2023 (12) TMI 462 - HC - Income Tax

Court Directs CBDT to Process Late Form 10-IC Submission, Allowing Taxpayer to Opt for 22% Rate u/s 115BAA.

A.C. Surgipharma Private Limited Versus Deputy Commissioner Of Income Tax Circle 1 (1) & Anr.

The court addressed a challenge to an intimation under Section 143(1) of the Income Tax Act, 1961, due to the petitioner's failure to file Form 10-IC to ... Denial of benefit of lower rate of tax @ of 22% u/s 115BAA - failure to file Form 10-IC - Petitioner placed before the court Circular No.19/2023 dated 23.10.2023 issued by the Central Board of Direct Taxes (CBDT) which, in effect, condones the delay in filing Form 10-IC - HELD THAT:- We are informed by petitioner that in terms of the said circular, a fresh Form 10-IC has been filed, albeit, electronically. Accordingly, petiotioner says that the petitioner fulfills the conditions referred to in paragraph 3 of the said circular. In these circumstances, the writ petition is disposed of, with a direction to the CBDT to process the petitioner’s request contained in Form 10-IC. CBDT will process the aforementioned prescribed form within eight (8) weeks from the date of receipt of the order passed today. The interim order which was made absolute on 19.05.2023, shall continue to operate pending the aforementioned exercise, and for further three (3) weeks, in case the result is adverse to the interest of the petitioner. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a demand raised under Section 143(1) for failure to file Form No. 10-IC (Rule 21AE) can validly deny applicability of Section 115BAA where the return of income (ITR-6) indicates an option for taxation under Section 115BAA for the relevant assessment year. 2. Whether the Assessing Officer is obliged, before proceeding to raise a demand, to give the assessee an opportunity to rectify non-filing of Form No. 10-IC when all information sought by the form is otherwise present in the return and the return shows exercise of the option under Section 115BAA. 3. Whether, and to what extent, a CBDT circular issued under Section 119(2)(b) can condone delay in filing Form No. 10-IC for AY 2021-22 and the legal consequences of such condonation on the revenue's processing of assessment/intimation under Section 143(1). 4. Whether the existence of an alternate remedy under Section 246A affects the jurisdiction of the Court to grant interim relief or direct administrative action in the facts presented. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of denial of Section 115BAA benefit due solely to non-filing of Form 10-IC where ITR indicates the option Legal framework: Section 115BAA provides a concessional tax rate for certain domestic companies upon exercise of an option; Rule 21AE prescribes Form No. 10-IC for furnishing the option; Section 143(1) permits issuance of intimation/demand based on computation by AO; Section 139(1) prescribes due date for filing returns. Precedent treatment: No earlier judicial precedents are referred to in the judgment for this specific interplay; the Court proceeds on statutory text and administrative guidance. Interpretation and reasoning: The Court notes the practical consequence that when the return (ITR-6) contains the option indication and all required information is otherwise furnished, denial of Section 115BAA purely on the technical ground of non-filing of Form 10-IC produces hardship. This factual posture frames the challenge to an intimation under Section 143(1) that disallows the concessional rate solely for non-filing of the prescribed form. Ratio vs. Obiter: The Court's directive to process the Form 10-IC (see conclusion) reflects the operative ratio in these facts - that administrative condonation and processing are appropriate where statutory/formal requirements are otherwise satisfied by the return and CBDT has condoned delay. Conclusions: Where the return timely filed under Section 139(1) indicates exercise of the option under Section 115BAA and the information required by Form 10-IC is present in the return, a mechanical denial of the concessional rate solely because Form 10-IC was not filed is not sustainable in light of administrative condonation subsequently issued by CBDT for AY 2021-22. Issue 2 - Obligation of the Assessing Officer to give opportunity to rectify non-filing before raising demand Legal framework: Principles of fair procedure and natural justice in tax proceedings; statutory mandate of filing prescribed forms; AO's powers under assessment/intimation provisions. Precedent treatment: The judgment poses the question whether AO should provide opportunity but does not rest its decision on a binding precedent establishing such an obligation. Interpretation and reasoning: The Court raises the proposition that if the information sought in Form 10-IC is otherwise available in the return and the return indicates the option, the AO should ordinarily allow the assessee an opportunity to make good the omission before raising a demand. However, the Court does not finally decide a general legal duty of the AO in all cases; instead the practical relief is grounded on the subsequent administrative condonation. Ratio vs. Obiter: Observations suggesting the AO ought to give an opportunity to correct course are primarily obiter in the context of this judgment, as the disposal relies on administrative condonation rather than establishing a categorical procedural obligation on AOs for all similar cases. Conclusions: The Court's discussion endorses the principle that opportunity to rectify would be preferable where the return demonstrates the option, but it stops short of laying down a binding, universally applicable rule imposing such an obligation on the AO in the absence of administrative direction or judicial precedent. Issue 3 - Effect and scope of CBDT circular condoning delay in filing Form 10-IC for AY 2021-22 Legal framework: Section 119(2)(b) empowers CBDT to give directions to subordinate authorities to prevent genuine hardship; Rule 21AE requires Form 10-IC; CBDT circular dated 23.10.2023 (Circular No.19/2023) purports to condone delay for AY 2021-22 subject to specified conditions. Precedent treatment: The Court applies the CBDT circular as an administrative direction issued under statutory power; no judicial precedent overruling or restricting such exercise is invoked in the judgment. Interpretation and reasoning: The Court accepts the CBDT's exercise of power under Section 119(2)(b) to condone delay where (i) return filed on or before due date under Section 139(1), (ii) the option for Section 115BAA is indicated in ITR-6, and (iii) Form 10-IC is filed electronically within the specified extended timeline. Given that the petitioner meets these conditions (and had filed Form 10-IC electronically thereafter), the Court concludes that administrative condonation applies and that the prescribed form should be processed by the CBDT/authorities. Ratio vs. Obiter: The acceptance of the CBDT circular's condonation as determinative in the facts is ratio for relief granted in this case. The Court's direction to the CBDT to process the form is grounded in the circular and constitutes the operative determination. Conclusions: Where the conditions of the CBDT circular are satisfied, delay in filing Form 10-IC for AY 2021-22 is to be condoned; the administrative authority is directed to process the Form 10-IC and consequent request for applicability of Section 115BAA within a specified timeframe (eight weeks), and interim protection from precipitate recovery measures is appropriate pending that exercise. Issue 4 - Impact of alternative remedy under Section 246A on Court's jurisdiction to grant relief Legal framework: Section 246A and statutory appellate/rectification remedies provide an alternative route to challenge assessments/rectify tax determinations. Precedent treatment: The revenue raised availability of Section 246A as an alternate remedy; the Court recorded that submission but did not treat it as bar to interference in the exercise of its discretion under writ jurisdiction given the administrative condonation and interim relief already in place. Interpretation and reasoning: The Court noted the availability of Section 246A but proceeded to grant relief because the practical issue (condonation under CBDT circular and filing of Form 10-IC) was susceptible to administrative resolution and immediate prospective prejudice to the petitioner was a concern. The Court therefore directed administrative processing rather than compelling pursuit of alternate statutory remedies alone. Ratio vs. Obiter: The decision to direct administrative processing despite the existence of an alternate remedy is ratio in this case but limited to the exercise of the Court's discretion on the presented facts; it does not lay down a general rule that alternate remedies will never preclude writ relief. Conclusions: Existence of an alternate remedy (Section 246A) does not automatically preclude judicial relief where administrative directions afford a straightforward resolution and interim prejudice warrants immediate intervention; the Court exercised its discretion to protect the petitioner pending administrative processing. Relief and Administrative Directions (Operative Conclusion) The Court directed the CBDT to process the prescribed Form 10-IC filed electronically within eight weeks from receipt of the order, on the basis that the conditions of the CBDT circular are satisfied. The Court maintained an interim bar on precipitate recovery actions pending the processing and extended that protection for a short additional period if the outcome is adverse. These directives constitute the operative relief in the judgment and represent the ratio applied to the facts before the Court.