MORNI SAREES PRIVATE LIMITED,INDORE vs. ASST. DIRECTOR OF INCOME TAX, CPC, BENGALURU

2.7 It is pertinent to note that the assessee has consistently following the same accounting treatment in the earlier and subsequent years and that such treatment has been accepted by CPC in the intimations issued u/s 143(1) of the Act year after year.

The details of the provision made for bonus payable to employees are as under:-

S.No. Year Amount of bonus payable – Provision made on 31st March of the relevant F.Y 1 A.Y 2016-17 Rs.8,89,300 2. A.Y 2019-20 Rs.5,58,100 3. A.Y 2021-22 Rs.9,59,000* 4 A.Y 2022-23 Rs.19,82,500 *A.Y 2021-22 under present appeal 2.8 That the provision of Bonus payable for the period was made on 31.03.2021 for paying the bonus to the employees as a part of incentive in the form of salary the same being not in the nature of statutory due is outside the purview of Section 43B.

Page 3 of 17 2.9 Therefore the provisions of Section 43B of the Act are clearly not applicable in case of the assessee.

2.10 The intimation u/s 143(1) of the Act dated 24.08.2022 shows total income provided by the tax payer as at Rs.49,65,010/- whereas the revenue has computed the same at Rs.59,24,230/-. The net addition comes to Rs.9,59,220/-. The amount of Rs.9,59,000/- is disallowed as bonus u/s 36 of the Act. Tax payable is shown as Rs.3,71,660/-. Therefore there was a demand u/s 143(1) intimation dated 24.08.2022 bearing Ack.No. 966337080240122 which is hereinafter referred to as the “impugned intimation order u/s 143(1)” for the sake of brevity. The assessee in turn being aggrieved by the “impugned intimation order” makes a rectification application dated 07.02.2023 in terms of Section 154 of the Act [Reprocess the Return] and the revenue by a rectification order u/s 154 of the Act deletes the aforesaid amount of Rs.9,59,000/- earlier disallowed as bonus (page 15 & 16 of paper book). In brief by an order u/s 154 of the Act dated 24.02.2023 revenue has allowed/withdrawn/deleted the amount of bonus earlier disallowed. [Total income computed at Rs.49,65,230/- instead of Page 4 of 17 earlier computed at Rs.59,24,230/- which means addition of Rs.9,59,000/- earlier disallowed was allowed] (Page 16 of paper book) .

2.11 It is also required to be noted and appreciated that on 27.08.2022 [which is a date prior to order u/s 154 dated 24.02.2023 (supra)], the assessee being aggrieved by the “impugned intimation order” had also filed “first appeal” in terms of Section 246A of the Act before Ld. CIT(A) who by the “impugned order” dated 04.12.2024 had dismissed the appeal of the assessee on reasons and grounds stated therein.

2.12 That the assessee being aggrieved by the “impugned order” has filed the instant second appeal before us and has raised following grounds of appeal against the “impugned order” which are as follows:-

“I. As regards non applicability of provisions of Sec. 36(1)(ii) of I.T. Act, 1961 The Ld. CIT(A) erred in confirming the aforesaid disallowance of Bonus Payable, without appreciating the fact that the appellant had not paid bonus by way of profits or dividend to its employees but had paid the same to employees as part of incentive in the form of salary and therefore the provision of Sec. 36(1)(ii) of I.T. Act, 1961 are not attracted at all and therefore the aforesaid disallowance is arbitrary, unjust and bad in law both on facts and in law.

II. As regards non applicability of provisions of Sec. 43B of I.T. Act, 1961

The Ld. CIT(A) erred in confirming the aforesaid Addition without appreciating the fact that the provisions of section 43 B are not applicable in case of appellant as bonus paid to employees is not covered u/s 43B and therefore the aforesaid disallowance is arbitrary, unjust and bad-in-law both on facts and in law.

III. As regards payment of Bonus of Rs. 7,19,000/- before due date of filing of ITR

Without prejudice to the above, the Ld. CIT(A) erred in confirming the aforesaid disallowance without appreciating the fact that the aforesaid payments had made before the due date of filing of the ITR and therefore the aforesaid disallowance is arbitrary, unjust and bad-in- Law both on facts and in law.

IV. As regards opportunity of personal hearing through video conferencing not provided:

Without Prejudice to the above, the Ld. CIT(A) erred in confirming the aforesaid addition without appreciating the fact that the appellant had specifically and categorically requested for an opportunity of personal hearing through video conferencing and therefore the appeal order passed by Ld. CIT(A) without providing the opportunity of VC is against the principles of natural justice and is also arbitrary, unjust and bad in law both on facts and in law.

V. As regards processing of ITR u/s 143(1)(a) under old regime instead of new regime

 Without Prejudice to the above, the Ld. CIT(A) erred in confirming the action of CPC assessing the Appellant under old regime, without appreciating the fact that the appellant has opted for new scheme u/s 115BAA applicable in the case of Company while filing the ITR for the above referred A.Y. and the return was also accepted by the portal. However as per the Intimation u/s 143(1)(a) dated 2009. Sao Les PFGr, his@processed the ITR filed as per old scheme of income tax, which is arbitrary, unjust and bad- in-law both on facts and in law.

 Without prejudice to the above, the Ld. CIT(A) erred in confirming the action of CPC assessing the Appellant under old regime, without appreciating the fact that being the first year of new regime and due to technical issues on portal, in spite of the fact that the portal has accepted the ITR. The non acceptance of the option under the new regime by the CPC while issuing the Intimation u/s 143(1)(a) dated 24-08-2022 is arbitrary, unjust and bad-in- law both on facts and in law.

 Without prejudice to above, the Ld. CIT(A) erred in confirming the action of CPC assessing the Appellant under old regime without appreciating the fact that the option of new regime being a beneficial provision deserves to be liberally interpreted and harsh implication of not giving benefit of opting of new scheme to the appellant ignoring the factual and legal position on record on technical grounds is arbitrary, unjust and bad-in-law both on facts and in law.

 Without prejudice to above, the Ld. CIT(A) erred in confirming the action of CPC assessing the Appellant under old regime, without appreciating the fact that the CPC had processed the ITR under the old regime without giving any intimation and calling objection from the appellant in this regard and therefore the same is arbitrary, unjust and bad-in-law both on facts and in law.

 Without prejudice to above, the Ld. CIT(A) erred in confirming the action of CPC assessing the Appellant under old regime, without appreciating the fact that the law allows for a liberal interpretation in favour of the appellant when it comes to the application of beneficial provisions, especially in a case where the choice of the new regime is evident and therefore the Appeal Order is arbitrary, unjust and bad-in-law both on facts and in law.

VI. As regards interest charged u/s 234B & 234C

That the interest charged is arbitrary and erroneous.

VII. That the appellant craves foregoing grounds of appeal leave to add &/or to alter any of the foregoing grounds of appeal as & when necessary”.

3. Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 02.07.2025 when the Ld. AR appearing for and on behalf of the assessee briefly narrated the facts of the case as narrated aforesaid and interalia contended basis two paper books Vol. I & II (pages 1 to 49) and synopsis (pages 1 to 19) that in view of order u/s 154 of the Act dated 24.02.2023 of CPC wherein the “impugned intimation order” stands modified the “impugned order” of CIT(A) substantially stands diluted as the disallowance of bonus earlier made by impugned intimation order is now reversed by order u/s 154 dated 24.02.2023 save and except that it was unnecessary for the Ld. CIT(A) to have inserted Section 36(1)(ii) r.w.s. 43B. The original disallowance was under Section 36(1)(ii) of bonus as per “impugned intimation order” and that Section 43B was nowhere in picture. Our attention was drawn to following:-

“ As per Section 36(1)(ii) of the Act, any sum paid to an employee as bonus or commission for services rendered, shall be allowed as deduction. But in this case, the bonus amount of Rs.9,59,000/- is shown as Bonus payable as on 31/03/2021, which means that the actual payment was not made during the relevant previous year. Hence the deduction is not allowable as per Section 36(1)(ii) r.w.s 43B wherein it is again reiterated that Page 8 of 17 any sum payable by the assessee as an employer shall be allowed only in the previous year in which such sum is paid. In view of the above, since the bonus of Rs. 9,59,000/- was not actually paid during the year and was paid on 13.12.2021 only, deduction cannot be allowed for the Assessment Year 2021-22. Hence this ground of Appeal is dismissed”. 3.2 The Ld. AR then further in respect of Ground V stated that for the year 2021-22 the assessee had opted for the new regime U/s 115BAA of the Act by filing Form 10-IC. However, due to the technical glitches on the portal, the relevant form could not be downloaded at the time of filing of ITR, although on the portal the ITR was successfully filed and the portal accepted the Return of Income under the new regime on 24.01.2022. It was a mandatory requirement on the portal that only after uploading from 10-IC, the ITR of the relevant assessment year, selecting and opting for Section 115BAA of the Act could be filed. Our attention was invited to the relevant part of ITR Form 6 showing that the assessee had opted for Section 115BAA of the Act (new regime) [paper book-II pages 39,40,41]. The attention to TAR clause No.8a on page 41 of paper book-II was too invited. It was submission of Ld. AR that the technical glitches under the new tax regime on portal was even accepted by CBDT. Assessee has also tried to file the Form 10-IC belatedly but CPC portal did not Page 9 of 17 permit. In fact the portal had locked filing of the Form 10-IC for Assessment Year 2021-22. The assessee had also filed a grievance before CPC-ITR regarding opting of new tax regime on 28.06.2025 (page 42-43 of paper book-II). Our attention was also invited to page 44-45 of paper book-II that Form 10-IC was sent by e-mail to the jurisdictional A.O on 23.06.2025 and so also by hard copy page 46&47 of paper book-II on 30.06.2025.

On page 48 of paper book-II is copy of Form 10-IC of the assessee. The Ld. AR then contended that Form 10-IC could not be filed at the material time and place due to the technical glitches on portal which fact is true and must be believed.

Since it could not be uploaded on portal there is no acknowledgement available on the portal but assessee attempted hard but to no avail. Though in the first instance itself the filing of the form 10-IC is required before the ITR filing but due to the technical glitches no flash came on portal or rather portal could not flashed it on the system. Nevertheless as stated it is now filed. Last two pages of Paper book-II evidences that it is now filed manually. It was electronic form earlier hence no copy is available. However all is made good now as stated by the e-mails

Page 10 of 17 to the Jurisdictional A.O and manually too. [Paper Book pages 42 to 49]. In concluding the Ld. AR stated that the benefit of Section 115BAA of the Act was claimed since inception in ITR filed on 24.01.2022 and Form 3CA-3CD on 07.01.2023 page 40-41 of Paper Book-II. Hence his prayer for relief be considered sympathetically. Reliance was placed on the order of ITAT, Ahmedabad Bench in case of Aprameya Eng. Ltd V/s ITO reported in (2024) 164 Taxmann.com 740 (Ahmedabad-Trib.) in para 8.2 was relied upon. It was submitted that it is substantially proved that the benefit of Section 115BAA of the Act was claimed and that the substantial benefit should not be denied due to procedural matters or delay if any.

3.3 Per contra the Ld. DR appearing for and on behalf of the Revenue contended that the assessee has not placed on record of this Tribunal any screen short evidencing technical glitches on the portal. At the material time and place when the Form 10- IC was being uploaded on the portal and system was not taking it the assessee could have flagged it. The Ld. AR has made grievance now only in fact in last week (prior to hearing date) when an identical issue somewhat slightly different was heard on Page 11 of 17 23.06.2025 by this bench in respect of same parties, as the new exercise of e-mail sent to JAO and the hard copy filed are all dated 28.06.2025 and 30.06.2025 respectively (page 44 & 46 of paper book-II) and prior thereto there was in action on the part of assessee with regard to filing of Form 10-IC, this exercise which is now done is after two years gap therefore the procedural lapses have continued for a long and it is not a small issue. It was submitted that “impugned order” should be upheld and reliance on the same was placed. The Ld. AR on rejoinder submitted that for on line failure assessee should not be denied benefit of Section 115BAA.

4.1 We now have to decide the legality, validity and the proprietery of the “impugned order” basis records of the case and rival contentions canvassed before us.

4.2 We have carefully perused the records of the case.

4.3 We are of the considered view that in so far as Ground Nos I,II & III are concerned that since the order u/s 154 of the Act dated 24.02.2023 (pages 15-18 of paper book-I) which had modified/rectified the “impugned intimation order” u/s 143(1)

Page 12 of 17 of the Act there is hardly anything more is called for. However since the bonus amount was paid before due date of filing of return i.e. Rs.9,59,000/- for which the necessary proof of bank statement of SBI is placed on record at page 37 of paper book-I showing debit of Rs.9,59,000/- on 13.12.2021 coupled with ledger account of employee showing payment of Rs.9,59,000/- (page 36 of paper book-I) the “impugned order” does not survive and is set aside to the said extent of disallowance of Rs.9,59,000/-. In fact both statement of bank (SBI) and so also the ledger account of bonus to employees were filed and were on record before Ld. CIT(A), therefore the Ld. CIT(A) ought not to have passed the “impugned order” u/s 36(1)(ii) r.w.s. 43B of the Act by doing so, he has erred in law. Ground No. I, II & III are thus allowed.

4.4 In so far as Ground No.(V) is concerned we observe and hold that since inception the assessee had claimed the benefit of Section 115BAA of the Act in ITR dated 24.01.2022 on page 3 of paper book-I (computation of income) wherein it is clearly stated that the total income for the purpose of Section 115BAA of the Act is Rs.49,65,010/-. Further ITR-6 filed on 24.01.2022 (page 4

Page 13 of 17 of paper book-I) at column No. (e) Section 115BAA benefit is claimed. From the relevant part of Form 3CA-3CD on page 5-6 of paper book-I it is clearly noticeable that the assessee has opted for taxation under Section 115BAA. From the page 39 of paper book-II which is acknowledgement of ITR-6 in column (e)

115BAA is clearly claimed and opted. From page 40 & 41 of paper book which are acknowledgement of form 3CA-3CD and the relevant extract of form 3CD column 8a clearly states that the assessee has opted for taxation u/s 115BAA. The assessee has made genuine grievance of technical glitches on portal as a result of which Form 10-IC could not uploaded and we concur with the contentions canvassed before us by Ld. AR that by virtue of technical glitches Form 10 IC could not be uploaded on system which fact gets corroborated with material on record as stated (supra). We simultaneously notice and observe that the assessee has rightly aired his grievance on technical glitches on Form 10- IC that the assessee had duly filed Form 10-IC at the material time and place but the same could not be downloaded at the time of ITR (page 41-42 of paper book-II). We also hold that the assessee has further demonstrated his bonafide on Form 10-IC

Page 14 of 17 issue by writing to jurisdictional A.O by e-mails and by way of a hard copy and has further enclosed Form 10-IC (pages 44 to 48 of paper book-II). While this exercise was a belated one but factum of assessee’s claim for taxation u/s 115BAA was in the existence right from the inception stage i.e. ITR & Form 3CD.

Under these facts and circumstances we hold that non filing of Form 10-IC for claiming taxation u/s 15BAA is not fatal. There is no material on record to establish that such a failure on the part of assessee was a deliberate one and that the assessee was negligent. The assessee since inception till last has successfully demonstrated bonafides. Merely because the assessee has not placed on record the necessary snap short on record is no ground to deny the benefit of Section 115BAA to the assessee as there are required proof for said claim as discussed aforesaid.

Further Ld. DR has not questioned eligibility of assessee u/s 115BAA. Hence the benefit of Section 115BAA, the assessee is entitled to in law. The plea of belated action on part of assessee at a very later date as contended by Ld. DR too fails as assessee in the ITR & Form 3CD has successfully demonstrated claim for u/s 115BAA. In fact we hold that so called procedural lapses are Page 15 of 17 ratified now and such act of ratification cannot be held against the assessee. We concur and gainfully refer to the coordinate bench decision of ITAT, Ahmedabad Bench in case of Aprameya Eng. Ltd V/s ITO reported in (2024) 164 Taxmann.com 740 (Ahmedabad-Trib.) wherein Form 10-IC was too filed belatedly (para 2) Tribunal held in para 8.2, 8.3, 8.4, 8.5 & 9 as under:-

“8.2 Considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits. The Courts have taken a lenient view on procedural lapses when substantive benefits are involved. SC ruling in the case of CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015] 376 ITR 456 (SC) emphasized that the making of a claim of deduction is mandatory, but timing is directory. Even if the claim is made during the assessment proceedings, such a claim is to be allowed.

8.3 After considering the submissions, the judicial precedents cited and the specific facts of the case, we are of the opinion the delay in filing Form 10-IC, though a procedural requirement, should not invalidate the assessee's substantive right to the benefit of section 115BAA of the Act.

8.4 The CBDT's Circulars extending the due dates for filing such forms in earlier years indicate a recognition of such procedural difficulties. These Circulars indicate a degree of administrative flexibility and a recognition that procedural lapses should not necessarily lead to the denial of substantive benefits. Moreover, denying the benefit based solely on this lapse would be against the principles of equity and justice, especially when there is no dispute regarding the assessee's eligibility for the lower tax rate.

8.5 In light of the above, the Ground Number 1 is allowed. Ground Number 2 is an alternative ground and, therefore, not adjudicated. Ground Numbers 3 and 4 are general in nature, which are also not adjudicated.

4.5 In light of above, the Ground No. I, II, III & V are allowed.

Ground No. IV is not pressed. Other grounds are general.

5.2 In result, appeal of the assessee is allowed.

Order pronounced in open court on 07.07.2025.