TaxTMI 
TaxTMI 
2026 (3) TMI 879
X X X X Extracts X X X X
X X X X Extracts X X X X
....und 3: Erroneous income-tax rate of 30% (plus surcharge and cess) instead of concessional rate of 22% (plus surcharge and cess) under section 115BAA of the Act 3.1 The Ld. AO erred in computing the tax liability at the normal tax rate of 30% (plus applicable surcharge of 12% and education cess of 4%) without appreciating the fact that the Appellant is subject to tax rate of 22% (plus applicable surcharge of 10% and education cess of 4%) 3.2 The Ld. AO erred in ignoring the fact that the Appellant has filed Form No. 10-IC for claiming concessional tax rate under section 1158AA of the Act on 1 April 2021. 3.3 The Ld. AO erred in appreciating that delay in filing the Form 10-IC is a mere procedural lapse due to technical issue which does not debar / take away the right of the Appellant from opting to be taxed under section 115BAA of the Act. 3.4 The Ld. AO erred in appreciating the fact that the delay in filing the return of Income and Form No. 10-IC was on account of COVID- 19 pandemic and the nationwide lockdown wherein the company's resources were either not available or were working from home. 3.5 The Ld. AO failed to appre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al income in the hands of the assessee at Rs. 34,30,85,760/-. 2.1 Aggrieved by the draft assessment order, assessee preferred an appeal before the DRP. The DRP dismissed the contentions of the assessee in respect of the grounds raised therein and upheld the proposed addition made by the Ld. AO/TPO. Upon receipt of the DRP directions, the Ld.AO passed the final assessment order being the impugned order. The Ld. AO while computing the tax on the income, adopted normal rates as against the concessional rate opted by the assessee in its return of income u/s 115BAA of the Act. Aggrieved by the order of Ld. AO, assessee is in appeal before this Tribunal. 3. Ground No.1 raised by the assessee is general in nature and do not require adjudication. 4. In Ground No.2 the assessee has challenged legal issue which assessee do not wish to press at this juncture and therefore is kept open to be agitated in an appropriate circumstance. 5.Ground No.3 raised by the assessee is against the computation adopted by the Ld.AO as per normal tax rate at 30% plus applicable surcharge of 12% and education cess of 4% ignoring the fact that assessee had opted for concessional rate u/s 115BAA of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was thus argued that the benefit of the concessional rate should not be denied on a mere technical delay, particularly when the intention to opt for section 115BAA was clearly manifested in the return of income. The Ld.AR placed reliance on decision of Hon'ble Bombay High Court in case of Gem Nuts & Produce Exports Co. (P.) (Ltd) vs. PCIT reported in (2025) 178 taxmann.com 256 and decision of Hon'ble Delhi High Court in case of Sarla Holdings (Pvt.) (Ltd) vs. PCIT reported in (2025) 179 taxmann.com 83. The Ld.AR submitted that the ratio of Sarla Holdings(supra) is that the benefit of section 115BAA cannot be granted where the assessee has not exercised the option in the return within the time prescribed, and a belated Form 10-IC or CBDT circular cannot cure that substantive defect. However, the judgment implicitly accepts that where the option is exercised in the return, delay in filing Form 10-IC stands on a different footing, being procedural in nature. 5.3. On the contrary, the Ld. DR submitted that, there is no discussion regarding the applicability of Section 115BAA of the Act in either the final assessment order or the DRP directions. He submitted that this addition eman....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dictional Pr. CIT, and the same could not be clarified on behalf of the assessee. It is pointed out that the onus to clarify all the pending proceedings which would affect the ongoing proceedings is on the assessee and if an application for condonation of delay is already pending before jurisdictional Pr. CIT, then the assessee (whose appeal in respect of the ground pertaining to section 115BAA is in substance requesting condonation of delay only) can not make a similar application before Hon'ble Bench. Hence even on this ground, it is humbly prayed that the appeal of the assessee may be dismissed. 6. The current appeal of the assessee is against the order under section 143(3) r.w.s. 144C(13) r.w.s. 1443 of the Act, dated 23- 07-2024. In an appeal against the order under section 143(3), the additions/dis-allowances made in intimation under section 143(1) cannot be challenged, as there is no automatic merger of the 143(1) intimation with the order u/s 143(3). In respect of merger reliance is placed on the judgment of Hon'ble Mumbai Bench of ITAT in case of MSC Agency (India) Private Limited in ITA No. 927 of 2024 (a copy of which has already been submitted in the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....same dispute cannot be raised before two different judicial (or quasi-judicial) authorities. 8. In this respect it is further pointed out that the copy of the intimation under section 143(1) has never been submitted on behalf of the assessee, and the ground on which the disallowance of the concessional rate of taxation under section 115BAA has been made is not clear. However, without clearly bringing out the relevant facts on record, it has been argued on behalf of the assessee that the reason for such a disallowance is a delay in filing Form 10-IC. Since section 115BAA of the Act makes it mandatory to file the form 10-IC within the date specified, absence of that indicates that it is simply a case wherein the claim under section 115BAA has not even been made as per the procedure given in the Act. Thus, in that sense the dispute predates even the intimation under section 143(1) which is merely communicates that the claim as mandated under the law has not even been made, 9. In light of the above and that allowing the appeal of the assessee herein would effectively amount to condonation of the delay in filing the relevant forms, the correct remedy available to the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ordingly, since allowing the appeal in the case would effectively amount to condonation of delay in filing of form 10-IC, and such a power is there with CBDT only (delegated to jurisdictional Pr. CIT in this case), it is humbly prayed that the only mechanism given in the act to deal with the dispute may not be bypassed and appeal of the assessee may be dismissed. Assessee's reliance on order of Hon'ble Supreme Court in MA No. 21 of 2022 in Suo Moto Writ Petition (SMWP) (C) 3 of 2020, dated 10-01-2022- 13. While no such ground was there in the grounds of appeal raised on behalf of the assessee in the course of the hearing the assessee also referred to the said order of Hon'ble Supreme Court, wherein the time limits for filing appeals and other proceedings before courts and tribunals were extended to 28-2- 2022 and it was argued that the assessee fled Form 10-IC before the said date. The relevant parts from clauses I, II, III, and IV of Para 5 of the order of Hon'ble Supreme Court is reproduced below- "I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is dir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rved the following in paras 41 and 42- "41. Admittedly, para 5(IV) of the Hon'ble Supreme Court's order dated 10 January 2022, on which Mr Pawar placed significant emphasis, does not mention PMLA. Instead, it refers to specific provisions of the Arbitration and Conciliation Act, 1996, the Commercial Courts Act, 2015, and the Negotiable Instruments Act, 1881. Even these provisions relate to initiating proceedings, setting outer limits for court or tribunal discretion regarding delay, and terminating proceedings. 42. Since the final order dated 10 January 2022 refers to certain specific provisions of the specified Acts but does not mention any provisions in PMLA, it is difficult to accept Mr Pawar's contention that the final order would govern the PMLA timelines as well. Furthermore, in the context of a reference to "other laws", the Hon'ble Supreme Court, in S. Kasi (Supra), has clarified that these are laws which specify period(s) of limitation for initiating proceedings, outer limits (within which the court or tribunal can condone delay), and termination of proceedings. The provisions in Section 5 (1) of the PMLA do not fall into any of these cate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and the PMLA authorities, were correct, then perhaps there was no need to issue an Ordinance followed by enacting TOLA to provide certain relaxations in timelines specified under eight statutes, including laws related to Benami properties or black money, etc. The lack of any reference to PMLA in TOLA, therefore, cannot be deemed insignificant." 19. In light of the above observations of Hon'ble Bombay High Court it is apparent that the directions of Hon'ble Supreme Court in the order in MA No. 21 of 2022 in Suo Moto Writ Petition (SMWP) (C) 3 of 2020, dated 10-01-2022 were not applicable in respect of filing of Income Tax Return or other statutory forms under the Income Tax Act and assessee's reliance on the order of Hon'ble Court may be rejected. Relevant provisions are mandatory provisions- 20. Without prejudice to the arguments already forwarded in this submission it is humbly submitted before Hon'ble Bench that the sub-section (5) of section 115BAA, which mandates the filing of form 10-IC, is a mandatory provision and no relaxation in respect of the same can be provided. Had it been a mere directory provision, an argument on relax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r our consideration is whether the assessee is entitled to be taxed at the concessional rate under section 115BAA of the Act. The assessee contends that it had duly exercised the option for the said regime in its return of income and had computed its tax liability accordingly, and that the subsequent filing of Form 10-IC with a short delay is only a procedural requirement which cannot defeat the substantive claim. It is further submitted that the Assessing Officer erred in applying the normal rate of tax while framing the assessment, and that the Tribunal is competent to adjudicate the correct rate of tax in the present appeal. The Revenue, on the other hand, contends that the benefit of section 115BAA is not available in the absence of timely filing of Form 10-IC, that any delay can be condoned only under section 119(2)(b) by the competent authority, and that since the issue originated from the intimation under section 143(1) and an appeal is pending before the Ld. CIT(A), the same cannot be examined in the present proceedings. The dispute thus centres on the nature of Form 10-IC, the scope of appellate jurisdiction to determine the correct rate of tax, and the effect of the alleg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ibed. (3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub- section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year: Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020. (4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section. Explanation. - For the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of condonation, thereby indicating that the time prescription is procedural and curable rather than a rigid substantive condition. 6.2. It is also relevant to consider the circular no.6/2022 dated 17/03/2022 that reads as under: "Circular No.6/2022 F.No.173/32/2022-IT A-1 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, the 17th March, 2022 Sub: Condonation of delay under section 119(2)(b) of the Income Tax Act, 1961 in filing of Form 10-IC for assessment year 2020-21 - Reg Section 115BAA of the Income Tax Act, 1961 (the Act) was inserted by the Taxation Laws (Amendment) Act, 2019 w.e.f. 01.04.2020. As per the Section, 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 April, 2020, shall, at the option of such person be computed at the rate of twenty-two per cent subject to satisfaction of conditions contained in subsection (2) of the section. 1.2 As per sub-section (5) of section 115BAA of the act read with Rule 21AF of the Income Tax Rules, 1962 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the return and the assessee had complied with all other substantive requirements of section 115BAA. The Circular thus makes a clear distinction between failure to exercise the option and delay in furnishing the prescribed form, and treats the latter as a curable procedural defect. This administrative clarification reinforces the interpretation that where the assessee has already opted for the concessional regime in the return of income and computed tax accordingly, a belated filing of Form 10-IC cannot be a ground to deny the statutory benefit. 6.2.2. Clause 3 of CBDT Circular No. 6/2022 dated 17.03.2022 specifically deals with the situation where an assessee has exercised the option for section 115BAA in the return of income but has failed to file Form 10-IC within the prescribed time. The Circular provides that in such cases, the delay in filing Form 10- IC shall be condoned and the assessee shall be allowed to file the form within the extended time, provided that the following conditions are satisfied: 1. the assessee has exercised the option under section 115BAA in the return of income filed within the due date specified under section 139(1); 2. the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se that the assessee has already preferred an appeal before the Ld. CIT(A) against the intimation issued under section 143(1), wherein the issue of denial of concessional rate under section 115BAA is stated to be pending. It is contended that the assessee cannot agitate the same issue simultaneously before two fora. The said objection, in our considered view, is not sustainable. 6.4.1. At the outset, the present appeal arises from the assessment framed under section 143(3). Once a regular assessment has been completed and tax liability has been determined therein, the computation of tax including the rate applied forms an integral part of the assessment order. The assessee is therefore entitled to challenge the correctness of the rate of tax adopted in the assessment order under appeal. The fact that a similar issue arose earlier at the stage of intimation under section 143(1) does not denude this Tribunal of jurisdiction to examine the legality of the final tax computation in the assessment order presently before it. 6.4.2. It is trite law that appellate jurisdiction is co-terminus with the subject matter of the order appealed against. The question of applicability of sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....option is unequivocally exercised in the return, the substantive requirement of the provision stands fulfilled. The dispute, therefore, is not one of condonation of delay, but of recognition of a validly exercised statutory option on admitted facts. 6.5.2. Section 119(2)(b) is an enabling provision which empowers the Board to mitigate hardship in cases where a claim could not be made within the prescribed time. It does not operate as a fetter on the appellate jurisdiction of this Tribunal under section 254 to determine the correct tax liability in accordance with law. Where the material necessary for adjudication is already on record and the issue is purely legal, this Tribunal is fully competent to examine whether the assessee satisfies the conditions of section 115BAA and to grant the consequential relief. Such adjudication does not amount to usurping the power of condonation vested in the Board. 6.5.3. It is also relevant to note that, through various circulars extending the due date under section 139(1), the Board itself recognised the practical and systemic difficulties faced by taxpayers during the COVID-19 period. These administrative relaxations clearly reflect the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Little Angels Educational Society v. Union of India(supra), deals with the limits of delegated condonation power in respect of Form 10B, and has no application to a case where substantive compliance stands established and the issue relates only to a procedural delay in filing Form 10-IC. 6.6.2. Thus reliance placed by the Ld. DR on above decision by Hon'ble Bombay High Courtin case of Little Angels Educational Society vs.UOI (supra), concerning condonation of delay in filing Form 10B is distinguishable. In such cases, the filing of the audit report is a foundational condition for claiming exemption, and the authority's power to condone delay was expressly circumscribed by a circular prescribing an outer time limit. In the present case, however, there is no statutory embargo providing that delayed filing of Form 10-IC, automatically invalidates an option already exercised in the return. The assessee's eligibility to opt for section 115BAA is not in dispute; only the timing of filing the prescribed form is in question. Thus, the controversy in the present facts does not involve enlargement of delegated condonation power, but interpretation of the substantive provision. 6.7. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....invalidate the exercise of such option. The form is only a procedural mode of intimation and cannot override the substantive act of exercising the option in the return. Hon'ble Bombay High Courts in case of Gem Nuts & Produce Exports Co. (P.) Ltd.(supra) and Sarla Holdings (P.) Ltd.(supra) have recognised that a procedural requirement relating to filing of a form cannot defeat a substantive statutory benefit where the intention to opt for the concessional regime is manifest from the return and all eligibility conditions are fulfilled. 6.9. It is equally settled that the appellate powers of this Tribunal under section 254 are wide and are intended to determine the correct tax liability in accordance with law. Where all the relevant facts are on record and the issue is purely legal, this Tribunal is competent to grant a statutory benefit even if the claim was not made in the prescribed manner, provided the assessee is otherwise eligible. This principle has been consistently recognised in several decisions following the ratio of the Hon'ble Supreme Court that the purpose of assessment proceedings is to compute the correct income and tax liability in accordance with law and not to d....