Assessee wins appeal after denial of section 115BAC benefits for late Form 10IE filing deemed directory not mandatory

ITAT Pune ruled in favor of the assessee regarding denial of benefits under section 115BAC due to belated filing of Form 10IE. The Tribunal held that filing Form 10IE is directory, not mandatory, following precedent in Akshay Devendra Birari case. Since Form 10IE was already available with CPC during return processing under section 143(1), the Tribunal directed CPC to amend intimation considering the available form and allowed the assessee's claim for new tax regime benefits.

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The core legal questions considered in this appeal pertain to the eligibility and procedural compliance for claiming the benefit of the new tax regime under section 115BAC of the Income Tax Act, 1961. Specifically, the issues include:

1. Whether the denial of benefit under section 115BAC due to non-filing of Form 10IE for the relevant Assessment Year (AY) 2023-24 was justified.

2. Whether the belated filing of Form 10IE for the preceding AY 2022-23 affects the eligibility for the new tax regime in AY 2023-24.

3. Whether the filing of Form 10IE is mandatory or merely directory in nature as per the statutory and procedural framework.

4. The implications of the continuity of the option exercised under section 115BAC in previous years on subsequent years' eligibility and compliance requirements.

Issue-wise Detailed Analysis:

Issue 1: Denial of benefit under section 115BAC due to non-filing of Form 10IE for AY 2023-24

The legal framework under section 115BAC provides an option for individual taxpayers to opt for a new tax regime with concessional tax rates subject to certain conditions, including filing of Form 10IE. The Assessing Officer (AO) processed the return under the old tax regime as Form 10IE was not filed for AY 2023-24.

The AO and the first appellate authority (Addl./JCIT(A)) held that since Form 10IE was not filed within the due date for AY 2023-24, the assessee was ineligible for the new tax regime benefits. The Tribunal examined the statutory provisions and procedural requirements and noted that the AO's reliance on the absence of Form 10IE for the AY under consideration was technically correct under the strict procedural regime.

However, the Tribunal also considered the practical aspects of the filing process, including the IT portal's limitation that prevented re-filing of Form 10IE once uploaded for a preceding AY.

Issue 2: Effect of belated filing of Form 10IE for AY 2022-23 on AY 2023-24 claim

The assessee contended that Form 10IE was belatedly filed for AY 2022-23 but was not accepted by the AO. The Addl./JCIT(A) rejected the claim on the basis that since the option under section 115BAC was not validly exercised for AY 2022-23 due to belated filing, the option could not be carried forward to AY 2023-24.

The Tribunal scrutinized this reasoning by referring to the principle that once an option under section 115BAC is validly exercised in a previous year, it applies to subsequent years unless withdrawn. The Tribunal noted that the Department's non-acceptance of the belated Form 10IE for AY 2022-23 should not preclude the assessee from claiming the benefit in AY 2023-24 if the form was available on record and the non-filing for AY 2023-24 was due to technical constraints.

Issue 3: Mandatory versus directory nature of filing Form 10IE

The assessee argued that filing Form 10IE is directory and not mandatory. The Tribunal examined precedents from coordinate benches, including the Pune ITAT in Akshay Devendra Birari and the Delhi Bench in Indo British Garments Pvt. Ltd., which held that the filing of the prescribed forms (Form 10IE for section 115BAC and Form 10IC for section 115BAA) is procedural and directory rather than mandatory.

The Pune Tribunal in Akshay Devendra Birari emphasized that the Centralized Processing Center (CPC) had the Form 10IE on record and ought to have considered it while processing the return, despite the late filing. It held that the benefit of the new tax regime should not be denied solely on the ground of non-filing or belated filing of Form 10IE.

The Delhi Tribunal in Indo British Garments Pvt. Ltd. reinforced this view by stating that once the option for concessional tax rate is exercised in a prior year, it creates a substantive right that cannot be withdrawn in subsequent years by mere non-filing of the prescribed form. The Tribunal observed that the statutory intent is to prevent withdrawal of the option once exercised and that procedural lapses in subsequent years should not defeat this substantive right.

Issue 4: Continuity and irrevocability of option under section 115BAC

The Tribunal noted that the statutory provision under section 115BAC implies that the option once exercised in a previous year continues to apply to subsequent years. This principle was supported by the cited precedents where the Tribunal held that the option cannot be withdrawn or denied in subsequent years due to procedural non-compliance such as non-filing of Form 10IE.

The Tribunal directed that the AO should verify whether the option was validly exercised and accepted in the earlier year and if so, allow the benefit in the current year notwithstanding the non-filing of Form 10IE for AY 2023-24.

Application of Law to Facts and Treatment of Competing Arguments

The Department's argument was grounded in the strict procedural requirement of filing Form 10IE within the due date for the relevant AY. The AO and Addl./JCIT(A) relied on the absence of a valid option exercised for AY 2022-23 and the non-filing of Form 10IE for AY 2023-24 to deny the benefit of the new tax regime.

The assessee's counter-argument emphasized the technical inability to file Form 10IE again for AY 2023-24 due to portal restrictions, the directory nature of the form filing, and the continuity principle of the option once exercised. The Tribunal found the assessee's arguments persuasive, especially in light of the coordinate bench decisions, and held that procedural non-compliance should not defeat substantive rights.

The Tribunal thus set aside the order of the Addl./JCIT(A) and directed the AO to allow the benefit of section 115BAC for AY 2023-24 by considering the Form 10IE already on record.

Significant Holdings:

"The Form No.10IE was very much available with the CPC and the CPC ought to have considered the same allowing the benefit of New Tax Regime. Therefore, we direct the CPC to amend the intimation by taking into consideration the Form No.10IE, as the same was available with the CPC at the time of processing the return of income."

"Once the assessee opts for concessional tax rate, it shall also apply subsequent assessment years as well and cannot be withdrawn."

"The option once exercised in any previous year cannot be withdrawn in later year. Where the statute itself provides for incapacity of the assessee to withdraw the exercise of option, the requirement of filing Form 10IC in the subsequent year becomes an irrelevant consideration."

"Filing of Form 10IE is only directory and not mandatory in nature."

"Where the option has already been exercised in the preceding AYs, such option exercised cannot be allowed to be deviated for non-filing or belated filing of the prescribed form in subsequent AYs."

The Tribunal's final determination was to allow the assessee's appeal, set aside the order of the Addl./JCIT(A), and direct the AO to grant the benefit of the new tax regime under section 115BAC for AY 2023-24 by considering the Form 10IE already available on record. This establishes the principle that procedural lapses in filing Form 10IE should not defeat the substantive right of the assessee to claim the benefit of the new tax regime once the option has been validly exercised and accepted in a prior year.

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