Nisha Khurana Vs ITO (ITAT Agra)
Late E-Verification Cannot Shut the Door on New Tax Regime: Procedure Must Promote Justice, Not Kill a Legitimate Claim
Return Filed on Time but E-Verified Late
The assessee filed her return of income for AY 2023-24 electronically on 31-07-2023, declaring total income of ₹15,26,039. In the return, she exercised the option to be assessed under the new tax regime u/s 115BAC.
However, the return was e-verified only on 22-09-2023, beyond the 30-day period prescribed under Rule 12 read with CBDT Notification No. 5/2022.
While processing the return u/s 143(1) on 18-12-2023, the CPC treated the effective filing date as the date of e-verification. Consequently, the return was treated as though it had not been filed within the time prescribed u/s 139(1), and the option for the new tax regime was denied. This resulted in a tax demand of ₹93,640.
The assessee filed rectification applications u/s 154 on 28-03-2025 and again on 12-08-2025. Both applications were rejected by the CPC on 20-08-2025.
CIT(A) Refused Relief on a Technical Ground
The assessee challenged the rectification order before the CIT(A). She contended that the return itself had been uploaded within the due date on 31-07-2023 and that only its e-verification was delayed. Therefore, the substantive option already exercised u/s 115BAC should not have been denied.
She also relied upon CBDT Circular No. 10/2025 dated 28-07-2025, issued u/s 119, which relaxed the time limit for processing returns electronically filed up to 31-03-2024 but erroneously invalidated by the CPC due to technical reasons.
The CIT(A), however, dismissed the appeal, essentially observing that the return had already been processed u/s 143(1) and that the assessee’s subsequent rectification request could not be accepted.
85-Day Delay Before ITAT Condoned
The appeal before the ITAT was delayed by approximately 85 days. The assessee explained that she was employed in Gurgaon, while her registered address with the Income-tax Department remained at Gwalior. The email address registered on the portal was also inactive, due to which she did not become aware of the appellate order in time.
The explanation was supported by an affidavit. Since the Revenue did not controvert its contents, the Tribunal accepted the cause as sufficient, condoned the delay and admitted the appeal for adjudication on merits.
CBDT Circular Required a Constructive Approach
Circular No. 10/2025 was issued after the CBDT received grievances concerning returns electronically filed for different assessment years but erroneously invalidated by the CPC for technical reasons. Since the statutory time limit for processing such returns had expired, the Board exercised its power u/s 119 and directed that returns filed electronically up to 31-03-2024 and wrongly invalidated should be processed.
For AY 2023-24, the normal processing period had expired on 31-12-2024. The circular therefore permitted validation and processing of eligible returns, with intimation u/s 143(1) to be sent by 31-03-2026. Consequential relief, including refund with applicable interest, was also directed to follow.
The Tribunal held that both the CPC and CIT(A) failed to take effective and constructive note of this binding relaxation while dealing with the assessee’s rectification claim.
Procedure Cannot Defeat Substantive Justice
The ITAT made an important observation that a rule, circular or prescribed procedure is merely an instrument for administering justice. Procedural prescriptions indicate the orderly manner in which statutory rights are to be exercised, but they should not be interpreted so rigidly that they extinguish a genuine right.
According to the Tribunal, such prescriptions must be applied with a human approach. Their object is to advance justice and not to create an artificial tax liability merely because of a curable technical lapse.
The assessee had electronically filed her return on 31-07-2023 and had clearly opted for the new tax regime. The delayed e-verification did not alter the contents of the return or suggest an afterthought concerning the option exercised. Therefore, the CIT(A) should not have rejected the claim merely because the CPC had already processed the return.
The ITAT set aside the impugned order and held that the assessee was entitled to exercise the option under the new tax regime u/s 115BAC. The appeal was allowed.
Author’s Comments
The ruling adopts a purposive approach to the interaction between filing, verification & exercise of the section 115BAC option. E-verification authenticates the return; it should not ordinarily be used to erase an option demonstrably exercised when the return was uploaded within the due date, particularly after the CBDT itself relaxed the consequences of technical invalidation.
The language of Circular No. 10/2025 specifically concerns returns “erroneously invalidated” by the CPC, whereas the assessee’s return had apparently been processed but the section 115BAC option was denied. The Tribunal nevertheless applied the circular constructively to cure the same underlying technical difficulty. This gives the ruling wider practical significance.
Taxpayers should still avoid relying on litigation: returns must be e-verified within the prescribed period, and registered email, mobile number & address should remain active. But where the tax choice is clear from a timely uploaded return, technology should record the choice—not rewrite it.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, AGRA (SMC) BENCH
This appeal is directed against the impugned order dated 11.12.2025 passed in appeal No ADDL/JCIT (A)-5 MUMBAI/10065/2022-23 by the ld. Commissioner of Income Tax, Mumbai [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2023-24, wherein ld CIT(A) has dismissed assessee’s appeal.
2. At the outset, we notice that, according to registry’s report, the assessee filed this second appeal on 26.05.2026 against the impugned order dated 11.12.2025 by a delay of about 85 days. The reasons mentioned in assessee’s application for condonation of delay are that, the appellant assessee was working in Gurgaon and her registered address with IT department was of Gwalior. The mail id on portal is non-active. The appeal could not thus be filed within time. The application is supported with assessee’s affidavit. In view of uncontroverted affidavit of assessee, we treat the aforesaid cause as sufficient and condone the said delay caused in filing this appeal. The appeal is admitted for hearing.
3. The brief facts state that the appellant assessee filed her return of income, for A.Y. 2023-24, on 31.07.2023 but got it e-verified on 22.09.2023 beyond 30 days limit as prescribed under rule 12 r.w. CBDT notification no. 5/2022, declaring an income of Rs. 15,26,039/- The return was processed u/s 143(1) of the Act on 18.12.2023 by raising a demand of Rs. 93,640/- by disallowing the option claimed by the assessee under new tax regime u/s 115BAC of the Act. Subsequently, the appellant assessee filed rectification applications u/s 154 of the Act on 28.03.2025 and 12.08.2025, which were rejected on 20.08.2025.
4. Aggrieved assessee, preferred an appeal before ld CIT(A) against the order dated 20.08.2025 passed by the CPC u/s 154 of the Act, however, ld CIT(A) dismissed assessee’s appeal on the ground that the appellant’s return of income was already processed u/s 143(1) against which the rectification application was filed by the assessee.
5. Appellant assessee has raised following grounds under this second appeal:
“1. That income tax return processing order passed u/s.143(1)(a) 1 passed by Ld AO is perverse, illegal, unjustified and bad in law and deserve to be quashed.
2. That Ld AO-CPC has grossly erred in processing return of income filed on dt.31.07.2023 by disregarding new tax regime u/s.115BAC which is opted by assesseee while filing return of income u/s.139(1) and in which return is e-verified on dt.22.09.2023 merely on the reason that it could not be e-verified within 30 days after online upload of return on IT Portal and by which it was erroneously treated to have been filed on dt.22.09.2023 (date of e-verification) and wrongly treated it has filed u/s.139(5) and by which new regime benefit u/s. 115BAC is not given.
3. That Ld AO has grossly erred in not following CBDT Circular no.10/2025 dt.28.07.2025 issued u/s. 119 of IT Act, 1961 whereby specific direction are given to CPC to process return of income which have been filed electronically upto 31.03.2024 without disallowing benefit of new regime u/s.115BAC. That CBDT Circular is having binding effect on the departmental officer and therefore non action on said Circular is absolutely illegal and unjustified in the facts & circumstances of the case.
4. That Ld AO has grossly erred in not processing return under new regime u/s.115BAC of IT Act, 1961 whereas statutory requirement for taking option u/s.115BAC(5) clause (ii) is to file return u/s.139(1) and the return of income is filed on dt.31.07.2023 i.e. within stipulated time allowed u/s.139(1) of IT Act.
5. That Ld CIT (A) has grossly erred in wrongly interpreting the provision of Section 115BAC and in rejecting the option claimed under new regime.
6. That Id CIT(A) has erred in confirming the order of assessing officer mechanically and without proper appreciating facts and legality of case and therefore same may be please be declared as illegal & be quashed.
….…………”
6. Perused the records. Heard ld AR for the appellant assessee and ld Sr DR for the respondent revenue.
7. The main point for determination under appeal is as to whether ld CIT(A) has erred in confirming the rectification order passed by CPC u/s 154 of the Act dated 20.08.2025, contrary to the directions contained in CBDT Circular No. 10/2025 dated 28.07.2025 issued by CBDT u/s 119 of the Act?
8. Ld AR for the appellant assessee has submitted that CBDT has issued Circular No. 10/2025 dated 28.07.2025 u/s 119 of the Act, whereby the time limit for processing of returns of income filed electronically which were incorrectly invalidated by the CPC, has been relaxed. Ld CIT(A) has passed the impugned order by ignoring the CBDT’s aforesaid directions according to which the returns of income filed electronically upto 31.03.2024 were erroneously invalidated by CPC, could now be processed. According to assessee, her return was filed on 31.07.2023, for A.Y. 2023-24, and the assessee opted new regime u/s 115BAC of the Act calculation of tax was correct. Prayed to allow assessee’s appeal.
9. Ld Sr DR has relied on the impugned order passed by the ld CIT(A).
10. It is undisputed fact that the assessee filed return on 31.07.2023 u/s 139(1) of the Act beyond the prescribed limit of 30 days. The same was processed by CPC u/s 143(1) of the Act on 18.12.2023. Assessee’s rectification application dated 28.03.2025 and 12.08.2025 moved u/s 154 of the Act were also rejected by CPC on 20.08.2025. The relevant Circular No. 10/2025 dated 28.07.2025 read as under:
“
Circular No. 10/2025
F. No.225/30/2025/ IТА-II
Government of India
Ministry of Finance
Department of Revenue.
Central Board of Direct Taxes
*****
North Block, the 28th July, 2025
Order u/s 119 of the Income-tax Act, 1961
Subject: Relaxation of time limit for processing of returns of income filed electronically which were incorrectly invalidated by CPC – reg.
It has been brought to the notice of Central Board of Direct Taxes (‘the Board’) that CPC-Bengaluru (CPC) has received grievances regarding erroneous invalidation, due to various technical reasons, while processing the returns filed electronically for different assessment years. The time period for processing these returns has lapsed, latest being 31.12.2024 for AY 2023-24. Therefore, these returns need to be validated and processed as per law.
2. The matter has been considered by the Board and it has been decided to relax the time-frame prescribed in second proviso to sub-section (1) of section 143 of the Income-tax Act, 1961 (the Act) in exercise of its powers under section 119 of the Act. The Board hereby directs that returns of income filed electronically upto 31.03.2024 which have been erroneously invalidated by CPC shall now be processed. The intimation under sub-section (1) of section 143 of the. Act in respect of processing of such returns shall be sent to the assessees concerned by 31.03.2026.
3. All subsequent effects under the Act, including issue of refund along with interest as applicable, shall also follow in these cases. In those cases where PAN-Aadhaar linkage is not found, refund of any amount of tax or part thereof, due under the provisions of the Act shall not be made as laid down in Circular No.03/2023 dated 28.03.2023 vide F.No.370142/14/2022-TPL.
4. This may be brought to the notice of all for necessary compliance.”
11. The aforesaid circular seems to have been issued by the CBDT in the background after receiving various grievances in respect of the erroneous invalidation due to various technical reasons while processing the returns filed electronically for different A.Ys. CBDT has subsequently quoted that the time period for A.Y. 2023-24 being 31.12.2024 had lapsed. After consideration of the grievance, the CBDT categorically directed that the returns filed electronically upto 31.03.2024, and erroneously invalidated by CPC shall now be processed. It will be relevant to note that any rule/circular or procedure is only a tool for justice and if necessary, can be moulded to decide the real controversy. These procedural prescriptions provide for natural way of doing things and do not bar even for adoption of additional procedure as and when the situation may demand. There has to be a human approach in following such procedural prescriptions so that it serves the ends of justice and it should not be applied in such a manner to kill the right/ duty of any party. The sole object of such procedural prescriptions is to promote justice.
12. We are of the consistent view that the CPC and the first appellate authority, both failed in their duty to take effective and constructive note of the aforesaid CBDT Circular dated 28.07.2025, while passing the impugned orders. The assessee had filed the return on 31.07.2023, hence, ld CIT(A) should not have declined the claim of assessee for new tax regime option, u/s 115BAC of the Act, merely because the assessee’s return was already processed by CPC. Such technicality cannot be allowed to become impediment in the process of achieving substantial justice. The impugned order is thus unsustainable in the eye of law. The aforesaid point is accordingly determined in positive in favour of the appellant assessee and against the respondent revenue. The assessee is, therefore, entitled to exercise the option for new tax regime u/s 115BAC of the Act. The appeal is liable to be allowed.
13. In the result, assessee’s appeal is allowed.
Order pronounced in the Open Court on – 15.09.2026
