tribunal held that the procedural requirement of filing Form 10-IE is directory and not mandatory. The assessee's intention to be taxed under the old regime was clear from filing the return and paying tax accordingly. Therefore, the CPC's action of recomputing tax under the new regime was unsustainable.
Key Issues
Whether the failure to file Form 10-IE to opt out of the new tax regime makes the assessee disentitled from being taxed under the old regime, despite demonstrably filing the return and paying tax accordingly.
Sections Cited
115BAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-1, Delhi vide order dated 21/01/2025 in DIN No. ITBA/APL/S/250/2024-25/1072381900(1) for the assessment year 2023- 24.
The only issue raised by the assessee is that the learned CIT(A) erred in not accepting the income as per old regime.
The facts in brief are that the assessee is an individual. The assessee for the year under consideration i.e. A.Y. 2023-24 filed return of income declaring income under “Old Tax Regime” at Rs. 6,08760/- only. The CPC while processing the return observed that the assessee in the immediate previous assessment year has opted for “New Tax Regime” but in the year under consideration offered income as per Old regime without opting out from the “New Tax regime” as required under section 115BAC of the Act. Hence, the CPC computed the income under New Tax Regime and raised a demand of taxes and interest of Rs. 53,380/- only.
The aggrieved assessee preferred an appeal before the learned CIT(A).
Before the learned CIT(A), the assessee through statement of facts and ground of appeal submitted that he is a regular income tax assessee and has been filing his return of income year after year. For the year under dispute, he voluntarily filed his return of income under the old regime. However, due to an oversight, he failed to opt out of the new regime under section 115BAC of the Act by filing Form 10-IE.
6. The assessee further submits that in earlier years he had been consistently opting for the new regime under section 115BAC. But for AY 2023-24, the return was filed under the old regime and tax was duly paid as per the old scheme only. Unfortunately, because of a procedural lapse, the option to opt out of the new regime was not exercised. As a result, the CPC, Bangalore, while processing the return, applied the . provisions of the new regime and determined higher tax liability of ₹90,784/- only, thereby creating additional demand.
The assessee submits that such an inadvertent mistake should not deprive him of the legitimate benefit of paying tax under the scheme that he had actually followed while filing the return of income and paying taxes. It is a settled principle that in matters of taxation, the assessee is entitled to choose the regime which is beneficial to him. The oversight in not opting out of the new regime was purely unintentional and should not be taken as a conscious choice to be assessed under the new regime.
The assessee further points out that under the old regime, his tax liability was correctly computed and paid at ₹37,377/-, which is substantially lower than the demand raised under the new regime. Thus, in the interest of equity and natural justice, the assessee prays that the tax liability may be directed to be considered under the old regime, which he had actually intended and complied with while filing the return. The assessee therefore requests that the additions made by CPC be deleted and the tax liability be restricted to the amount computed and paid under the old scheme. He also prays for an opportunity to file any additional documents and to be heard personally before the final disposal of the appeal.
The learned CIT(A) after considering the facts in totality observed that section 115BAC of the Act provides taxpayers with the option to choose between the old and new tax regimes. However, this option is subject to specific conditions, one of which is the mandatory filing of .
Form 10-IE to communicate the choice of opting out of the new regime. The requirement to file this form is not a mere formality but an important statutory condition meant to ensure clarity, uniformity, and fairness in the tax system.
It was held that procedural compliance is essential, especially when a taxpayer wants to switch regimes. Even if the lapse was unintentional, such non-compliance cannot be condoned because it goes against the express provisions of law. Allowing such exceptions would dilute the statutory framework and create confusion in applying tax laws. The legislature has deliberately made this requirement strict to avoid misuse and to protect revenue administration.
In this case, the assessee’s explanation of oversight could not be accepted as a valid ground. Since the Form 10-IE was not filed within the prescribed time, the assessee cannot claim the benefit of the old regime for AY 2023-24. The learned CIT(A) held that strict compliance with the law is necessary, and any relaxation would erode the integrity of the statute. Accordingly, the appeal was dismissed, and the tax liability computed under the new tax regime was upheld.
Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before the Tribunal.
The learned AR before us reiterated the assessee’s submission as made during the first appellate proceeding. The learned AR further argued that requirement of filing form 10-IE is only procedural and directory in nature and this view has been confirmed by the Hon’ble . bench of Pune Tribunal in the case of Akshay Devendra Birari vs. DCIT reported in 164 taxmann.com 58.
On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials placed before on record. The short issue is whether the assessee’s failure to file Form 10-IE, while filing the return of income under the old regime, disentitles him from being assessed under the regime he has actually chosen and complied with in substance.
15.1 It is not in dispute that the assessee for A.Y. 2023-24 filed his return under the old regime and paid tax accordingly. The only lapse was the non-filing of Form 10-IE to opt out of the new regime, as he had earlier chosen the new regime in prior years. The CPC, while processing the return, mechanically applied the provisions of section 115BAC of the Act and recomputed the tax liability under the new regime, which led to a higher tax demand. The ld. CIT(A) confirmed this action by holding that filing of Form 10-IE is a mandatory requirement.
15.2 In our view, the approach of the ld. CIT(A) is too rigid and contrary to the principle that procedural provisions are meant to advance justice, not to deny it. The requirement of filing Form 10-IE is procedural in nature and intended to bring clarity and uniformity in administration. It cannot override the substantive right of an assessee to choose the tax regime under which he wants to be assessed. Once the assessee has . demonstrated his choice by filing return and paying tax under the old regime, such intention must be respected.
15.3 The Hon’ble Pune Bench of the Tribunal in the case of Akshay Devendra Birari vs. DCIT [2024] 164 taxmann.com 58 (Pune – Trib.) has already held that filing of Form 10-IE is directory and not mandatory, and that the CPC should not deny the benefit merely because the form was not filed on time if the intention of the assessee is clear and the form was otherwise available on record. The ratio of this decision squarely applies to the facts of the present case.
15.4 Further it pertinent to highlight that the purpose of introducing the dual tax regime under section 115BAC of the Act was to give flexibility to taxpayers. Parliament consciously provided two parallel regimes i.e. the old regime with deductions and exemptions, and the new regime with lower rates but without exemptions. The objective was to empower taxpayers to evaluate and choose whichever regime is more beneficial to them. This objective would be defeated if technical lapses like delayed or missing Form 10-IE filings are used to force an assessee into a regime he never intended to adopt. The law should be interpreted to give effect to the beneficial purpose rather than to frustrate it.
15.5 Considering the facts, the settled legal principles that procedures are handmade of justice, and the ratio laid down by the Pune Bench in Akshay Devendra Birari (supra), we hold that the assessee’s claim for taxation under the old regime is valid. The demand raised by CPC under the new regime is unsustainable. Accordingly, we set aside the order of the ld. CIT(A) and direct the Assessing Officer/CPC to recompute the . assessee’s income under the old regime as declared in the return of income and restrict the tax liability to the amount already paid as per the law. Hence, the ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is hereby allowed.
Order pronounced in court on 26th day of August, 2025