Late Filing of Form 10-IE Does Not Extinguish Section 115BAC Option for Subsequent Years: ITAT Pune Ruling
Background and Context
A significant ruling has emerged from the Income Tax Appellate Tribunal (ITAT), Pune Bench, clarifying the continuity of the new tax regime option under Section 115BAC of the Income Tax Act, 1961. The case — Seema Kulkarni Vs ITO (ITAT Pune) — pertained to Assessment Year 2023-24 and addressed a recurring practical difficulty faced by assessees who had filed Form 10-IE belatedly in the preceding year and were subsequently denied the benefit of the concessional tax regime in the following year.
The central question before the Tribunal was straightforward yet consequential: Does a belated filing of Form 10-IE for one assessment year disqualify an assessee from continuing to avail the new tax regime under Section 115BAC in a subsequent assessment year, particularly when the return for the subsequent year is filed within the prescribed due date?
The Tribunal answered this question decisively in favour of the assessee.
Facts of the Case
The assessee, an individual deriving income primarily from profession, filed her return of income for AY 2023-24 on 26.06.2023, declaring a total income of Rs. 21,05,090/- and opted for the new tax regime under Section 115BAC of the Income Tax Act, 1961.
When the return was processed by the Assessing Officer/Central Processing Centre (AO/CPC) on 10.01.2024, the benefit of Section 115BAC was denied. The CPC raised a tax demand of Rs. 85,850/- on the ground that Form 10-IE for AY 2022-23 had been submitted belatedly — specifically on 06.08.2022, after the prescribed due date under Section 139(1) of the Act.
The foundational facts, therefore, were:
- Form 10-IE was filed for AY 2022-23, albeit after the due date.
- No fresh Form 10-IE was filed for AY 2023-24.
- The return of income for AY 2023-24 was filed within the prescribed due date under
Section 139(1). - The assessee had not withdrawn the earlier option exercised under
Section 115BAC.
First Appellate Authority's Findings
The assessee challenged the CPC's action before the Additional/Joint Commissioner of Income Tax (Appeals), Panaji. However, the first appellate authority upheld the demand raised by the CPC, relying on the following reasoning:
"The language of Section 115BAC(5) is mandatory and not directory. The legislature has consciously linked the exercise of option to the due date of return filing to ensure certainty in revenue collection and computational uniformity. Where the return is filed belatedly, the assessee is automatically excluded from the concessional regime."
The first appellate authority further held that since the assessee was ineligible for the new tax regime, the CPC's computation of tax under normal provisions was legally sustainable. Several judicial decisions were cited in support of this position, including:
- CIT v. Shelly Products (2003) 261 ITR 367 (SC)
- Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC)
- ITO v. R. L. Rajgharia [2018] 169 ITD 127 (Kol. Trib.)
- Union of India v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC)
- Keshavji Ravji & Co. v. CIT (1990) 183 ITR 1 (SC)
The appellate authority also referenced CBDT's FAQ on the New Tax Regime (2020-21), which states that belated returns filed under Section 139(4) cannot opt for the new regime. On this basis, both grounds of the assessee's appeal were dismissed at the first appellate stage.
Grounds Raised Before the ITAT
Aggrieved by the first appellate order, the assessee carried the matter to the Tribunal, raising the following grounds:
- The lower authorities erred in denying the benefit of tax determination under
Section 115BAC(New Scheme of Taxation) of the Income Tax Act, 1961, even though the benefit of the new scheme continues in terms ofSection 115BAC(5)(i)until it is specifically withdrawn by the assessee as per the proviso toSection 115BAC(5).