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Facts
The assessee, a co-operative bank, filed a revised income tax return for AY 2021-22 claiming concessional tax rates under Section 115BAD, after initially missing the deadline for Form 10IF. The CPC processed the return at normal rates and disallowed delayed provident fund/ESI payments. The CBDT later condoned the delay in filing Form 10IF but stipulated that merits and interest relief would be subject to the AO's review.
Held
The Tribunal remanded both key issues back to the Assessing Officer (AO). The AO is directed to re-examine the assessee's eligibility for Section 115BAD on merits, acknowledging the CBDT's condonation but without interest relief. For the PF/ESI disallowance, the Tribunal admitted additional evidence and instructed the AO to re-adjudicate, considering recent Supreme Court and High Court judgments and the impact of the Covid-19 pandemic on payment delays.
Key Issues
1. Whether the assessee is eligible for concessional tax rates under Section 115BAD, given the CBDT's condonation of delay in filing Form 10IF. 2. Whether the delayed deposit of employees' share of PF/ESI contributions should be disallowed, considering the Covid-19 pandemic and recent judicial pronouncements.
Sections Cited
143(1)(a), 115BAD, 36(1)(va), 119(2)(b), 139(1), 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: Shri Manjunatha G. & Shri Ravish Sood
(�नधा�रण वष�/Assessment Year:2021-22) The Warangal District Vs. Deputy Commissioner of Cooperative Central Bank Income Tax, Limited, Hanamkonda, Circle-3(1), Warangal. Hyderabad. PAN: AABTT3137G (Appellant) (Respondent) �नधा�रती �वारा/Assessee by: Sri S. Rama Rao, Advocate राज� व �वारा/Revenue by: Dr. Sachin Kumar, Sr. AR सुनवाई क� तार�ख/Date of 11/11/2025 Hearing: घोषणा क� तार�ख/Date of 14/11/2025 Pronouncement: आदेश / ORDER PER. RAVISH SOOD, J.M:
The present appeal filed by the assessee co-operative bank is directed against the order passed by the CIT(A)/NFAC, Delhi, which in turn arises from the intimation issued under Section 143(1)(a) of the Income-tax Act, 1961, by the AO/CPC, Bengaluru, dated 28.12.2022, for the Assessment Year 2021-22. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds of appeal before us:
“1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.
2. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the CPC, Bangalore in making adjustment by taxing the income of the assessee at the normal rates instead applying the provisions of Sec.115BAD and in disallowing the PF payment made after the due date inspite of the fact that payments were due during Corona pandemic period.
3. The learned Commissioner of Income-Tax (Appeals) erred in holding that in the circumstances the normal rate of tax as applicable to the AOP are applicable to the assessee and that the provisions of Sec.115BAD are not applicable.
The learned Commissioner of Income-Tax (Appeals) ought to have seen that a revised return of income was filed within time and the prescribed form was also filed along with such return of income and, therefore, the appellant complied with the conditions for taxing u/s 115BAD of the I.T. Act.
5. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing officer in making the addition of the PF payment for the months of February, 2021 and March, 2021 of Rs.19,15,388/- and Rs.17,32,178/- respectively as the income of the appellant without considering the fact that the amounts were due during Corona pandemic period.
6. The learned Commissioner of Income-Tax (Appeals) ought to have seen that adjustments were made while processing the return of income u/s 143(1) which is not permissible.
7. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that during the relevant period i.e. February, 2021 and March, 2021, the Corona Pandemic was in full swing and the due dates applicable during the said. periods were all extended by the Hon'ble Supreme Court of India and, therefore, the disallowance could not have been made by the CPС.
8. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the CPC in charging interest u/s 234C of Rs.36,202/-.
9. Any other ground that may be urged at the time of hearing.”
The assesssee, which is a co-operative bank carrying on banking activities in District: Warangal, had filed its return of income for AY 2021- 22 on 15.02.2022, declaring an income of Rs. 9,73,69,950/-.
The assessee at the time of filing its original return of income did not file “Form No. 10-IF” required under Section 115BAD r.w Rule 21AH to exercise the option for taxation under Section 115BAD of the Act. The assessee thereafter filed a revised return of income on 31.03.2022, along with Form 10IF, claiming taxation under section 115BAD. The CPC processed the return of income on 28.12.2022 but treated the income under normal rates for an AOP and computed a refund of Rs. 10,16,460/- instead of the refund of Rs. 1,18,48,010/- that was claimed by the assessee. Apart from that, the AO/CPC disallowed under Section 36(1)(va) of the Act the delayed deposit of the employees share of contribution to PF/ESI amounting to Rs. 19,15,388/- (paid on 16.03.2021) and Rs.17,32,178/- (paid on 11.05.2021) aggregating to Rs.36,47,566/-, as the respective amounts were not credited to the employees’ accounts within the due dates prescribed under the relevant statute.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A), wherein it assailed the intimation issued by the AO/CPC under Section 143(1) of the Act, inter alia, on the ground, viz. (i). the CPC had erred in making adjustments while processing its return of income u/s 143(1) of the Act; (ii). that as the revised return of income along with “Form 10IF” was filed within time, therefore, the option u/s 115BAD ought to have been allowed; and (iii). the employee’s share of contribution towards PF/ESI paid before the “due date” for filing the return of income ought to have been allowed as deduction. However, the CIT(A) did not find favour with the contentions advanced by the assessee and dismissed the appeal.
As had been brought to our notice by the Ld. AR, the assessee had thereafter filed an application with the Central Board of Direct Taxes (CBDT) on 02.08.2023 under section 119(2)(b) of the Act, seeking condonation of the delay in filing Form 10IF. The CBDT, after considering the facts, vide its order dated 01.09.2025, condoned the delay in filing Form 10IF and authorized the income-tax authorities to admit the said Form 10IF within the stipulated time. However, the CBDT clarified that the condonation of delay shall not amount to acceptance of the claims made in the said Form and that the Assessing Officer shall examine the same on merits. It was further clarified that no interest shall be payable in case of refund arising due to the condonation of delay in filing Form 10IF, and that no relief of interest paid or payable under sections 234A, 234B or 234C of the Act shall be available to the assessee.
Shri S. Rama Rao, Advocate, the Ld. Authorised Representative (for short, “AR”) for the assessee, at the threshold of the hearing of the appeal, had placed on record the order u/s 119(2)(b) of the Act, dated 01.09.2025 passed by the CBDT on an application dated 02.08.2023 that was filed by the assessee for condonation of the delay in filing “Form 10IF” for the subject year, i.e., AY 2021-22, wherein it had condoned the delay and authorized the jurisdictional Income-tax Authorities to admit “Form 10IF” within the stipulated time. The Ld. AR had drawn our attention to the CBDT order passed u/s 119(2)(b) of the Act, dated 01.09.2025. Elaborating further on his contention, the Ld.AR submitted that as assessee in its original return of income had though inadvertently omitted to exercise the option under Section 115BAD of the Act and file “Form 10IF”, but thereafter, had exercised the said option and filed the “Form 10IF” in its revised return of income filed on 31.03.2022, therefore, considering the fact, that the CBDT vide its order u/s 119(2)(b) of the Act, dated 01.09.2025 had condoned the delay in filing of ‘Form IF”, therefore, the assessee’s claim that it should be taxed at the concessional rate under section 115BAD (i.e @ 22%) merits acceptance.
Apropos the declining of the assessee’s claim for deduction of the impugned delayed deposit of the employee’s share of contribution towards PF/ESI, the Ld. AR submitted that as the subject payments were made before the due date applicable pursuant to pandemic-related extensions and prior to filing of the return of income, therefore, the same were entitled for deduction.
Per Contra, Dr. Sachin Kumar, Ld. Senior Departmental Representative, submitted that though the CBDT vide its order passed u/s 119(2)(b) of the Act, dated 01.09.2025 had condoned the delay in filing “Form 10IF” for the subject year, i.e., AY 2021-22, but as the assessee had not exercised the option for the concessional tax rates under Section 115BAD before the due date specified under sub-section (1) of Section 139 of the Act, therefore, it was disentitled from claiming the applicability of the same for the year under consideration. Also, it was submitted by him that as the assessee had delayed the deposit of the employee’s share of contribution towards ESI/PF, therefore, both the authorities below had rightly disallowed the same.
We have thoughtfully considered the contentions of the Ld. Authorised Representatives of both parties in the backdrop of the orders of the authorities below.
We shall first deal with the assessee’s claim regarding applicability of the concessional tax rates contemplated under Section 115BAD after the CBDT order u/s 119(2)(b) of the Act, dated 01.09.2025, condoning the delay in filing “Form 10IF” for the subject year, i.e., AY 2021-22.
Admittedly, the assessee appellant had failed to file “Form 10IF” within the due date under Section 139(1) of the Act, but had subsequently sought for the condonation of the delay by filing an application u/s 119(2)(b) of the Act. Thereafter, the CBDT, vide its order dated 01.09.2025, had condoned the delay and permitted the income- tax authorities to admit the “Form 10IF”. However, the CBDT had clarified that such condonation does not mean automatic acceptance of the assessee’s claim under section 115BAD and that the Assessing Officer shall examine the same on merits.
In view of this condonation, as the procedural default in filing Form 10IF stands cured, therefore, the assessee’s option to be assessed under section 115BAD of the Act for AY 2021-22 is now valid in the eyes of law. However, the Assessing Officer is required to examine the computation and eligibility of the said claim of the assessee on merits and in accordance with the provisions of section 115BAD and the conditions prescribed therein. Accordingly, we herein restore the issue to the file of the AO to verify the assessee’s eligibility under section 115BAD and recompute its tax liability, if the conditions are satisfied.
Before parting on the aforesaid issue, we may herein observe, as a word of caution, that no interest shall be payable in case of refund arising due to the aforesaid condonation of the delay in filing of “Form 10IF”, and that no relief in respect of interest under sections 234A, 234B or 234C shall be admissible, in line with the CBDT order dated 01.09.2025.
Apropos the disallowance by the AO of the delayed deposit of the employees share of contribution towards PF/ESI u/s 36(1)(va) of the Act, we may herein observe that in light of the decision of the Hon’ble Supreme Court in Checkmate Services Pvt. Ltd. v. CIT [2022] 143 taxmann.com 178 (SC), the deposit of the employees share of contribution towards labour welfare funds are allowable as a deduction only if the same are deposited within the due dates prescribed under the relevant statutes.
The assessee appellant has filed before us an application for admission of additional evidence, wherein it has, inter alia, sought for the admission of EPF payment confirmation receipts for the wage months of February 2021 and March 2021, Page Nos. 140-143 (application for additional evidence). It is stated that as the said documents could not be traced during the Covid-19 period, therefore, it could not be placed on the record of the authorities below.
We have given thoughtful consideration and are of the view that, as the aforesaid EPF payment confirmation receipts will have a strong bearing on the adjudication of the issue before us, and there is a justifiable reason as to why the same could not be filed in the course of the proceedings before the authorities below, therefore, we admit the same.
The assessee has placed on our record as “additional evidence” four payment receipts aggregating to an amount of Rs. 37,00,738/-, as under Wage Month Amount of Date of payment payment (aggregate) February, 2021 Rs. 1,80,219/- 16.03.2021 February, 2021 Rs. 17,36,169/- 12.03.2021 March, 2021 Rs. 48,187/- 09.04.2021 March, 2021 Rs. 17,36,163/- 09.04.2021 As the aforesaid payment receipts were not there before the authorities below and have been filed before us as “additional evidence”, therefore, in all fairness and in the interest of justice, we restore the matter to the file of the AO who shall verify the assessee’s claim for deduction of the aforesaid amount in the backdrop of the judgment of the Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. v. CIT [2022] 143 taxmann.com 178 (SC). The AO shall, in the course of the set aside proceedings, verify as to whether or not the employee’s share of contribution towards PF was deposited by the assessee within the specified dates as contemplated under the relevant statutes, and, thus, re-adjudicate the issue based on the facts emerging therefrom in the backdrop of the aforesaid settled position of law.
At this stage, we may herein observe that as the assessee has, inter alia, claimed that the delay in deposit of the employee’s share of contribution towards PF was due to Covid Pandemic, therefore, the AO shall, in the course of the set aside proceedings, verify the veracity of the said claim of the assessee. We may further observe that the Hon’ble High Court of Karnataka in its recent order in the case of Prolific HR Consultants (India) Ltd. vs. ADIT(CPC), Bengaluru, of 2023, dated 10.09.2025, had allowed a deduction under Section 36(1)(va) of the Income Tax Act,1961, for a 16-day delay in depositing the Employees’ Provident Fund by the assessee due to the COVID-19 lockdown. Accordingly, the AO shall in the course of the set aside proceedings verify the claim of the assessee that the delay in deposit of the employee’s share of contribution towards PF was due to the Covid pandemic, and, if the same is found to be order, then he shall adjudicate the same after considering the aforesaid judgment of the Hon’ble High Court of Karnataka in Prolific HR Consultants (India) Ltd. vs. ADIT(CPC), Bengaluru (supra).
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the open court on 14th November, 2025.
Sd/- Sd/- (MANJUNATHA G.) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 14th November, 2025 OKK / SPS Copy to: S.No Addresses 1 The Warangal District Cooperative Central Bank Limited, 2-5- 302, Nakkalagutta, Hanamkonda, Warangal-506001. 2 Deputy Commissioner of Income Tax, Circle-3(1), Signature towers, Opp. Botanical Garden, Kondapur, Hyderabad. 3 The Pr. CIT, Hyderabad 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order
Sr. Private Secretary, ITAT, Hyderabad.