Kishor Kewalram Zamtani HUF Vs ITO (ITAT Nagpur)
New-Regime Option Is Not an Annual Subscription — Once Validly Exercised by a Business Assessee, It Continues Automatically
The Nagpur Bench of the ITAT has held that where an assessee having business income exercises the option for the new tax regime u/s 115BAC, the option continues to apply to subsequent assessment years. The benefit cannot be denied merely because a fresh Form 10-IE was not filed for the succeeding year.
The assessee, Kishor Kewalram Zamtani HUF, filed its return of income for AY 2023-24 on 28.07.2023, declaring a total income of ₹16,51,740. Since the return was filed before the due date of 31.07.2023, it was a timely return u/s 139(1).
The HUF had income chargeable under the head “Profits & gains of business or profession”. It calculated its tax liability under the concessional new tax regime u/s 115BAC at ₹2,42,343.
The CPC, however, denied the benefit of the new regime and processed the return under the old tax regime. It computed the tax liability at ₹3,20,343, resulting in an additional demand of ₹78,000.
The assessee filed a rectification application u/s 154, pointing out that it had already exercised the option for the new regime by filing Form 10-IE on 14.10.2022 along with the return for AY 2022-23. The option exercised in the earlier year continued to govern the subsequent year and was not required to be exercised afresh.
The CPC rejected the rectification application. The CIT(A) also confirmed the CPC’s action. The assessee therefore approached the Tribunal.
When the appeal was called for hearing, no one appeared on behalf of the assessee. There had also been no appearance on an earlier date. The Tribunal nevertheless proceeded to decide the appeal after hearing the Departmental Representative and examining the material available on record.
The Tribunal examined section 115BAC as it applied to AY 2023-24. Under the statutory framework applicable to that year, the concessional regime was optional. The manner in which the option had to be exercised depended upon whether the taxpayer had income from business or profession.
A person having business or professional income was required to exercise the option on or before the due date prescribed u/s 139(1). Section 115BAC(5)(i) further provided that once such an option was exercised for any previous year, it would apply to the subsequent assessment years as well.
The proviso imposed an important restriction. A business assessee could withdraw the option only once in a subsequent year. Once withdrawn, the person could not opt for the concessional regime again unless the person ceased to have income from business or profession.
Thus, unlike a person without business income, a business assessee was not expected to select between the old and new regimes afresh every year. The option had a continuing statutory effect.
The Tribunal found that the assessee had filed Form 10-IE on 14.10.2022 along with the return for AY 2022-23. That exercise preceded the filing of the return for AY 2023-24. There was also nothing to indicate that the assessee had withdrawn the option after exercising it.
The HUF therefore remained governed by the new tax regime for AY 2023-24. The CPC was not justified in treating the option as unavailable and recomputing the tax liability under the old regime.
The Tribunal accordingly reversed the finding of the CIT(A) and directed the jurisdictional AO to calculate the assessee’s liability under the new tax regime u/s 115BAC, as claimed in the return. The assessee’s appeal was allowed.
Author’s Comments
The ruling clarifies a frequent source of CPC mismatches under the pre-AY 2024-25 version of section 115BAC. For a taxpayer having business or professional income, Form 10-IE was not merely a year-specific declaration. Once the option was validly exercised, the new regime continued automatically for subsequent years until it was withdrawn in the manner permitted by law.
Therefore, the absence of a separate Form 10-IE for every succeeding year could not, by itself, justify processing the return under the old regime. The CPC should have examined the assessee’s earlier Form 10-IE and its continuing legal effect.
The distinction between taxpayers with and without business income was crucial. A non-business taxpayer could ordinarily choose the applicable regime while filing the return for each year. A business taxpayer’s decision had longer consequences because the option continued, and withdrawal was restricted to one occasion.
The decision also shows the proper scope of rectification u/s 154. Where the CPC ignores a Form already available in the electronic record and applies the wrong tax regime, the resulting computation can involve a mistake apparent from the record. The matter does not necessarily require a prolonged factual investigation.
However, the initial exercise of option must itself satisfy the applicable statutory requirements. The taxpayer should retain the Form 10-IE acknowledgement, filing date, assessment year and acknowledgement number. If the original Form was itself filed beyond the applicable due date, a separate controversy regarding the validity of the initial option may arise. The present order proceeded on the footing that the option exercised for AY 2022-23 was effective.
The ruling relates to AY 2023-24, when the old regime remained the normal regime and section 115BAC had to be positively opted for. From AY 2024-25, the statutory structure was reversed and the new regime became the default regime, with eligible taxpayers required to opt out if they wished to be governed by the old regime.
The practical principle emerging from the decision is clear: a continuing option cannot be denied as though it expired at the end of every year. Once the HUF had entered the new regime in accordance with section 115BAC(5)(i), CPC could not push it back into the old regime without any valid withdrawal.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
The captioned appeal at the instance of assessee pertaining to A.Y. 2023-24 is directed against the order dated 10.10.2025 framed by Addl/JCIT(A), Jodhpur/(NFAC) arising out of Rectification order dated 25.07.2025 passed u/s. 154 of the Income Tax Act, 1961 (in short ‘the Act’).
2. When the case called for, none appeared on behalf of the assessee. In the past also, there was no appearance from the side of the assessee on 11.03.2026. I therefore proceed to adjudicate the appeal with the assistance of ld. Departmental Representative and available material on record.
3. The sole grievance of the assessee is that the Centralized Processing Centre (CPC) has denied the benefit of the option exercised by the assessee u/s.115BAC for paying the tax under the New regime.
4. I have heard the ld. Departmental Representative and perused the record placed before me. I observe that the assessee is a Hindu Undivided Family (HUF) and in the return of income for A.Y. 2023-24 filed on 28.07.2023 assessee declared total income of Rs.16,51,740/-. Assessee has paid the tax liability under the New regime based on the option exercised u/s.115BAC in the return filed for the A.Y. 2022-23. However, the same has been denied and against the tax liability calculated by the assessee at Rs.2,42,343/- the CPC has calculated the tax liability at Rs.3,20,343/- under the Old Regime. Assessee filed Rectification application which came to be dismissed by the CPC.
5. I observe that the assessee has filed Form 10-IE on 14.10.2022 along with the return filed for A.Y.2022-23. Due date of filing of return for A.Y. 2023-24 is on or before 31.07.2023 and the return has been filed on 28.07.2023. As per the provisions of section 115BAC of the Act, assessee is required to file Form 10-IE before the due date of filing of the return of income u/s.139(1) of the Act and further proviso to section 115BAC(5) of the Act provides that the option under clause (i) of section 115BAC (5) “once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise option under this section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available”.
6. I observe that the assessee has shown income under the head profits from business and profession or profession and section 115BAC(5)(i) is applicable on the assessee and for the sake of clarity the same is reproduced here :
“115BAC. Tax on income of individuals [Hindu undivided family and others].
(1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or a Hindu undivided family, for any previous year relevant to the assessment year beginning on or after the [1st day of April, 2021 but before the 1st day of April, 2024], shall, at the option of such person, be computed at the rate of tax given in the following Table, if the conditions contained in sub-section (2) are satisfied, namely: –
| S. No | Total income | Rate of tax |
|---|---|---|
| (1) | (2) | (3) |
| 1. | Upto ₹2,50,000 | Nil |
| 2. | From ₹2,50,001 to ₹5,00,000 | 5 per cent |
| 3. | From ₹5,00,001 to ₹7,50,000 | 10 per cent |
| 4. | From ₹7,50,001 to ₹10,00,000 | 15 per cent |
| 5. | From ₹10,00,001 to ₹12,50,000 | 20 per cent |
| 6. | From ₹12,50,001 to ₹15,00,000 | 25 per cent |
| 7. | Above ₹15,00,000 | 30 per cent |
[(1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6),-
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 other provisions of this Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year:
Provided further that where the option is exercised under clause (i) of sub-section (5), in the event of failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent assessment years also and other provisions of this Act shall apply for those years accordingly.
[(2) For the purposes of sub-section (1A), the total income of the person referred to therein, shall be computed-
(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;]
(ii) without set off of any loss, –
(a) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i);
(b) under the head “Income from house property” with any other head of income;
(iii) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed; and
(iv) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.
(3) The loss and depreciation referred to in clause (ii) 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 assets which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2021. corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2020 in the prescribed manner, if the option under sub-section (5) is exercised the 1st day of April, 2021,
[Provided further that in a case where,–
(i) the assessee has not exercised the option under sub-section (5) for any previous year relevant to the assessment year beginning on or before the 1st day of April, 2023;
(ii) the income-tax on the total income of the assessee is computed under sub-section (1A); and
(iii) there is a depreciation allowance in respect of a block of assets which has not been given full effect prior to the assessment year beginning on the 1st day of April, 2024, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2023 in the manner as may be prescribed.]
(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,–
(i) who has exercised option under sub-section (5) for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021 but before the 1st day of April, 2024;
(ii) whose total income is computed under sub-section (1A), 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 purposes of this sub-section, the term “Unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);]
(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner by the person, –
(i) having income from business or profession, on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2021, and such option once exercised shall apply to subsequent assessment years;
(ii) having income other than the income referred to in clause (i), alongwith the return of income to be furnished under sub-section (1) of section 139 for a previous year relevant to the assessment year:
Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise option under this section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available.
Provided further that the provisions of this sub-section shall not apply for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024.
(6) Nothing contained in sub- section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed, for any assessment year, and such option is exercised,–
(i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or
(ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i):
Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available.].”
7. I further observe that section 115BAC(5)(i) of the Act clearly provides that the option once exercised shall apply to subsequent assessment years also. Considering the provisions of section 115BAC of the Act, I find that since the assessee has exercised the option on 14.10.2022 along with the Income Tax Return for A.Y. 2022-23, which is prior to filing of the return of income for the impugned assessment year, the assessee is eligible for the benefit under the New Tax Regime and that ld.CIT(A) grossly erred in confirming action of the CPC. Ld. Jurisdictional Assessing Officer is directed to calculate the tax liability of the assessee for the impugned assessment year as per the New Tax Regime u/s.115BAC as claimed in the Income Tax Return. Finding of ld.CIT(A) is reversed and grounds of appeal raised by the assessee are allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on 10th September, 2026 under Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963.
