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Facts
The assessee, a private limited company, opted for a concessional tax rate of 22% under Section 115BAA. They filed Form 10-IC and the return of income after the due date. The CPC processed the return at the normal tax rate of 30% and applied MAT provisions, stating the conditions for the concessional rate were not met due to the late filing of Form 10-IC.
Held
The Tribunal held that the delay in filing Form 10-IC was a procedural lapse and not a substantive one, especially given the assessee acted in good faith and paid tax at the concessional rate. Relying on various judicial precedents, the Tribunal ruled that procedural requirements should not override substantive benefits.
Key Issues
Whether the denial of concessional tax rate under Section 115BAA due to the procedural delay in filing Form 10-IC is justified, or if substantial compliance should prevail over technical non-compliance.
Sections Cited
143(1), 115BAA, 115JB, 139, 21AE, 21AG, 119(2)(b)
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
Assessee by Shri Ravi Sharma, Adv., Shri Kshitze Bansal, AR & Ms. Kashish Gupta, AR Department by Sh. Om Parkash, Sr. DR Date of Hearing 27/08/2025 Date of Pronouncement 29/08/2025 O R D E R
PER MANISH AGARWAL, AM:
1. This appeal is filed by the assessee against the order of Ld. Adl./Joint Commissioner of Income Tax (Appeals)-2, Surat [“CIT(A), in short] dated 21.10.2024 in appeal No. NFAC/2021-22/10264739 arising out of the assessment order passed by CPC u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) for AY 2022-23 .
Brief facts of the case are that the assessee is a private limited company and is engaged in providing software development, information technology consulting services to its holding company and other group companies. For the year under appeal, the assessee opted for the concessional tax rate of 22% u/s 115BAA of the Act by e-filing the requisite Form 10-IC under Rule 21AE of the Income-tax Rules, 1962 on 19.12.2022. Thereafter, the assessee filed its return of income on 23.12.2022 and due tax was paid at concessional tax rate of 22% under section 115BAA of the Act. The return was processed vide intimation under section 143(1) of the Act dated 26.06.2023 wherein a normal tax rate of 30% was applied by CPC to the total income of the assessee as against the concessional tax rate of 22% as per section 115BAA of the Act and further applied MAT provisions u/s 115JB of the Act which are otherwise not applicable on opting concessional tax regime u/s 115BAA of the Act. The reason for applying the normal tax rate was that the assessee has not followed the conditions to opt for concessional rate of taxation. It was observed that the assessee was required to file Form 10IC on or before the due date specified under sub section (1) of section 139 for furnishing the return of Income to avail the benefit. Since, the assessee filed Form 10IC on 19.12.2022 and ITR on 23.12.2022, which was after the due date of filing of its ITR as specified under sub section (1) of section 139 of the Act. The due date of filing of ITR u/s. 139(1) was on or before 07.11.2022 (extended). Accordingly, the CPC had applied normal rate of tax.
Kworks Technologies Pvt. Ltd. 3. Against this order an appeal was filed before ld. CIT(A) who vide impugned order dt 21.10.2024, dismissed the appeal of the assessee.
4. Aggrieved by the said order of CIT(A), assessee preferred the present appeal before the Tribunal by taking following grounds of appeal:
“On the facts and circumstances of the case & in law, the intimation passed under section 143(1) of the Income tax Act, 1961 (‘the Act.) dated 26 June 2023 in erroneous and bad in law.
2. On the facts and circumstances of the case & in law, the Appellate ought to be allowed concessional tax rate of 22% under section 115BAA of the Act for the year under consideration based on the favorable judicial precedents available in this regard.
3. On the facts and circumstances of the case & in law, the Ld. AO/CPC/ld. CIT(A) grossly erred in not considering the favorable judicial precedents on allowability of concessional tax rate of 22% under section 115BAA of the Act and thus, acted in a manner against the cannons of tax jurisprudence. 4. On the facts and circumstances of the case & in law, the applicable surcharge on gross tax liability should be considered at 10% instead of the consequential rate of 12% applied in the intimation passed under section 143(1) of the Act dated 26 June 2023. 5. On the facts and circumstances of the case & in law the minimum alternative tax (‘MAT’) provisions under section 115JB of the Act ought not be applied in case of the Appellant who has exercised the option referred to under section 115BAA of the Act.” 5. Before us, ld.AR of the assessee submits that a search action was carried out in the case of the assessee on 11.11.2021 by DGGI, Delhi Zone unit under GST on assessee’s partent entity and final show cause was issued on 23.09.2022 and further representation Kworks Technologies Pvt. Ltd. were made thereafter due to which final accounts were prepared late and consequently the return of income was filed delayed. He further submits that the Form 10IC was filed prior to the filing of return of income and non submission of form 10IC within due date is a procedural mistake. It is also stated that section 115BAA specifically gave an option to the company to opt for the new tax regime. From tax calculated in ITR and from clause 8(a)of Form 3CA, the intention and act of the assessee was very clear to opt new tax regime as per section 115BAA. Besides, IT portal did not provide option for condonation of delay in filing this form. The ld.AR has also relied on certain decisions of co-ordinate benches and High Court in support of the contention that filing of form is not mandatory, which are as under : (a) State of Punjab vs Shamlal Murari (AIR 1976 SC 1177) (b) CIT vs J.H.Gotla (MANU/SC/0126/1985) (c) Bajaj Tempo Ltd. vs CIT [1992] 196 ITR 188 (SC) (d) Akshay Devendra Birari vs DCIT, CPC [TS-402-ITAT- 2024 (PUN)] (e) Krishna Gopal Diwvedi HUF [TS-140-ITAT-2025 (Mum.)] (f) Cell Com Teleservices (P.) Ltd. vs Union of India [2025] 176 taxmann.com 712 (Allahabad) [17.07.2025] (g) Bansal Corelam Pvt.Ltd.v s ITO, dated 26.11.2024 (h) Aprameya Engineering Ltd. vs ITO [TS-411-ITAT-2024 (Ahd.)] Kworks Technologies Pvt. Ltd. 6. It is also argued that as per section 143(1) the impugned adjustment of different tax rate not does not fall within the scope of adjustment stated in Section 143(1)(a). He thus, prayed that tax be charged int eh case of the assessee at concessional tax rate as provided u/s 115BAA of the Act.
7. On the other hand ld. Sr. DR supports the orders of the lower authorities and submits that the assessee has not fulfilled the conditions for availing the concessional tax rates and therefore the lower authorities has rightly denied the same to the assessee. Therefore, he requested for the confirmation of the order of the AO and CIT(A).
We have heard the arguments of both the parties and perused the material available and relevant facts of the case. The sole issue involved in the instant appeal is denial of benefit u/s 115BAA of concessional rate of tax on the ground that Form 10IC was not filed in the prescribed time i.e. before the due date u/s 139(1) for filing the return. It appears that assessee had acted in bonafide manner in claiming the option of concessional tax u/s 115BAA of the Act, in as much as while filing the return, it made clear that option to pay tax under Section 115BAA was exercised. Importantly, tax has also been paid at 22% in accordance with the provisions of Section 115BAA. It is undisputed fact that the assessee selected the option u/s 115BAA of the Act in return of income while calculating the tax as well as specified in clause 8(a) of Form 3CA which is clearly the beneficial one for the company. From tax calculated in the return Kworks Technologies Pvt. Ltd. and from clause 8(a) of Form 3CA, the intention and act of the assessee was very clear to opt new tax regime as per section 115BAA. There is no material objective to be achieved by the assessee in not e-filing papers before the due date of return of the same, once the intent was very well declared in Form 3CA. It is also seen that substantial compliance was made to claim benefit of Section 115BAA of the Act which is evident from the fact that while filing the returns, assessee clearly stated that the option to discharge the tax was exercised u/s 115BAA of the Act and due tax was calculated and paid @ 22% without claiming deductions as contemplated u/s 115BAA of the Act. The reason given for the delay was bonafide where due to the search, the delay occurred in the preparation of the final accounts which lead to the delay in filing the Form 10IC as well as the return of income which was also field after the due date u/s 139(1) of the Act. This appears to be exceptional circumstances and deserves to be considered.
The Hon'ble Supreme Court, in the case of Dilip Kumar 9. (2018) 9 SCC 1 (FB, SC), while deciding the Doctrine of Substantial Compliance held as under: "33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of Kworks Technologies Pvt. Ltd. substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted."
The Hon’ble Allahabad High Court in the case of Cell Com Teleservices (P.) Ltd. vs. Union of India [2025] 176 taxmann.com 712 M (Allahabad) [17-07-2025) (refer Page No. 36- 55 of Case Law Compilation (CLC)) wherein the Hon'ble Allahabad High Court held as under -
“The arbitrary rejection of the condonation of delay in filing Form 10-IC are strongly supported by various judgments that widely interpret "genuine hardship" under Section 119(2)(b) of the Act. The Hon'ble Supreme Court in B.M. Malani (supra) emphasized that "genuine hardship" signifies "genuine difficulty" and requires a purposeful interpretation of the provision, mandating a judicious exercise of discretion by statutory authorities. The Hon'ble Gujarat High Court in Gujarat Electric Co. Ltd. (supra) held that "genuine hardship" must be construed liberally. The Hon'ble Bombay High Court in K.S. Bilawala Ors. (supra) and Sitaldas K Motwani (supra) further consolidated this liberal interpretation, asserting that the power to condone delay is for substantial justice and refusing it can defeat the interest of justice. The Hon'ble Gujarat High Court in Deepak Pragjibhai Gondaliya (supra), held that the filing of forms for claiming benefits is procedural and no assessee benefits from late filing. The Hon'ble Bombay High Court in Pankaj Kailash Agarwal (supra) recited by the Madras High Court in MRF Ltd. (supra), firmly stated that the "an assessee feels that he would be paying more tax if he does not get the advantage of deduction will certainly constitute genuine hardship."
The judgments discussed hereinabove collectively stress that when substantial justice and technical considerations are Kworks Technologies Pvt. Ltd. aligned against each other, the preference should be given to the cause of substantial justice and the authorities' approach should be justice-oriented on merits. The clear and repeated position of law is that even if a procedural delay occurs due to "gemuine hardship", it should not prevent an assessee from receiving a rightful tax benefit. Therefore, in light of the aforesaid judgments of Hon'ble Supreme Court and Hon'ble High Courts, we are of the view that filing of Form 10-1C prior to filing of return is not mandatory and if "genuine hardship" is shown then delay may be condoned and in this respect the provision of law shall be taken as a beneficial piece of legislation.
After perusing the contentions of the learned counsel for the parties, records and case laws cited, in the opinion of the Court, the genuine hardship shall be seen by the concerned respondent authority as the petitioner is not getting benefit of concessional rate of tax under the Act, in respect of delay, therefore, the impugned order dated 30.01.2024 passed by the Principal Commissioner of Income Tax, Ghaziabad is quashed and the respondent authority is directed to condone the delay in filing Form 10-IC and accept the said Form 10-IC. The respondent concerned is further directed to provide consequential relief to the petitioner by recomputing its tax liability on the submission of its ITR by taking into account Form 10-IC.
Accordingly, the writ petition is allowed.”
The Co-ordinate Bench of Delhi Tribunal in the case of Bansal Corelam Pvt. Ltd v ITO, dated 26 November 2024, Hon'ble ITAT Delhi (refer Page No. 1-6 of CLC) held as below:
2. “The only issue to be decided in this appeal is as to whether the Id NFAC was justified in confirming the denial of claim made by the assessee to opt new tax regime under section 115BAA of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The assessee is a private limited company and had filed its return of income for assessment year 2021-22 belatedly on 30-3-2022. The extended due date under section 139(1) of the Act for the year under consideration was 15-3-2022. The assessee in the return of income had opted to pay the tax under the new tax regime as provided in section 115BAA of the Act by declaring total income of Rs 1,11,94,760/-. The requirement to file Form No. 10 IC along with the return of income was indeed not adhered to by the assessee in the instant case. Form 10 IC was admittedly filed by the assessee on 17-3-2022 which was beyond the extended due date under section 139(1) of the Act. But the return of income was filed belatedly on 30-3-2022 The Learned CPC while processing the return under section 143(1) of the Act on 13-11-2022 denied the benefit of lower tax rate as provided under section 115BAA of the Act to the assessee on the ground that Form 10-IC was not filed on or before the due date of filing the return of income under section 139(1) of the Act and computed the income of the assessee under normal provisions of the Act. In the instant case, Form 10 IC was filed by the assessee beyond the due date prescribed under section 139(1) of the Act, but was filed before the date of filing the return under section 139(4) of the Act. The intention of the assessee to disclose the income under the new tax regime under section 115BAA of the Act was disclosed in the tax audit report of the assessee. In our considered opinion, the filing of Form 10 IC though mandated in the Act need to be construed as directory in nature. This view of ours is further fortified by the decision of Ahmedabad Tribunal in the case of Aprameya Engineering Ltd vs ITO reported in 164 taxmann.com 740 (Ahdbd Trib) wherein it was held as under:- 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.
Kworks Technologies Pvt. Ltd. 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, denving 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."
Respectfully following the same, we direct the learned AO to recompute the income under the new tax regime in terms of section 115BAA of the Act in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee are allowed.”
The Co-ordinate Bench of Ahmedabad Tribunal in the case of Aprameya Engineering Ltd. vs. ITO [TS-411-ITAT-2024(Ahd)) (refer Page No. 7-17 of CLC) wherein it was held that considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits. Hence, delay in filing of Form 10-IC, being a procedural requirement, should not invalidate the assessee's right to claim the benefit of Section 115BAA of the Act. It was further held that CBDT circulars extending due dates for filing of such forms in the earlier years indicate a degree of administrative flexibility and recognition that procedural lapses should not lead to denial of substantive benefits. The relevant extract of the judgement is reproduced as under:
8.1... “In the instant case, the Ld.A.O. as well as the Ld.CIT(A) has denied benefit of concessional tax rate u/s 115BAA of the Act on account of an inadvertent error on the part of the assessee in not e-filing Form 10 IC before due date prescribed.
Kworks Technologies Pvt. Ltd. We are, therefore, of the view that there is sufficient compliance if the Form 10 IC has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the intent was very well declared in Form 3CD. 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. reported in (2015) 376 ITR 456 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 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 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.”
The Co-ordinate Bench of Pune Tribunal in the case of Akshay (Akshay Devendra Biruri vs. DCIT, CPC [TS-402-ITAT- 2024(PUN)] (refer Page No. 18-21 of CLC) wherein the Hon'ble Kworks Technologies Pvt. Ltd. Tribunal held that in order to claim the benefit of the new tax regime, filing of Form 101E under Rule 21AG of the Rules, is not a mandatory requirement but it is rather directory in nature. The Hon'ble Tribunal directed the Revenue to allow the benefit of the new tax regime by taking into consideration the Form 101E as the same was available with the Revenue at the time of processing the return of income. The relevant paragraph of the said ruling is reproduced herewith for your Honour's ready reference:
“We heard the Id. Sr. DR and perused the relevant material on record. The solitary issue that arises for our consideration in the present appeal is whether the CPC was justified in denying the benefit of New Tax Regime. Admittedly, the appellant had failed to submit the prescribed Form No.101E in order to claim the benefit of New Tax Regime before the due date for filing the return of income. However, the appellant had filed the said form on 10.01.2024 on which date the CPC had processed the return of income u/s, 143(1)(a) denying the benefit of New Tax Regime. In any event, it is not a mandatory requirement for filing of Form No.101E but directory in nature. The Form No.101E was very much available with the CPC and the CPC ought to have considered the same allowing the benefit of New Tax Regime. Therefore, we direct the CPC to amend the intimation by taking into consideration the Form No.101E, as the same was available with the CPC at the time of processing the return of income. We order accordingly.”
The Co-ordinate Bench of Mumbai Tribunal in the case of Krishna Gopal Diwvedi HUF [TS-140-ITAT-2025(Mum)] wherein the Hon'ble Mumbai Tribunal held as under 7.9. “Coming to the instant case, we observe that till the date of processing the return filed by the Assessee for the A.Y. 2022- Kworks Technologies Pvt. Ltd. 23, Form No. 101E for exercising the option for availing the benefits of new tax regime filed on 10-01-2022 for the AY 2021- 22 was neither withdrawn nor rejected or made invalid but the same was still available or effective before the AO during the assessment proceedings or passing the Assessment order and therefore in our considered view, the return filed by the Assessee should have been considered, under the new tax regime provisions. Thus, the Assessee is entitled for the benefit of new tax regime and consequently the addition is deleted. Resultantly, the appeal 1.e. filed by the Assessee is allowed,"
In previous years, the CBDT extended the due dates for filing such forms indicates 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. 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. Supreme Court rulings always emphasized that the making of a claim of deduction is mandatory, but timing/format is directory.
In view of the above facts and by respectfully following judicial pronouncements cited above), in our considered opinion assessee should not be deprived from the concessional rate of tax available in the statute merely for the procedural lapse. Accordingly, we direct the AO to compute the tax at the concessional rate as per Section
Ground of appeal No. 5 is consequential in nature.
In the result, appeal of assessee is allowed.