2024 (9) TMI 216 - HC - Income Tax

Taxation u/s 115BAA - denial of benefit of lower rate of tax of 22% on delay in filing Form 10-IC by the petitioner - return of income filed by the petitioner in Form of Return of Income i.e. ITR-6 - HELD THAT - Petitioner has filed the return of income under section 139 (1) of the Act before the due date by applying the provisions of section 115BAA of the Act. Respondent No. 2 ought to have condoned the delay in filing Form 10-IC by the petitioner instead of rejecting the review application filed by the petitioner on technical ground as in substance, the petitioner has exercised the option for lower rate of tax u/s 115BAA of the Act which is clear from the computation of income available on record. Even in Form ITR-6, the petitioner has filled in the details by computing the tax as provision for current tax in Column 54 at Rs. 49,58,000/- by applying lower rate of tax meaning thereby, the petitioner has exercised option merely because in absence of any provision for exercising the option in Column (e) as per the Circular No. 19/2023, the petitioner cannot be deprived of lower rate of tax and the delay in filing Form 10-IC ought to have been condoned by respondent No. 2 so as to fulfill the condition prescribed in sub-section (5) of section 115BAA of the Act read with section 21AE of the Rules providing for procedure for filing Form 10-IC. The impugned order passed u/s 119 (3) (b) of the Act and intimation under section 143 (1) of the Act dated 13.11.2022 are hereby quashed and set aside and the mater is remanded back to the respondent No. 2 to pass appropriate order condoning delay in filing Form 10-IC by the petitioner for exercising the option of lower rate of tax under section 115BAA as per the return of income filed by the petitioner in Form of Return of Income i.e. ITR-6 so as to enable the AO or the Central Processing Center (CPC) to re-process the Return of Income filed by the petitioner applying provision of section 115BAA of the Act for lower rate of tax at 22% instead of regular rate of tax applicable to the domestic company. Such exercise shall be completed within twelve weeks from the date of receipt of copy of this order by the respondent No. 2.

Summary

Issues Involved:
1. Delay in filing Form 10-IC electronically.
2. Rejection of application under Section 119(2)(b) of the Income Tax Act.
3. Eligibility for reduced tax rate under Section 115BAA.
4. Procedural deficiencies in Form ITR-6.
5. Application of CBDT Circulars.

Issue-Wise Detailed Analysis:

1. Delay in Filing Form 10-IC Electronically:
The petitioner failed to file Form 10-IC electronically by the due date due to an oversight by the accountant. This form is necessary to avail the concessional tax rate of 22% under Section 115BAA of the Income Tax Act. The delay resulted in the return being processed under Section 143(1) without the benefit of the reduced tax rate, leading to an additional tax liability of Rs. 20,48,040.

2. Rejection of Application under Section 119(2)(b) of the Income Tax Act:
The petitioner applied for condonation of delay under Section 119(2)(b) of the Act, citing extreme financial hardship. The application was rejected by the respondent on the grounds that the CBDT Circular for condonation applied only to Assessment Year 2020-21, not 2021-22. Additionally, the rejection was premature as it was issued before the scheduled hearing date.

3. Eligibility for Reduced Tax Rate under Section 115BAA:
The petitioner had complied with all substantive provisions of Section 115BAA, including not claiming any deductions and computing tax at the reduced rate. However, due to a technical glitch, the petitioner could not file Form 10-IC electronically, which is a procedural requirement to avail the reduced tax rate.

4. Procedural Deficiencies in Form ITR-6:
The petitioner argued that Form ITR-6 did not provide a specific box for exercising the option under Section 115BAA, making it impossible to comply fully with the procedural requirements. This was corroborated by the court, which noted the absence of a box for the option in Column (e) of the form.

5. Application of CBDT Circulars:
The petitioner relied on CBDT Circular No. 6/2022, which condoned delays for Assessment Year 2020-21, and Circular No. 19/2023, which extended similar relief for Assessment Year 2021-22. Despite fulfilling the substantive conditions, the petitioner's application was rejected on technical grounds, which the court found unjustified.

Judgment:
The court quashed the impugned orders dated 13.10.2023 and 22.02.2024, and the intimation under Section 143(1) dated 13.11.2022. It remanded the matter back to the respondent to condone the delay in filing Form 10-IC and to re-process the return of income applying the provisions of Section 115BAA for the lower tax rate of 22%. The respondent was directed to complete this exercise within twelve weeks from the date of receipt of the court's order. The court emphasized that procedural technicalities should not impede substantive justice, especially when the petitioner had complied with all substantive provisions of the Act.