2025 (8) TMI 41 - AT - Income Tax

Concessional tax under s.115BAA allowed despite delayed Form 10-IC, lapse treated as procedural and condonable

Kcreate Konnect E Solutions Private Limited Versus Dy. CIT, Cir. 1 (1) (1) Vadodara.

ITAT Ahmedabad held that the assessee had validly opted for concessional tax under s.115BAA for AY 2020-21, as the option was clearly indicated in ITR-6 ... Claim of concessional tax regime u/s 115BAA - Non-filing of Form No. 10-IC electronically within the time prescribed under Rule 21AE r.w.s. 115BAA(5) - HELD THAT:- Assessee had validly exercised the option for taxation u/s 115BAA for the assessment year 2020–21. The declaration opting for the concessional tax regime was clearly recorded in Part A-GEN of the ITR-6, and further reiterated in Clause 8(a) of the tax audit report in Form No. 3CD, thus evidencing the assessee’s consistent and contemporaneous intention to be governed by the said provision. The omission to file Form No. 10-IC within the time stipulated under Rule 21AE or within the condonation window allowed under CBDT Circular No. 6/2022 dated 17.03.2022 is, in our view, a procedural lapse which does not vitiate the substantive compliance already demonstrated. Asssessee was not served with the intimation under section 143(1) dated 18.12.2021 and only became aware of the resultant demand when its refund for A.Y. 2022–23 was adjusted, at which point the window for filing Form 10-IC in terms of the CBDT Circular had already expired. This renders the omission involuntary and devoid of any element of deliberate non-compliance. This view finds support from consistent judicial precedents as discussed above where it has been held that substantive compliance, as evidenced from the ITR and tax audit report, is sufficient, and that procedural defects alone cannot defeat a legitimate claim, particularly when the conduct of the assessee is bona fide and revenue is not prejudiced. Restore the matter to the file of the AO. Assessee shall file Form No. 10-IC before the AO during the course of such proceedings. The AO shall verify the relevant factual matrix and ensure that all other conditions for availing the benefit of concessional taxation under section 115BAA are duly satisfied. Appeal is allowed for statistical purposes. ISSUES: Whether the assessee is entitled to the concessional tax rate of 22% under section 115BAA of the Income-tax Act, 1961 despite non-filing of Form No. 10-IC electronically within the prescribed time under Rule 21AE.Whether the omission to file Form No. 10-IC within the prescribed or extended time is a procedural lapse that can be condoned when substantive compliance is otherwise demonstrated.Whether the assessee is alternatively entitled to the concessional tax rate of 25% under the first proviso to section 115BA, based on turnover criteria.Whether failure of the lower appellate authority to adjudicate the alternate plea for 25% tax rate under section 115BA renders the order non-speaking and unsustainable. RULINGS / HOLDINGS: The Court held that the assessee had validly exercised the option for taxation under section 115BAA by declaring such option in Part A-GEN of the ITR-6 and in Clause 8(a) of Form No. 3CD, constituting 'substantive compliance' despite non-filing of Form No. 10-IC electronically within the prescribed time, which was deemed a 'procedural lapse'.The omission to electronically file Form No. 10-IC within the due date or extended period under CBDT Circular No. 6/2022 is a procedural irregularity that 'does not vitiate the valid and timely exercise of option under section 115BAA' when the assessee's intention and eligibility are otherwise clearly documented.The Court recognized the CBDT Circular No. 6/2022 as acknowledging hardship due to procedural lapses and condoning delay in filing Form 10-IC subject to conditions, but noted that the Circular does not expressly require cumulative compliance of all conditions, allowing for equitable interpretation in favor of the assessee.The Court held that the assessee's alternative claim for concessional tax rate of 25% under section 115BA was not adjudicated by the CIT(A), and therefore the matter is restored to the Assessing Officer for verification and decision on this alternate plea.The Court directed restoration of the matter to the Assessing Officer to allow the assessee to file Form No. 10-IC and verify all conditions for concessional taxation under section 115BAA, and upon satisfaction, to grant the benefit of the 22% tax rate accordingly. RATIONALE: The Court applied the statutory framework of section 115BAA of the Income-tax Act, 1961, which provides a concessional tax rate of 22% to domestic companies opting for the regime 'in the prescribed manner' on or before the due date under section 139(1), with Rule 21AE prescribing electronic filing of Form No. 10-IC as the mode of exercise.The Court emphasized the principle of 'substance over form' and noted that the assessee's declaration of option in the ITR and tax audit report (Form No. 3CD) fulfilled the substantive requirements of section 115BAA, while non-filing of Form 10-IC was a procedural formality that should not defeat the claim.The Court relied on CBDT Circular No. 6/2022, which condones delay in filing Form 10-IC due to technical difficulties, and judicial precedents that support liberal interpretation of procedural requirements where the assessee's conduct is bona fide and revenue is not prejudiced.Judicial precedents cited include decisions holding that procedural lapses should not override substantive compliance, such as CIT v. G.M. Knitting Industries (P) Ltd., Fastner Commodeal Pvt. Ltd. v. PCIT, Traxit Engineers Pvt. Ltd. v. CPC, and Neptunes Power Plant Services Pvt. Ltd. v. CPC.The Court distinguished the Supreme Court decision in PCIT v. Wipro Ltd. on the basis that it involved a strict exemption provision and absence of contemporaneous disclosure, unlike the present case involving a rate-of-tax option with full contemporaneous declarations.The Court noted that the assessee was unaware of the intimation under section 143(1) and discovered the demand only upon refund adjustment, precluding timely filing of Form 10-IC within the extended window, thus negating any deliberate non-compliance.The failure of the CIT(A) to consider the alternate plea for 25% tax rate under section 115BA was recognized as a legal defect requiring restoration for adjudication.