TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 946
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....EAL) ADDL/JCIT(A)-2-DELHI has erred in selecting taxation option 115BAA but failed to take into consideration the appellant filed return of income under normal provision at the rate of 25 percent. 6. The CIT(APPEAL) ADDL/JCIT(A)-2-DELHI has erred in not allowing credit under section 115JAA. 7. The CIT(APPEAL) ADDL/JCIT(A)-2-DELHI has erred in levying interest of Rs. 76,450/-. 8. The appellant serves the right to add, delete and modify any grounds of appeal." 2. The brief facts of the case are that the assessee company had filed its return of income on 04.11.2024 declaring total income at Rs. 47,53,300/- claiming normal taxation provision @25%. The return of income filed by the assessee company thereafter was processed u/s. 143(1) of the Income Tax Act, 1961 (for short 'the Act'), accordingly, intimation was issued on 13.02.2025, wherein though the income offered by the assessee has been accepted by the Centralized Processing Centre (CPC)/A.O, however the working of tax liability under old regime by the assessee has not been coincided by the CPC, thus, by processing of return culminates with enhancement in tax liability of Rs. 2,48,670/-. 3. Aggrieve....
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....m 10 IC is filled so the appellant cannot change it from sec 115BAA to normal rate of taxation. 5.3 The attention is invited to the provision of Section 115BAA: Tax on income of certain domestic companies. 115BAA. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 1158A and section 115BA8, the income- tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied: Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes o....
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....s assigned to it in clause (w) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005). (5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the Mums of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years: Provided that in case of a person, where the option exercised by it under section 115BAA has been rendered invalid due to violation of conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section: Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. It has been clearly stated that once the option is exercised which is by filing the Form 10IC the same cannot be withdrawn for same or any other previous year 5.4 Accordingly, the ap....
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....n the Tax Audit Report that option under regime is selected as "No". The copy of tax audit report in Form 3CA is placed before us in the paper book, wherein at Sr. No. (8)(a) the question "Whether the assessee has opted for taxation under section 115BA/115BAA/115BAB/115BAC(1A)/115BAD/115BAE?", the assessee has opted "No". From the aforesaid copy of tax audit report, it was intended that the assessee had made it clear that it did not intend to exercise option new tax regime while filing return of income. Copy of ITR-6 FILED ON 04/11/2024 is furnished for our attention, wherein under the section "FILING STATUS" at sr. no (e) the question, ""Have you opted for taxation under section 115BA/ 115BAA/ 115BAB/ 115BAC(1A)/ 115BAD/ 115BAE?", the assessee has again opted "No". The Ld. Counsel also clarified that as per provisions to sub-section (1) of Section 115BAA of the Act, the option shall become invalid, if the assessee claimed any deduction which is mentioned in sub-section (2) of Section 115BAA of the Act. In effect, if any claim is made in the return of income, which is barred under the new tax regime, then the exercise of option by filing of form 10IC will become invalid. The Ld. Co....
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.... to invalidate the filing of Form 10-IC was requested to be accepted, as the claim of MAT credit bars the assessee to to claim lower tax rate u/s 115BAA being violating the provisions of section 115JAA, thus fails to satisfy the conditions contained in sub- section (2) of section 115BAA, accordingly the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. Consequently, the assessee would become ineligible to low claim tax rate under new regime. 9. Per contra, the Ld. Sr. DR representing the revenue submitted that as per provisions of Section 115BAA of the Act, option once exercised cannot be withdrawn and therefore, the same shall apply to the year under consideration as well as to the subsequent assessment years. Since the assessee has filed Form 10-IC to opt for new tax regime, its subsequent withdrawal by not claiming the same in the return of income should not be accepted, accordingly the order passed by the CPC/A.O and confirmed by t....
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....hat such provisions are introduced for the benefit of the assessee and the same are further tagged riders / conditions to be fulfilled by the assessee to claim low tax benefit under new regime. 13. In the present case, according to the proviso to section 115BAA, though the assessee does not have any entitlement to opt out from option once exercised for any previous year or subsequent year, therefore our answer to (Qi) is "NO". However, in terms proviso to sub-section (1) r.w. sub-section (2) of Section 115BAA, there are certain conditions imposed on the assessee which needs to be fulfilled before claiming of benefits of low tax regime. However, since the assessee while filing return had opted out from the aforesaid option and have also claimed MAT Credit deductions u/s 115JAA, which are not permissible under the new tax regime, therefore, it can be construed that the assessee had not fulfilled pre requisite condition to avail benefit of new tax regime and accordingly, the same would be treated as if option had not been exercised by the assessee in the relevant assessment year or in subsequent years, accordingly we answer (Qii& Q iii) in affirmative. 14. Coming to the case law....
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.... has been substantial compliance of the requirement under Section 115BAA of the Act, as evident from the fact that while filing the returns, it was declared/stated by the assessee that the option to discharge the tax was exercised under Section 115BAA of the Act and taxes were in fact paid @ 22% without claiming deductions as contemplated under Section 115BAA of the Act. In this regard, it may be relevant to refer to the Hon'ble Supreme Court, in the case of Dilip Kumar (2018) 9 SCC, wherein while deciding the Doctrine of Substantial Compliance held as under: "33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment. has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compl....
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....ee is fulfilling all the conditions except filing of Form No. 10IC. Considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits. The Courts have taken a lenient view on procedural lapses when substantive benefits are involved. Supreme Court rulings always emphasized that the making of a claim of deduction is mandatory, but timing/format is directory. The assessee duly claimed the benefit in its return of income filed in Form No. ITR-6 and return was filed well within the time prescribed u/s. 139(1) of the Act. 6. The provisions of Section 143(1) of the Act are clear in their requirement that prior to passing an intimation order, the Assessing Officer must provide the taxpayer with a reasonable opportunity to present their case and address any concerns or discrepancies. It is incumbent upon the tax authorities to afford taxpayers a fair hearing and a chance to clarify or contest any issues related to their tax assessment. In this specific case, it was not provided with any such opportunity to be heard. As observed that the assessee has not filed Form No. 10IC for claiming concessional rate of tax but on the ot....
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....td. (2009) 318 ITR 135/178 Taxman 310 (Delhi) also held that once audit report is filed before framing of assessment, the provisions of Section 80-IA (7) would be complied as furnishing of such report at the time of filing of return is directory in nature and not mandatory. Considering the similar principle that the assessee prayed before the ld. CIT(A) to allow it to file Form 10-IC before the appropriate authority in order to claim the benefit u/s 115BAA of the Act. It is settled principles under law that appeal is a continuation of assessment proceedings and the ld. CIT(A) has co- terminus power as of Assessing Officer, therefore, the ld. CIT(A) was required to consider the report in Form 10-IC. In view of the above factual and legal discussion, the ground of appeal raised by the assessee is restored back to the file of assessing officer to consider the report in Form-10IC and allow relief to the assessee, if the assessee fulfil all other requisite condition as per law. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose." 6.5 The co-ordinate bench of ITAT, Ahmedabad has taken also considered the issue in hand as below in the ....
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....e ground of appeal raised by the assessee is restored back to the file of ld. Assessing officer with a direction to take on record the Form 10IC and consider the same in consonance with the CBDT Circular(supra) and the return of income filed by the assessee and after verifying the same, he will adjudicate the issue whether the assessee is entitled for tax rate as per Section 115BAA of the Act in Assessment Year 2020-21 or not. Needless to say, the assessee would be given opportunity of hearing following the principles of natural justice and fairplay. 8. In the result, the appeal is allowed for statistical purposes." 15. In view of the aforesaid facts and circumstances, following the settled principles of law as per jurisprudence referred to supra, we observe and take support that substantial compliance with an enactment is insisted and where mandatory and directory requirements are lumped together and if mandatory requirements are compiled with it will be proper compliance of the enactment. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirement that are important to invoke a tax or duty exemption and to fo....