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Facts
The assessees opted for the new tax regime under Section 115BAC of the Income Tax Act but were denied the benefit by the CPC, Bangalore, for Assessment Year 2023-24. The denial was based on the non-filing of Form No.10-IE in the impugned year and untimely filing in the preceding year, leading to assessment under the old regime. The appeals also dealt with initial defects regarding short payment of filing fees and a 71-day delay in filing the appeals.
Held
The Tribunal condoned the delay in filing and held that the failure to file Form No.10-IE within the prescribed due date, especially for subsequent years when the option was already validly exercised, does not invalidate the assessee's claim. The requirement to file Form No.10-IE is merely directory. Consequently, the Ld. CIT(A)'s order was set aside, and the AO was directed to allow the assessee the benefit of the new tax regime under Section 115BAC.
Key Issues
Whether the denial of the new tax regime benefit under Section 115BAC is valid due to non-filing or untimely filing of Form No.10-IE, when the option was already exercised in a preceding year, and whether the filing of Form No.10-IE for subsequent years is mandatory or directory.
Sections Cited
115BAC, 143(1), 250(6), 253(6), 139, 10, 10AA, 16, 23, 24, 32, 32AD, 33AB, 33ABA, 35, 35AD, 35CCC, 80CCD, 80CCH, 80JJAA
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SMT.ANNAPURNA GUPTA
आदेश/O R D E R आदेश आदेश आदेश PER:ANNAPURNA GUPTA, ACCOUNTANT MEMBER
The above two appeals relate to different assessees and are against separate orders of the Ld. Commissioner of Income- Tax(Appeals), National Faceless Appeal Centre (NFAC), and 2083/Ahd/2024 2 Thane/Gurugram [hereinafter referred to as “ld.CIT(A)]dated12.06.2024 and 18.07.2024respectively passed under section 250(6)_of the Income Tax Act, 1961 ("the Act" for short) ,dismissing the appeal of the assessee against the intimation /order of the Assessing Officer (AO)/CPC, Bangalore, passed under section 143(1) of the Act pertaining to Assessment Year2023-24.
Ld. counsel for the assessees submitted that the issues raised in both appeals are identical, pertaining to denial of the option exercised by the assessee as per section 115BAC of the Act, of paying taxes under the new regime, i.e. at lesser rate than the normal rate prescribed without claiming any exemption or deduction from its income, in the intimation made by the CPC, Bangalore, u/s 143(1) of the Act . That therefore, the arguments presented should be considered equally for both the matters, and adjudication may be conducted accordingly. Ld. DR fairly agreed with the same. Both the appeals were therefore heard together and are being disposed off by this common consolidated order.
At the outset it was pointed out by the ld. counsel for the assessee that there were two defects noted by the Registry in the filing of both the appeals – the first being in relation to the filing fees paid short by Rs.9500/- and the other of the appeals being filed delayed, beyond limitation prescribed as per law.
With regards to the filing fees being paid short, the ld. counsel for the assessee pointed out that section 253(6) of the Act, which prescribed the appeal filing fees in case of appeals filed to the ITAT, the quantum of fees was fixed on the basis of income assessed by AO in sub clause(a) to (c), while sub clause (d) dealt with other remaining cases. Our attention was drawn to the relevant provisions of section 253(6) of the Act as under: “6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of October, 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of,— (a) where the total income of the assessee as computed by the Assessing Officer, in the case to which the appeal relates, is one hundred thousand rupees or less, five hundred rupees, (b) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, one thousand five hundred rupees, (c) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than two hundred thousand rupees, one per cent of the assessed income, subject to a maximum of ten thousand rupees, (d) where the subject matter of an appeal relates to any matter, other than those specified in clauses (a), (b) and (c), five hundred rupees: Provided that no fee shall be payable in the case of an appeal referred to in sub-section (2), or, sub-section (2A) as it stood before its amendment by the Finance Act, 2016, or, a memorandum of cross objections referred to in sub-section (4).”
4.1 Ld. Counsel for the assessee contended that in the case of the assessee there was no variation in the income assessed of the assessee, and the only difference was that while the assessee had returned its income as per the new regime specified in terms of section 115BAC of the Act paying taxes in accordance with the rates specified therein, the assessment had been framed in terms of old regime, determining the taxes to be paid as per the rates prescribed in the old regime, which was higher than that required as per the new regime. He, therefore, stated that in terms of provisions of section 253(6) of the Act, the case of the assessee fell under clause (d) and the assessee therefore, was required to pay filing fees of only Rs.500/- which it had duly deposited.
Ld. DR was unable to contradict the contentions of the assessee as above either with respect to the provision of law or the fact of the case. and 2083/Ahd/2024 4 5.1 Therefore accepting the contentions of the assessee, the defect of short payment of filing fees of Rs.9,500/- noted by the Registry is accordingly treated as no defect.
The other defect noted in the filing of the appeal of there being delay of 71 days in filing of the present appeal before the Tribunal. The assessee filed an application seeking condonation of delay, stating that the counsel of the assessee being pre-occupied with other professional matter, inadvertently ,by oversight failed to file the appeal in time, and the affidavit of the concerned counsel of the assessee, Shri Biren Shah to this effect was also filed before us.
Noting the contents of the same we find that the assessees have established the existence of sufficient cause for the delay in the filing of the present case. The delay, we have noted, in any case is not attributable to the assessee, the fault lying at the door of the counsel of the assessee, who being preoccupied with work was unable to file the appeal in time. We consider it good and sufficient reason for condoning the delay of filing of the present appeals and accordingly delay of 71 days is condoned .Order was pronounced in the Open Court.
7.1 Thereafter, both the appeals were proceeded to be adjudicated.
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 and 2083/Ahd/2024 5 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.
We have considered contentions of both the parties.
10.1 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 ?
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. With this background of facts, it is to be adjudicated, whether in the impugned year also, the assessee necessarily needed to file Form No.10-IE to opt for paying taxes under new regime as per section 115BAC of the Act. For the said purpose, it is necessary to reproduce the relevant provisions of section 115BAC of the Act. “115BAC. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or a Hindu undivided family, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021 73[but before the 1st day of April, 2024], shall, at the option of such person, be computed at the rate of tax given in the following Table, if the conditions contained in sub-section (2) are satisfied, namely:—
Sl. No. Total income Rate of tax (1) (2) (3) 1. Upto Rs. 2,50,000 Nil 2. From Rs. 2,50,001 to Rs. 5,00,000 5 per cent 3. From Rs. 5,00,001 to Rs. 7,50,000 10 per cent 4. From Rs. 7,50,001 to Rs. 10,00,000 15 per cent 5. From Rs. 10,00,001 to Rs. 12,50,000 20 per cent 6. From Rs. 12,50,001 to Rs. 15,00,000 25 per cent 7. Above Rs. 15,00,000 30 per cent and 2083/Ahd/2024 7 Provided that where the person fails to satisfy the conditions contained in sub- section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and other provisions of this Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year: Provided further that where the option is exercised under clause (i) of sub-section (5), in the event of failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent assessment years also and other provisions of this Act shall apply for those years accordingly. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (2) For the purposes of sub-section (1A), the total income of the person referred to therein, shall be computed— (i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14)(other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI- A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;] (ii) without set off of any loss,— (a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (b) under the head "Income from house property" with any other head of income; (iii) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed; and (iv) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner by the person,— (i) having income from business or profession, on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2021, and such option once exercised shall apply to subsequent assessment years; (ii) having income other than the income referred to in clause (i), alongwith the return of income to be furnished under sub-section (1) of section 139 for a previous year relevant to the assessment year: and 2083/Ahd/2024 8 Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise option under this section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available: Provided further that the provisions of this sub-section shall not apply for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024.”
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 and 2083/Ahd/2024 9 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.
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.
In the result, the appeals of the assessees are allowed as indicated above.