Form 10-IE filing held directory; ITAT allows Section 115BAC benefit despite delayed filing

Harbans Singh Vs AO, CPC (ITAT Amritsar)

Summary: The assessee challenged the order of the Ld. JCIT (A)–8, Mumbai dated 19/12/2023 passed under section 250, which arose from the CPC, Bangalore intimation under section 143(1) dated 28/10/2022. The dispute concerned denial of the benefit of the lower tax rate under section 115BAC on the ground that Form 10-IE had not been filed within the time prescribed under section 139(1).

The assessee, an individual having business income, originally filed his return on 02/01/2022 within the extended due date of 15/03/2022, claiming deductions under Chapter VIA under the old tax scheme. He subsequently filed a revised return on 24/03/2022, declaring returned income of Rs. 16,91,220/-, opted for the new tax scheme under section 115BAC and submitted Form 10-IE on the same date. CPC processed the return under section 143(1) on 28/10/2022 but did not allow the benefit of the new tax regime, stating that Form 10-IE had not been filed within the time allowed under section 139(1).

The first appellate authority dismissed the appeal, applying the principle of strict interpretation to exemption provisions and holding that the assessee was not eligible for section 115BAC benefit because Form 10-IE had not been filed within the prescribed time.

Before the Tribunal, the assessee submitted that technical glitches on the income-tax filing portal had affected compliance and that the CBDT had repeatedly extended the return filing deadline. It was further submitted that Form 10-IE was directory rather than mandatory and that the form was already before the Assessing Officer when the assessment under section 143(1) was completed. The assessee also referred to Rule 21AG and argued that the Rules did not specifically provide for denial of the section 115BAC benefit for delayed filing.

The Departmental Representative opposed the appeal, submitting that the technical-glitch contention was unacceptable since the assessee had successfully filed the original return through the same portal. It was also argued that a revised return under section 139(5) was intended to address omissions or wrong statements and not for the purpose relied upon by the assessee under section 115BAC.

The Tribunal noted that the original return had been filed within the time under section 139(1), while the revised return was accepted by CPC and the final assessed income was Rs. 16,91,220/-. Form 10-IE was also on record before the Assessing Officer on the date of assessment.

Relying on the decision of the ITAT Pune in Akshay Devendra Birari, the Tribunal held that the requirement of filing Form 10-IE is directory and not mandatory. The Tribunal also considered decisions concerning delayed filing of Form 67 and Form 10/10B, as well as the Gujarat High Court decision concerning technical glitches in filing Form 10-1C.

The Tribunal accordingly held that it was sufficient compliance if Form 10-IE was before the Assessing Officer at the time of assessment. CPC was directed to take the Form 10-IE filed by the assessee into consideration and pass appropriate orders. The appeal was allowed for statistical purposes.

Facts and Procedural History

The assessee filed the original return of income on 02/01/2022, within the extended due date under section 139(1), which had ultimately been extended to 15/03/2022. The original return claimed deductions under Chapter VIA under the old tax scheme.

The assessee thereafter filed a revised return on 24/03/2022, declaring income of Rs. 16,91,220/-, opted for the new scheme of taxation under section 115BAC and submitted Form 10-IE under Rule 21AG(1).

CPC, Bangalore completed processing under section 143(1) on 28/10/2022. Although the revised return was considered and the returned income was accepted, the benefit of the lower tax rate under the new scheme was not allowed on the ground that Form 10-IE had not been filed within the time prescribed under section 139(1).

The assessee’s appeal before the Ld. JCIT (A)–8, Mumbai was dismissed by order dated 19/12/2023. The assessee thereafter approached the Tribunal.

Issues Before the Tribunal

The Tribunal identified two issues arising from the grounds of appeal:

• whether filing Form 10-IE within the time prescribed under section 139(1), for exercising the option under section 115BAC, is mandatory or directory; and
• if the option under section 115BAC was not allowed, whether the Assessing Officer was required to allow the deduction under Chapter VIA claimed in the original return.

Submissions of the Assessee

The Ld. AR submitted that technical glitches in the income-tax filing portal during September 2021 had resulted in repeated extensions of the return filing deadline through CBDT Circular Nos. 09/2021, 17/2021 and 01/2022 dated 15/03/2022.

It was submitted that the original return had been filed on 02/01/2022 within the extended time under section 139(1), while the revised return was filed on 24/03/2022 along with Form 10-IE. The AR emphasised that the assessment under section 143(1) was completed only on 28/10/2022, by which time Form 10-IE was already before the Assessing Officer.

The assessee further submitted that filing Form 10-IE was directory and not mandatory and that Rule 21AG did not specifically prescribe denial of the section 115BAC benefit for delayed filing. The assessee also distinguished the Supreme Court judgment in Dilip Kumar and Company on the ground that it concerned exemption under the Customs Act, whereas the present dispute concerned taxation at reduced rates under the new scheme.

Submissions of the Department

The Ld. DR relied upon the order of the first appellate authority. It was submitted that the assessee’s contention regarding technical glitches was not acceptable because the original return had been successfully filed through the same portal.

The Department also submitted that a revised return under section 139(5) was intended to address an omission or wrong statement and was not meant for the purpose relied upon by the assessee in relation to section 115BAC. The Department therefore sought sustenance of the first appellate order.

Tribunal’s Observations and Findings

Form 10-IE Requirement is Directory

The Tribunal noted that the original return was filed within the time prescribed under section 139(1). The revised return was subsequently filed under section 139(5) at a higher income of Rs. 16,91,220/-, which was the finally assessed figure under section 143(1).

The Tribunal also noted that CPC had considered and accepted the revised return while ignoring the claim made through Form 10-IE, even though the form was available before the Assessing Officer on the date of assessment.

For this issue, the Tribunal relied upon the coordinate Pune Bench decision in Akshay Devendra Birari, where filing of Form 10-IE was held to be directory rather than mandatory.

Reference to Delayed Form 67 Decisions

The Tribunal also considered the Bangalore Bench decision in Hertz Software India Private limited, concerning delayed filing of Form 67 under Rule 128. In that matter, the requirement was held to be directory because Rule 128(9) did not provide for disallowance of Foreign Tax Credit merely due to delayed filing.

The Tribunal also referred to Ms Brinda Kumar Krishna for the same principle concerning Form 67.

Other Procedural Filing Decisions

The Tribunal considered the decision of the ITAT Ahmedabad Bench in ITO ( E) vs Ramji Mandir Religious and Charitable Trust, (2024)158 taxman.com 114 ( Ahmedabad), where filing of Form 10/10B before the due date under section 139(1) was held to be directory and the delay was not considered fatal where the form was available before the Assessing Officer when the CPC intimation was passed.

The Tribunal also referred to the Gujarat High Court decision in PCIT vs KGY Glass Industries P Ltd. In that matter, Form 10-1C was required to be filed within the time under section 139(1), but filing was stated to have been practically prevented by technical glitches. The High Court held that, in the absence of fault on the part of the assessee, the benefit under section 115BBA could not be denied.

Tribunal’s Decision

Considering the various decisions and the facts of the case, the Tribunal agreed with the decision of the Pune Bench in Akshay Devendra Birari.

The Tribunal held that the requirement of filing Form 10-IE is directory in nature and not mandatory. It further held that it was sufficient compliance if Form 10-IE was before the Assessing Officer at the time of assessment.

The Tribunal therefore directed CPC to take into consideration the Form 10-IE filed by the assessee and pass appropriate orders.

Final Decision

The appeal of the assessee bearing ITA No. 25/Asr/2024 was allowed for statistical purposes.

Order pronounced in the open court on 24.07.2024.

Cases Discussed

• Akshay Devendra Birari vs DCIT (ITAT Pune), ITA no 782/ PUN/ 2024 dated 05/06/2024
• ITO ( E) vs Ramji Mandir Religious and Charitable Trust, (2024)158 taxman.com 114 ( Ahmedabad)
• PCIT vs KGY Glass Industries P Ltd, ( 2023) 156 taxmann.com18 ( Gujrat)
• Hertz Software India Private limited vs ACIT cir – 3, Bangalore, ITA No 29/ Bang/ 2021, dated 07/03/2022
• Ms Brinda Kumar Krishna (2022 (2) TMI 752- ITAT Bangalore
• Dilip Kumar and Company, (civil appeal 3327 of 2007 dated 30/07/2018)

Alternative SEO Titles

• ITAT Amritsar Holds Form 10-IE Filing Directory for Section 115BAC Benefit
• Section 115BAC Benefit Cannot Be Denied Merely for Delayed Form 10-IE Filing
• ITAT Allows Consideration of Form 10-IE Filed After Section 139(1) Deadline
• Delayed Form 10-IE Filing Held Directory by ITAT Amritsar
• ITAT Directs CPC to Consider Form 10-IE for New Tax Regime Benefit

FULL TEXT OF THE ORDER OF ITAT AMRITSAR

This appeal is filed by the assessee against the order of Ld. JCIT (A) – 8, Mumbai, dated 19/12/2023, passed u/s 250 of the Act 61, which has emanated from the order of the CPC, Bangalore passed u/s 143(1) dated 28/10/2022.

2. The grounds of appeal taken by the assessee are as follows:

“1. That the Ld. CIT(A) vide order u/s 250(6) dated 19.12.2023 has erred in confirming the action of the AO in not providing the benefit of lower tax as per section 115BAC due to the fact that form 10IE was not filed before the due date of filing of return u/s 139(1). i.e. 31.12.2021.

2. That the Ld. CIT(A) vide order u/s 250(6) dated 19.12.2023 has erred in confirming the action of the AO without appreciating that form 101E could not be filed before the due date of filing of return u/s 139(1) i.e. 31.12.2021 due to technical glitch.

3. That the order passed u/s 250(6) of the Income Tax Act, is bad in law as the requirement of filing of form 10IE before the due date of filing of return u/s 139(1) is directory in nature and as such the benefit of lower tax rate cannot be denied.

4. That the order passed u/s 250(6) of the Income Tax Act, is bad in law as since the adoption of lower tax rate as per section 115BAC cannot be brought under the ambit of adjustment u/s 143(1) which covers ‘arithmetical error, incorrect claim, disallowance of loss, disallowance of expenditure, disallowance of deduction or addition of income appearing in form 26AS or form 16A’.

5. Without prejudice to the aforesaid grounds, the Ld. CIT(A) has erred in not appreciating that even if the benefit of lower tax rate as per section 115BAC is denied to the assessee, then, in such a case, the assessee is entitled to avail deduction under chapter Vl-A of the income tax act 1961.

6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.”

3. The brief facts are that the assessee is an individual having business income and has filed return of income on 02nd January, 2022 (extended due date being 15/03/2022), claiming deduction under Chapter VIA of the Act 61, under old scheme, which was subsequently REVISED on 24th March, 2022, disclosing a returned income of Rs. 16,91,220/-, wherein the assessee opted for the new scheme of taxation u/s 115BAC and has also submitted Form 10-IE (as per Rule 21AG (1)), on the same date of revised return.

4. The assessment was completed by CPC, Bangalore u/s 143(1) of the Act 61, on 28th October, 2022, on the income disclosed in the REVISED return, but without allowing the benefit of tax rate prescribed under the new scheme of taxation, on the ground that Form 10-IE, has not been filed within the time allowed u/s 139(1) ( i.e. within the extended time frame of 15th March, 2022).

5. The matter was carried in first appeal and the Ld. JCIT (A), dismissed the appeal holding that in case of exemption provisions the rule of strict interpretation shall be applied and in case of any ambiguity the benefit must go to revenue. The observation of JCIT(A), relevant portion reproduced:

“After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State.

Thus, Hon’ble Supreme Court has held that in case of exemption provisions the rule of strict interpretation shall be applied and in case of any ambiguity the benefit must go to revenue. Therefore, I hold that the assessee is not eligible for benefit u/s 115BAC of the Act as the appellant had not filed the Form 10E within the due date. Accordingly, the appellants appeal on the above grounds is dismissed.”

6. The assessee is now before the tribunal on various grounds contained in Form 36, but the grounds relates to two issues, firstly, whether the filing of Form 10-IE, before the time allowed for filing of return u/s 139(1), in order to opt for the new scheme of taxation u/s 115BAC is directory or mandatory, and secondly, if the said option is not allowable to the assessee, in the instant case, whether it is incumbent on the part of the AO to allow the claim for deduction under Chapter VIA, as claimed in the original return.

7. The Ld. AR submitted that there has been a technical glitch in the income tax filing portal during the period September 2021, resulting in repeated extension of time by the CBDT vide circular numbers 09/2021, 17/ 2021 and again vide circular no 01/2022 dated 15/03/2022, and ultimately the due date was extended till 15th March, 2022.

8. He submitted that the original return was filed within the extended time allowed u/s 139(1) of the Act 61 on 02/01/2022, and subsequently the revised return was filed on 24/03/2022, along with Form 10-IE, opting for the new tax scheme, and eventually the assessment u/s 143(1) was completed on 28/10/2022, (much after filing of Form 10-IE) which means on the date of assessment, the FORM 10 – IE was before the AO, and yet the same has not been considered for the purpose of assessment, thereby denying the benefit of reduced tax rates to the assessee under the new tax scheme.

8.1 He further submits that the furnishing of Form 10-IE is directory in nature and not mandatory and it is sufficient compliance if the necessary Form 10-IE is filed before the assessing officer, before the date of assessment, which admittedly has been done in this case.

8.2 He further referred to Rule – 21AG of the I.T Rules’62, to submit that the rules do not specifically provide for disallowing the claim of assessee for late filing of the form 10 -IE.

8.3 He further submitted that the Hon’ble Apex court judgment in the case of Dilip Kumar and Company, (civil appeal 3327 of 2007 dated 30/07/2018), as cited by the Ld. first appellate authority is distinguishable on facts, in as much the said judgment relates to cases of exemption under Customs Act, whereas in the instant case the assessee is not claiming any exemption on income but only claiming the benefit of taxation at reduced rates under the new scheme, provided by law.

9. The Ld. DR relied upon the order of the first appellate authority and has also filed a written submission stating that firstly the contention of the assessee regarding technical glitches in the portal is not acceptable because the assessee has managed to file the original return within due time through the same portal and secondly the revised return u/s 139(5) is only to take care of any omission or wrong statement and not for the purpose of section 115BAC of the Act 61, and he prays for sustaining the first appellate order.

10. We have heard the submissions of both the counsels and considered all the materials on record. The main issue to be decided is whether the filing of Form 10- IE within the time frame of section 139(1) of the Act 61, as per provisions of section 115BAC, is mandatory or directory in nature.

10.1 In the instant case we find that the original return of income is within time u/s 139(1) of the Act 61, filed on a returned income of Rs. 14,92,640/-, which was subsequently revised u/s 139(5), at a higher figure of Rs.16,91,220/-, which is the finally assessed figure u/s 143(1) dated 28/10/2022, meaning thereby, the revised return has been considered and accepted by CPC, ignoring the claim of the assessee in Form 10-IE, which was also on record before the AO, on the date of assessment.

10.2 We find that an identical issue has been decided by the coordinate bench of the ITAT, Pune in the case of Akshay Devendra Birari vs DCIT, CPC, Bangalore, in ITA no 782/ PUN/ 2024 dated 05/06/2024, where the Hon’ble Bench has held on the facts case that filing of Form 10-IE is not a mandatory requiredment but only directory in nature and CPC ought to have considered the same allowing the benefit of new tax regime.

10.3 We would also like to consider the decision of the Bangalore Bench of the tribunal in the case of Hertz Software India Private limited vs ACIT cir – 3, Bangalore, ITA No 29/ Bang/ 2021, dated 07/03/2022, which relates to the matter of delayed filing of Form 67, under Rule 128, in the matter of claim of FTC. On the facts of the case it was held that one of the requirements of Rule 128 for claiming FTC is that form 67 is to be submitted by assessee before due date prescribed u/s 139(1) of the Act, but this requirement cannot be treated as mandatory, rather it is directory in nature, because Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67. Similar view has been taken in the case of Ms Brinda Kumar Krishna (2022 (2) TMI 752- ITAT Bangalore, for the purpose of Form 67 rwr 128 relating to FTC.

10.4 We also consider the decision of the ITAT, Ahmedabad Bench, in the case of ITO ( E) vs Ramji Mandir Religious and Charitable Trust, (2024)158 taxman.com 114 ( Ahmedabad), where in the matter of filing of Form 10/10B which is required to be furnished before due date u/s 139(1) of the Act, the tribunal held the same to be merely directory in nature and opined that the same cannot be so fatal so as to deny exemption u/s 11(2) specially when the said Form – 10/10B was available before the AO when intimation was passed by CPC, u/s 143(1).

10.5 Regarding the issue of technical glitch raised by the assessee, that Form 10- IE could not be uploaded in the portal within the time allowed u/s 139(1), due to technical incompatibility in the portal we refer to a judgment of the Hon’ble Gujrat High court in the matter of section 115BBA of the Act, in the case of PCIT vs KGY Glass Industries P Ltd, ( 2023) 156 taxmann.com18 ( Gujrat), where Form 10-1C was required to be filed by the domestic company within time allowed u/s 139(1) of the Act, opting to be taxed as per provisions of section 115BBA, was not practically possible due to technical glitches in the portal, the Hon’ble court held that in absence of any fault on the part of the assessee, the assessee cannot be deprived of benefit under section 115BBA of the Act. 10.6 As such considering all aspects of the matter, and noting the legal conclusions derived at by various courts and tribunals, on the facts of respective cases, cited above, we are in agreement with the decision of the coordinate bench of the Pune tribunal in the case of Akshay Devendra Birani (supra), and we hold that requirement of filing form 10-IE is directory in nature and not mandatory and it is sufficient compliance if the said form is before the AO at the time of assessment. As such we direct the CPC to take into consideration the form 10-IE filed by the assessee and pass appropriate orders.

11. In the result, the appeal of the assessee bearing ITA No. 25/Asr/2024 is allowed for statistical purposes.

Order pronounced in the open court on 24.07.2024.