The ITAT Ahmedabad has clarified that an assessee’s right to opt for the new tax regime under Section 115BAC is not defeated by a technical delay in filing Form 10-IE, provided the form is submitted before the return is processed under Section 143(1). This ruling reinforces the principle that procedural lapses cannot override substantive tax benefits when substantial compliance is established.
Background & Facts
The Dispute
The appellant, an individual assessee, filed his return of income for Assessment Year 2022-23 on 20.10.2022, declaring total income of Rs. 11,36,960. On 19.10.2022, he duly filed Form No. 10-IE to opt for the new tax regime under Section 115BAC. The return was filed under Section 139(4) as a belated return, since the due date under Section 139(1) had expired. The Centralized Processing Centre (CPC), Bengaluru, processed the return under Section 143(1) on 23.02.2023 but computed the tax liability under the old regime, ignoring the Form 10-IE filed on 19.10.2022. This resulted in an additional tax demand.
Key Facts
- The assessee filed Form No. 10-IE on 19.10.2022
- The return of income was filed on 20.10.2022 under Section 139(4)
- The CPC issued intimation under Section 143(1) on 23.02.2023
- The intimation clearly showed the assessee’s income was computed under the old regime despite the availability of Form 10-IE
- The assessee filed a rectification application under Section 154 on 05.07.2024, seeking correction of the error
- The CPC rejected the rectification application by order dated 06.09.2024
- The assessee filed an appeal before the Ld. CIT(A) on 10.11.2024, which was initially filed beyond the statutory period
Procedural History
- 19.10.2022: Form 10-IE filed by assessee
- 20.10.2022: Return of income filed under Section 139(4)
- 23.02.2023: CPC processed return under old regime, issued intimation
- 05.07.2024: Rectification application filed under Section 154
- 06.09.2024: CPC rejected rectification application
- 10.11.2024: Appeal filed before Ld. CIT(A) - filed beyond 30-day limit
- 17.11.2025: Ld. CIT(A) condoned delay under Section 249(3) but dismissed appeal on merits
- 25.03.2026: Hearing before ITAT Ahmedabad
- 23.04.2026: ITAT pronounced order allowing appeal
The Parties' Positions
For the Appellant
The appellant contended that:
- Form 10-IE was filed before the return was processed
- The form was available on record at the time of Section 143(1) intimation
- Judicial precedents from Pune and Ahmedabad ITAT benches held that filing Form 10-IE is directory, not mandatory
- Denial of benefit on technical grounds violates the principle of substantial compliance
- The Hon’ble Gujarat High Court in Association of Indian Panelboard Manufacturers v. DCIT had held that procedural requirements cannot override substantive rights when compliance is evident
For the Respondent
The Revenue argued that:
- Section 115BAC(5) requires the option to be exercised on or before the due date under Section 139(1)
- Since the return was filed under Section 139(4), the option was invalid
- The CIT(A) correctly applied the statutory mandate
- Judicial precedents relied upon were distinguishable or not binding
Relief Sought
The appellant sought:
- Setting aside of the CIT(A) order dated 17.11.2025
- Direction to CPC/Assessing Officer to recompute income under the new tax regime
- Refund of excess tax paid with interest
- Costs of litigation
The Legal Issue
The central question was whether an assessee who files Form 10-IE after the due date under Section 139(1) but before the return is processed under Section 143(1) is entitled to the benefits of the new tax regime under Section 115BAC, or whether strict compliance with the due date is mandatory.
Arguments Presented
For the Appellant
The appellant relied on the principle of substantial compliance and judicial precedents from the Pune and Ahmedabad benches of the ITAT. In Akshay Devendra Birari v. DCIT (2024) 164 taxmann.com 58 and Arun Gopilal Samnani v. ITO (2025) 174 taxmann.com 33, the ITAT held that the filing of Form 10-IE is directory in nature. The Gujarat High Court in Association of Indian Panelboard Manufacturers v. DCIT (21.03.2023) had similarly held that where the form is available on record before processing, the benefit cannot be denied merely due to procedural delay. The appellant emphasized that the legislative intent behind Section 115BAC was to provide taxpayers with a choice, and denying it on a technicality defeats that purpose.
For the Respondent
The Revenue contended that Section 115BAC(5) explicitly requires the option to be exercised on or before the due date under Section 139(1). Since the return was filed under Section 139(4), the option was invalid. The Revenue argued that the CIT(A) correctly interpreted the statutory provision as mandatory and that the precedents cited were either not binding or factually distinguishable. The Revenue maintained that allowing belated filings would create administrative chaos and undermine the statutory timeline.
The Court's Analysis
The ITAT rejected the Revenue’s hyper-technical interpretation. The Bench observed that the statutory requirement under Section 115BAC(5) to file Form 10-IE is procedural, not substantive. The key issue was not whether the form was filed on time, but whether it was available on record before the return was processed.
"The requirement of law stood substantially complied with and denial of benefit of the new tax regime is not sustainable."
The Bench noted that the Form 10-IE was filed on 19.10.2022, a day before the return, and was clearly available to the CPC at the time of processing on 23.02.2023. The intimation under Section 143(1) itself reflected the assessee’s income computation without reference to the option - a clear administrative error. The Bench emphasized that the Hon’ble Gujarat High Court had already settled that procedural lapses cannot defeat substantive rights when the form is on record.
The ITAT distinguished the CIT(A)’s reliance on a strict reading of Section 115BAC(5) by pointing out that the provision does not state that the option is void if filed after the due date; it merely prescribes the time for exercise. The Bench held that the legislative intent is to facilitate taxpayer choice, not to penalize minor procedural deviations when the substance is intact.
The Bench also noted that the CIT(A) failed to consider the alternative ground - that even if the new regime was not applicable, deductions under Chapter VI-A should have been allowed under the old regime. The CIT(A) summarily dismissed this without analysis, which the ITAT found legally unsustainable.
The Verdict
The appeal was allowed. The ITAT set aside the order of the Ld. CIT(A) dated 17.11.2025 and directed the Assessing Officer or CPC to recompute the assessee’s income for A.Y. 2022-23 under the new tax regime, taking into account Form 10-IE filed on 19.10.2022. The reassessment must be completed within 60 days from the date of this order. Any excess tax paid shall be refunded with interest at the rate of 6% per annum from the date of payment until the date of refund. Costs of Rs. 10,000 are awarded to the appellant.
What This Means For Similar Cases
Substantial Compliance Overrides Procedural Lapses
- Practitioners can now confidently argue that Form 10-IE filed before Section 143(1) processing, even if after the Section 139(1) due date, entitles the assessee to the new regime
- The burden shifts to the Revenue to prove actual prejudice, not mere non-compliance with timing
- Rectification applications under Section 154 are viable remedies where the form is on record but ignored
Belated Returns Do Not Automatically Disqualify New Regime Benefits
- Filing under Section 139(4) does not extinguish the right to opt for the new regime if Form 10-IE is submitted before processing
- Taxpayers filing belated returns should retain proof of Form 10-IE submission and ensure it is uploaded in the e-filing portal
- CPCs must be trained to cross-verify Form 10-IE availability before computing tax under the old regime
Judicial Precedents Are Binding Across ITAT Benches
- The ITAT affirmed that decisions from other benches, including the Gujarat High Court, are persuasive and must be considered
- Revenue cannot ignore binding precedents by claiming jurisdictional differences
- Practitioners should cite Arun Gopilal Samnani and Association of Indian Panelboard Manufacturers as controlling authority in similar cases
