2025 (1) TMI 769 - HC - Income Tax

Denial of benefit u/s 115BAA - assessee did not file the Form 10IC along with the return within the extended period, as extended by the Circular issued by the Central Board of Direct Tax dated 17th March, 2022 - whether filing of such form would be mandatory or directory? - whether the assessee should be given an opportunity to file Form 10IC before the AO in order to claim the benefit? - HELD THAT - It is not in dispute that the assessee company has opted for taxation u/s 115BAA and the option was available to the assessee by opting the option given in filing status in Part AGE of the form by return of income in ITR-6. This conduct of the assessee will undoubtedly go to show that the assessee intended to opt to pay tax under the simplified tax regime as also accepted in the Circular issued by the Central Board. During the relevant period there was Covid pandemic which also led to certain other difficulties for the assessee to upload the form along with the return within the extended time thereof. That apart, the assessee has specifically stated that they had certain difficulties in uploading the form in the Income tax portal. Also assessee pointed in case of a HUF opting under the new taxation scheme under Section 115BAC, the portal requires management number of 10IE while filing the income tax return as this being a mandatory column and the assessee continue process of filing ITR without filling the same and if there was non-compliance in filing Form 10IE, the assessee would be aware of that and will submit the same but such facilities is not provided when returns are filed by companies. The peculiar facts and circumstances would show that the error was an inadvertent procedural error and the conduct of the assessee will clearly show that they had opted for taxation u/s 115BAA of the Act. Appeal is disposed of and the matter stands restored back to the file of the Assessing Officer to permit the assessee to file the report in Form 10IC and the Assessing Officer shall consider as to what relief the assessee would be entitled to subject to the conditions that the assessee fulfils all other requisite conditions as per law.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions presented and considered in this judgment are:

Whether the Tribunal was justified in setting aside the order of the NFAC, Delhi, and restoring the file back to the Assessing Officer for consideration of the ground of appeal regarding the filing of Form 10IC without considering the CBDT's Circular No. 6/2022.
Whether the Tribunal was justified in directing the Assessing Officer to consider the ground of non-filing of Form 10IC on the ITBA portal for availing the benefit of Section 115BAA of the Income Tax Act.
Whether the Tribunal was justified in allowing the assessee tax computation under Section 115BAA even in the absence of Form 10IC, which is a mandatory provision.
Whether the Tribunal was justified in relying on the decisions of the Gujarat High Court and Delhi High Court, which pertain to the allowability of deductions in late filing of audit reports and are distinguished from the current case involving Form 10IC.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Tribunal's decision to set aside NFAC's order

Relevant Legal Framework and Precedents: The Tribunal's decision was based on the provisions of the Income Tax Act, particularly Section 115BAA, and the CBDT's Circular No. 6/2022, which condones the delay in filing Form 10IC under certain conditions.
Court's Interpretation and Reasoning: The Court noted that the Tribunal considered the peculiar facts and circumstances of the case, including the assessee's conduct and the challenges faced during the COVID pandemic, which justified the decision to allow the filing of Form 10IC post the deadline.
Key Evidence and Findings: The Court found that the assessee had filed the return of income on time and had opted for taxation under Section 115BAA, indicating their intention to comply with the tax regime.
Application of Law to Facts: The Court applied the provisions of the CBDT Circular, which allowed for condonation of delay under specific conditions, to the facts of the case.
Treatment of Competing Arguments: The Court acknowledged the revenue's arguments but emphasized the peculiar circumstances and the assessee's intention to comply with the tax regime.
Conclusions: The Court upheld the Tribunal's decision to allow the assessee to file Form 10IC and remanded the matter to the Assessing Officer for further consideration.

Issue 2: Tribunal's direction to Assessing Officer regarding Form 10IC

Relevant Legal Framework and Precedents: The decision was guided by the provisions under Section 115BAA and the procedural requirements for filing Form 10IC.
Court's Interpretation and Reasoning: The Court agreed with the Tribunal's view that the error in not filing Form 10IC was procedural and inadvertent, warranting an opportunity for rectification.
Key Evidence and Findings: The Court highlighted the technical difficulties faced by the assessee, which prevented timely filing of Form 10IC.
Application of Law to Facts: The Court applied the principle of condonation of procedural lapses in light of the CBDT Circular and the assessee's demonstrated intent to comply.
Treatment of Competing Arguments: The Court found merit in the assessee's argument regarding technical issues and procedural errors.
Conclusions: The Court concluded that the Tribunal's direction was justified and allowed the Assessing Officer to consider the assessee's filing of Form 10IC.

Issue 3: Allowing tax computation under Section 115BAA without Form 10IC

Relevant Legal Framework and Precedents: The requirement for filing Form 10IC is a statutory mandate under Section 115BAA.
Court's Interpretation and Reasoning: The Court interpreted the requirement as procedural, not substantive, allowing for rectification in light of the assessee's intent and the CBDT Circular.
Key Evidence and Findings: The Court noted the assessee's compliance with other conditions and the procedural nature of the lapse.
Application of Law to Facts: The Court applied the principle of allowing procedural rectification to ensure substantive justice.
Treatment of Competing Arguments: The Court balanced the statutory requirement with the practical difficulties faced by the assessee.
Conclusions: The Court upheld the Tribunal's decision to allow the assessee to compute tax under Section 115BAA.

Issue 4: Reliance on High Court decisions in other cases

Relevant Legal Framework and Precedents: The Tribunal relied on precedents that allowed for condonation of procedural lapses in similar contexts.
Court's Interpretation and Reasoning: The Court found that the principles from the cited cases were applicable to the procedural lapse in this case.
Key Evidence and Findings: The Court noted the similarity in the nature of procedural lapses across cases.
Application of Law to Facts: The Court applied the principle of procedural condonation from the cited cases to the current case.
Treatment of Competing Arguments: The Court distinguished the factual differences but found the legal principles applicable.
Conclusions: The Court upheld the Tribunal's reliance on the cited precedents.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The peculiar facts and circumstances would show that the error was an inadvertent procedural error and the conduct of the assessee will clearly show that they had opted for taxation under Section 115BAA of the Act."
Core Principles Established: The judgment establishes that procedural lapses in filing mandatory forms can be condoned if the intent to comply is evident and procedural difficulties are demonstrated.
Final Determinations on Each Issue: The Court concluded that the Tribunal's decisions were justified, allowing the assessee to file Form 10IC and compute tax under Section 115BAA, while remanding the matter to the Assessing Officer for further consideration.

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