2025 (1) TMI 700 - AT - Income Tax

Denial of benefit of provision of Section 115BAA - delay in filing the Form 10IC - levy of tax and surcharge at 25% and 12% respectively, instead of 22% and 10% respectively, as prescribed under the provisions of section 115BAA - CIT(A) contending that benefit u/s 115BAA cannot be claimed for the AY 2022-23 merely because there was a delay in filing Form 10-IC for the AY 2021-22. HELD THAT - The Form 10IC can be filed only once and there is no option/provision to file the Form 10IC every year to opt for the new regime to get the benefit of reduced tax rate as per provisions of Section 115BAA - now, we are in Assessment Year 2022-23 and the CIT(A) failed to consider that though there was a delay in filing the Form 10IC to get benefit in the AY 2021-22, the same has been filed belatedly on 31/03/2022 and the Assessee has assigned reasons for condoning the delay and the matter is pending. Thus in our considered opinion, CIT(A) cannot deny the Assessee to opt for new regime at least for the Assessment Year under consideration i.e. 2022-23. Considering the fact that the Assessee filed return of income on 30th November, 2022 and Form No. 10IC which was already filed on 31/03/2022, which are well within the prescribed due date of 30th November, 2022, therefore, we are of the opinion that the CIT(A) ought to have given the benefit of reduced tax rate as prescribed u/s 115BAA of the Act for the year under consideration. Set aside the order of the A.O. as well as Ld. CIT(A) and direct the A.O. to give benefit of reduced tax rate at 22% as prescribed u/s 115BAA under the new tax regime for the year under consideration. Appeal filed by the Assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the Assessee was denied the opportunity to be heard, violating principles of natural justice.

2. Whether the Assessee was entitled to the reduced tax rate under Section 115BAA for the Assessment Year (AY) 2022-23, despite the late filing of Form 10-IC for AY 2021-22.

3. Whether the rejection of Form 10-IC for AY 2021-22 automatically invalidates the Assessee's claim for subsequent years.

4. Whether the Assessee was unfairly denied the opportunity to rectify the delay in filing Form 10-IC.

5. Whether the Centralized Processing Centre (CPC) failed to provide the mandatory statutory notice under Section 143(1)(a) before processing the return with a higher tax rate.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Denial of Opportunity to be Heard

Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given an opportunity to present their case. The lack of a hearing or adequate opportunity to present submissions can be grounds for appeal.

Court's Interpretation and Reasoning: The court noted that the Assessee claimed not to have been provided an opportunity to be heard through video conferencing before the order was passed.

Key Evidence and Findings: The Assessee argued that no submissions were received by the CIT(A) and that the decision was made based on a condonation application for a different AY.

Application of Law to Facts: The court acknowledged the procedural lapse in not providing an opportunity to the Assessee to present their case.

Treatment of Competing Arguments: The Revenue did not provide substantial arguments to counter the Assessee's claim of procedural unfairness.

Conclusions: The court implied that the procedural lapse contributed to the decision to allow the appeal.

Issue 2: Entitlement to Reduced Tax Rate under Section 115BAA

Relevant Legal Framework and Precedents: Section 115BAA allows companies to opt for a reduced tax rate, provided certain conditions, including timely filing of Form 10-IC, are met.

Court's Interpretation and Reasoning: The court examined whether the Assessee met the conditions for AY 2022-23, despite issues in AY 2021-22.

Key Evidence and Findings: The Assessee filed Form 10-IC on 31/03/2022 and the return of income on 30/11/2022, both within the prescribed due dates for AY 2022-23.

Application of Law to Facts: The court found that the Assessee complied with the requirements for AY 2022-23 and should not be penalized for the previous year's delay, which was under appeal.

Treatment of Competing Arguments: The Revenue argued that the late filing in AY 2021-22 invalidated subsequent claims, but the court disagreed, emphasizing compliance for the current year.

Conclusions: The court concluded that the Assessee was entitled to the reduced tax rate for AY 2022-23.

Issue 3: Invalidation of Claims Due to Previous Year's Delay

Relevant Legal Framework and Precedents: The filing of Form 10-IC is a one-time requirement, and its acceptance is crucial for opting into the reduced tax regime.

Court's Interpretation and Reasoning: The court considered whether the delay in AY 2021-22 should impact AY 2022-23.

Key Evidence and Findings: The Assessee provided reasons for the delay, which were pending consideration for condonation.

Application of Law to Facts: The court found no basis for denying the benefit for AY 2022-23 when the Assessee met the requirements for that year.

Treatment of Competing Arguments: The court dismissed the Revenue's argument that the previous year's issues automatically affected subsequent years.

Conclusions: The court held that the Assessee's compliance for AY 2022-23 was sufficient for entitlement to the reduced rate.

Issue 4: Opportunity to Rectify Delay

Relevant Legal Framework and Precedents: Taxpayers may seek condonation for delays due to reasonable causes, which should be considered by the authorities.

Court's Interpretation and Reasoning: The court noted the Assessee's pending application for condonation of delay for AY 2021-22.

Key Evidence and Findings: The Assessee argued that no opportunity was provided to rectify the delay for AY 2022-23.

Application of Law to Facts: The court found that the pending condonation application should not preclude benefits for AY 2022-23.

Treatment of Competing Arguments: The Revenue did not address the potential for rectification adequately.

Conclusions: The court implied that the Assessee should not be penalized for the unresolved issue of delay in the previous year.

Issue 5: Statutory Notice under Section 143(1)(a)

Relevant Legal Framework and Precedents: Section 143(1)(a) requires a statutory notice before adjustments to the return are made.

Court's Interpretation and Reasoning: The court considered whether the CPC failed to issue the required notice.

Key Evidence and Findings: The Assessee claimed no notice was provided before processing the return at a higher rate.

Application of Law to Facts: The court found procedural irregularity in the CPC's actions.

Treatment of Competing Arguments: The Revenue did not sufficiently counter the claim of procedural failure.

Conclusions: The court's decision to allow the appeal was influenced by this procedural oversight.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Ld. CIT(A) cannot deny the Assessee to opt for new regime at least for the Assessment Year under consideration i.e. 2022-23."

Core Principles Established: Compliance with filing requirements for the current year should be considered independently of unresolved issues from previous years.

Final Determinations on Each Issue: The Assessee's appeal was allowed, granting the benefit of the reduced tax rate for AY 2022-23 under Section 115BAA.