2025 (1) TMI 447 - AT - Income Tax

Denial of benefit of new tax regime - Form 10 1E required to be submitted before or at the time of filing of ITR, but was submitted late - HELD THAT - As due date relates to furnishing of returns of income for any previous year, relevant to the assessment year commencing on or even after 1.4.2021. From said provision, it cannot be said that law debars such an assessee from uploading of said Form, before or on the due date of ITR for the subsequent Assessment Year, even after one Form 10IE for the previous Assessment Year stands rejected from consideration by the department due to its late submission i.e. beyond the due date. Once said Form submitted for an Assessment Year is not accepted by the department only because same was uploaded beyond the due date, the abovesaid provision does not debar the assessee from repeating his option or desire to continue to opt to avail benefits of new tax regime in the very next Assessment Year, by furnishing fresh Form 10IE before or on the due date for furnishing of ITR for the very next Assessment Year. There is nothing to suggest that permitting an assessee to continue to opt on the basis of previously submitted Form or allowing him to furnish fresh Form for the very next assessment year, is going to cause any loss of revenue to the State. Having regard to the given facts and circumstances, and while applying the decision for the appellant, we deem it a fit case to allow the assessee to avail of benefit of concessional rate u/s 115BAC(5)(i) for the year under consideration i.e. AY 2023-24, on the basis of option already expressed to be exercised in the previous Assessment Year, subject to the condition that the assessee fulfills all other requirements of law as available u/s 115BAC(5)(i) of the Act. This appeal is allowed and department is directed to consider the option already expressed to be exercised in the previous Assessment Year, on the basis of Form 10 1E then submitted, subject to the condition that the assessee fulfills all other requirements of law as available u/s 115BAC(5)(i) of the Act.

1. ISSUES PRESENTED and CONSIDERED

The core legal question addressed in this judgment is whether an assessee, who submitted Form 10IE late for the Assessment Year 2022-23, can be denied the benefits of the new tax regime for the subsequent Assessment Year 2023-24, despite specifying in the Income Tax Return (ITR) for the latter year that they wish to continue with the new tax regime.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework is Section 115BAC(5) of the Income Tax Act, 1961, which requires an assessee to submit Form 10IE to opt for the new tax regime. The submission must be made on or before the due date specified under Section 139(1) for furnishing the return of income. The precedents considered include decisions by Co-ordinate Benches of ITAT in cases such as Pran Panda vs. ITO, Harbans Singh vs. AO, and Akshay Devendra Birari vs. DCIT.

Court's Interpretation and Reasoning

The court interpreted the requirement to submit Form 10IE as directory rather than mandatory, suggesting that procedural lapses should not necessarily result in the denial of substantive benefits, especially when no loss to the revenue is demonstrated. The court emphasized the need for a flexible approach, considering the intent of the law and the practical difficulties faced by assessees.

Key Evidence and Findings

The court noted that the assessee had attempted to submit Form 10IE for the subsequent year but was prevented by the system, which did not allow the submission due to the previous year's form being rejected for late submission. The assessee's intent to continue with the new tax regime was clearly indicated in the ITR for the Assessment Year 2023-24.

Application of Law to Facts

The court applied the law by considering the legislative intent behind Section 115BAC(5) and the practical implications of strict adherence to procedural requirements. It concluded that the rejection of Form 10IE for the earlier year should not preclude the assessee from opting for the new tax regime in the subsequent year, provided all other legal requirements are met.

Treatment of Competing Arguments

The court addressed the department's argument that the submission of Form 10IE is mandatory and must be done within the prescribed period. It contrasted this with the assessee's position, supported by precedents, that the requirement is directory. The court favored the assessee's interpretation, emphasizing a more lenient approach to procedural compliance.

Conclusions

The court concluded that the assessee should be allowed to avail of the benefits of the new tax regime for the Assessment Year 2023-24, based on the option expressed in the previous year, subject to compliance with other legal requirements.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"We deem it a fit case to allow the assessee to avail of benefit of concessional rate u/s 115BAC(5)(i) of the Act, for the year under consideration i.e. AY 2023-24, on the basis of option already expressed to be exercised in the previous Assessment Year, subject to the condition that the assessee fulfills all other requirements of law as available u/s 115BAC(5)(i) of the Act."

Core Principles Established

The judgment establishes that procedural requirements for opting into the new tax regime should be interpreted flexibly, especially when the intent to comply is clear and no revenue loss is incurred. The court highlighted the importance of balancing procedural compliance with substantive justice.

Final Determinations on Each Issue

The appeal was allowed, setting aside the order of the Commissioner of Income Tax (Appeal) and directing the department to consider the option expressed in the previous year, thus granting the assessee the benefits of the new tax regime for the Assessment Year 2023-24.

In conclusion, the court's decision reflects a pragmatic approach to tax compliance, emphasizing the need for systems and procedures that accommodate genuine attempts by taxpayers to fulfill their obligations while ensuring that substantive rights are not unduly compromised by procedural technicalities.

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