TAINWALA PERSONAL CARE PRODUCTS PVT LTD,MUMBAI V. DCIT CIRCLE 3(3)(1), MUMBAI

ITA 369/MUM/2025

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The case involves Tainwala Personal Care Products Pvt Ltd, which appealed against the decision of the Deputy Commissioner of Income Tax, Circle \\u2013 3(3)(1), Mumbai, regarding the denial of the concessional tax rate under Section 115BAA of the Income Tax Act, 1961. The denial was due to the non-filing of Form 10IC, a procedural requirement under Rule 21AE of the Income Tax Rules, 1962. The assessee argued that the omission was a genuine clerical error and not a deliberate act, and that it should not override the substantive benefit conferred by Section 115BAA. The Income Tax Appellate Tribunal (ITAT) considered various precedents and the principles of substantial compliance and beneficial interpretation, leading to the decision to allow the appeal for statistical purposes and restore the matter to the Assessing Officer for further consideration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314595 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2021-2022
• Other Referred Cases: Dilip Kumar vs. State, Kumar Medicare Pvt Ltd vs Commissioner Of Income Tax Department, Fastner Commodeal Private Limited vs AdIT (CPC), Bengaluru, Mahalaxmi Asphalt Private Limited vs Ito, Ward-2(1)(1), Ahmedabad
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: HARIDAS BHATT
• Keywords: Condonation of delay; Opportunity of being heard; Principle of natural justice; Competent authority; Procedural lapse
• Section: 115JB

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA 369/MUM/2025 (A.Y. 2021-22) Tainwala Personal Care Products Pvt Ltd, Plot No. 118 Tainwala House Road No. 18, MIDC Andheri East, Mumbai - 400 093, Maharashtra v/s. बनाम Deputy Commissioner of Income Tax Circle – 3(3)(1), Aayakar Bhawan, Mumbai - 400020, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACT1967C Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Haridas Bhatt Respondent by : Shri Hemanshu Joshi (Sr. DR) Date of Hearing 24.04.2025 Date of Pronouncement 06.05.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the appellate order passed by the Learned Commissioner of Income-tax, Appeal/ADDL/JCIT(A)-5, Delhi[hereinafter referred to as “CIT(A)”] pertaining to the intimation order passed u/s. 143(1) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 14.12.2022 as passed by the Assessing Officer, CPC, Bangalore for the Assessment Year [A.Y.] 2021-22. P a g e | 2 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. 2. The grounds of appeal are as under:- 1. On the facts and circumstances of the case, and in Law, the Asst. Director of Income Tax, CPC Bengaluru erred in rejecting the option of Section 115BAA for the procedural lapse in not filing Form 10IC. 2. On the facts and circumstances of the case and in law the AO failed to appreciate that: a. The Assessee has opted for Section 115BAA and filed the return and tax audit accordingly. b. The mere fact that form 10IC is not filed cannot be sole reason to deny the Assessee of the beneficial provision. c. The Section 115BAA is a beneficial provision which cannot be denied due to procedural lapse. 3. The appellant, therefore, prays that the Assessee's return please be processed with the benefit U/s 115BAA and the demand deleted. 3. The appeal concerns the denial of the concessional tax rate under Section 115BAA of the Act due to the non-filing of Form 10IC, which is a mandatory procedural requirement under Rule 21AE of the Income Tax Rules, 1962. 4. The ld.CIT(A) has elaborately discussed the whole issue stating that the assessee filed its Income Tax Return (ITR) on 13.03.2022, declaring a total income of Rs. 8,49,58,240/- and opting for the beneficial provisions of Section 115BAA. Along with the ITR, it also submitted its tax audit report in Form 3CD, reflecting its intention to avail of the concessional tax regime. However, while processing the return under Section 143(1) of the Act, the claim under Section 115BAA was disallowed due to the omission to file Form 10IC, and the income was assessed under Section 115JB based on book profits, resulting in a P a g e | 3 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. gross tax liability of Rs 92,69,260/-.Before him, it was contented that procedural lapse of not filing Form 10IC should not override the substantive benefit conferred by Section 115BAA.The intention to opt for Section 115BAA was bona fide and evident from the tax audit report filed within the statutory timelines. The omission to file Form 10IC was a genuine clerical error and not a deliberate act. The assessee further submitted that denial of the benefit solely on procedural grounds would defeat the very purpose of introducing Section 115BAA, which aims to incentivize businesses through reduced tax rates. 4.1 The ld.CIT(A) though admitted that assessee's intention to avail of the concessional tax regime under section 115BAA was bona fide and substantiated by the tax audit report filed within the prescribed timelines, however, the provisions of Section 115BAA(5) explicitly require the filing of Form 10IC on or before the due date specified under Section 139(1).Referring to the Central Board of Direct Taxes (CBDT), through Circular No. 17 of 2024 dated 18.11.2024, it is stated that the Circular recognized the challenges faced by taxpayers in complying with procedural requirements and provided a mechanism to condone such lapses. The Circular allows taxpayers to file a condonation application for the late submission of Form 10IC before the competent authority. Accordingly, though the appeal was dismissed solely on the procedural P a g e | 4 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. ground of non-filing of Form 10IC, the assessee was granted liberty to file a condonation application before the appropriate authority under the provisions of the aforementioned CBDT Circular. The assessee was advised to act promptly and file the condonation application along with supporting documents to demonstrate its eligibility for the concessional tax regime under Section 115BAA. 5. We have carefully considered all relevant facts of the case. Section 115BAA of the Income Tax Act, 1961 offers a reduced tax rate for domestic companies. Rule 21AE (1) of the Income Tax Rules allows a domestic company to benefit from lower tax rates by filing Form 10IC. By doing so the company will be charged a 22% tax rate under the Income Tax Act 1961 and will receive all benefits under Section 115BAA. Form 10IC must be submitted by the ‘due date’ for filing the company's return for the previous year. 5.1 Before us, while the ld.DR has relied on the orders of authorities below, the ld.AR of the assessee has made oral arguments and also made written submission in support of the grounds of appeal. It is submitted by way of an affidavit that Income Tax Portal was not accepting submission of 10 IC for AY 2021-22 anymore. The ld.AR has also relied on certain decisions of co-ordinate benches and High Court in support of the contention that filing of form is not P a g e | 5 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. mandatory. We find that the assessee company has not filed the relevant Form in time. However, no reasons have been stated for the delayed action when return and audited accounts were filed in time. It is also not known whether any grievance application was submitted to CPC when the system was not accepting its application within the extended time prescribed by the CBDT Circular(supra). We find that CBDT has extended the time limit for condonation of delay for the Form IC on at least three occasions, the latest being Circular no.17/2024 dated 18.11.2024 providing for deadline of 31.03.2025 or three months from the date of Circular. It is submitted that the Form needed to be e-filed but the Income Tax portal was not allowing uploading of the Form of earlier years. 5.2 We also find that there has been substantial compliance of the requirement under Section 115BAA of the Act, as evident from the fact that while filing the returns, it was declared/stated by the assessee that the option to discharge the tax was exercised under Section 115BAA of the Act and taxes were in fact paid @ 22% without claiming deductions as contemplated under Section 115BAA of the Act. In this regard, it may be relevant to refer to the Hon'ble Supreme Court, in the case of Dilip Kumar (2018) 9 SCC , wherein while deciding the Doctrine of Substantial Compliance held as under: P a g e | 6 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. “33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted.” 5.3 The authorities below failed to appreciate that if the failure to consider the claim of option to discharge tax under section 115BAA on the ground of failure on the fact of the petitioner to file Form 10-IC within the period stipulated under section 115BAA would cause genuine hardship to the assessee. The CBDT's Circulars extending the due dates for filing such forms in earlier years indicate a recognition of such procedural difficulties. These Circulars indicate a degree of administrative flexibility and a recognition that procedural lapses should not necessarily lead to the denial of substantive benefits. Moreover, denying the benefit based solely on this lapse would be against the principles of equity and justice, especially when there is no dispute regarding the assessee's eligibility for the lower tax rate. Considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits. The Courts have taken a lenient P a g e | 7 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. view on procedural lapses when substantive benefits are involved. Supreme Court rulings always emphasized that the making of a claim of deduction is mandatory, but timing/format is directory. 5.4 It may be stated here that the coordinate bench of ITAT, Mumbai has considered similar issue in the case of Kumar Medicare Pvt Ltd , Mumbai vs Commissioner Of Income Tax Department dated 21 August, 2024 in ITA No.1675/Mum/2024.Relevant parts of the order are extracted below for ready reference: “5. In view of the above provisions, it is observed that the assessee is fulfilling all the conditions except filing of Form No. 10IC. Considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits. The Courts have taken a lenient view on procedural lapses when substantive benefits are involved. Supreme Court rulings always emphasized that the making of a claim of deduction is mandatory, but timing/format is directory. The assessee duly claimed the benefit in its return of income filed in Form No. ITR-6 and return was filed well within the time prescribed u/s. 139(1) of the Act. 6. The provisions of Section 143(1) of the Act are clear in their requirement that prior to passing an intimation order, the Assessing Officer must provide the taxpayer with a reasonable opportunity to present their case and address any concerns or discrepancies. It is incumbent upon the tax authorities to afford taxpayers a fair hearing and a chance to clarify or contest any issues related to their tax assessment. In this specific case, it was not provided with any such opportunity to be heard. As observed that the assessee has not filed Form No. 10IC for claiming concessional rate of tax but on the other hand CPC, Bengaluru also has not followed the procedure prescribed by the law. It is reasonably assumed that the if the CPC, Bengaluru would have followed the procedure, i.e. giving the assessee a reasonable opportunity of hearing, the assessee would have filed the Form No. 10IC before the CPC, Bengaluru and this technical requirement would have been completed. 7. In view of this, the Jurisdictional AO is directed to give a fresh opportunity to the assessee ignoring this adjustment made by the CPC, Bengaluru and the assessee is directed to file the form no. 10IC electronically/before the Jurisdictional AO to comply with the rules. Once the assessee filed the Form 10IC, P a g e | 8 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. the Jurisdictional AO is directed to revise the tax computation of the assessee in compliance with the provisions of section 115BAA of the Act.” 5.5 The co-ordinate bench of ITAT, Kolkata has taken also considered the issue in hand as below in the case of Fastner Commodeal Private Limited vs AdIT (CPC), Bengaluru on 7 March, 2024 ITA No.1010/Kol/2023: “9. We after hearing the rival submission of the parties and perused the material available on record find that the assessee is a domestic company and eligible to avail the benefit of tax u/s 115BAA of the Act, provided the assessee fulfilled the requisite condition for availing such benefit. The point of dispute in the appeal is only in relation to lower authorities are that assessee has not filed Form No. 10IC electronically before due date for filing return of income u/s 139(1) of the Act. The case of the assessee is that Form 10IC could not be uploaded on ITBA portal due to technical glitch and it was the first year of availing such benefit. The only question for our consideration is whether non-filing of Form No. 10IC on ITBA portal is fatal to the assessee or not in availing the benefit of section 115BAA. 10. We find that the Hon'ble High Court in Gujarat Paguthan Energy Corporation (P) Ltd. Vs DCIT (supra) while considering the eligibility of deduction of Section 80-IA of the Act, wherein the assessee is required to furnish audit report before due date of filing return of income, and such audit report was filed during assessment proceedings, the assessee was held to be eligible for deduction under Section 80-IA of the Act. Further, Hon'ble Delhi High Court in CIT vs Web Commerce (India) (P) Ltd. (2009) 318 ITR 135/178 Taxman 310 (Delhi) also held that once audit report is filed before framing of assessment, the provisions of Section 80-IA (7) would be complied as furnishing of such report at the time of filing of return is directory in nature and not mandatory. Considering the similar principle that the assessee prayed before the ld. CIT(A) to allow it to file Form 10-IC before the appropriate authority in order to claim the benefit u/s 115BAA of the Act. It is settled principles under law that appeal is a continuation of assessment proceedings and the ld. CIT(A) has co-terminus power as of Assessing Officer, therefore, the ld. CIT(A) was required to consider the report in Form 10-IC. In view of the above factual and legal discussion, the ground of appeal raised by the assessee is restored back to the file of assessing officer to consider the report in Form-10IC and allow relief to the assessee, if the assessee fulfil all other requisite condition as per law. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.” P a g e | 9 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. 5.6 The co-ordinate bench of ITAT, Ahmedabad has taken also considered the issue in hand as below in the case of Mahalaxmi Asphalt Private Limited vs Ito, Ward-2(1)(1), Ahmedabad dated 30 September, 2024 in ITA No.1291/Ahm/2024: “7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee vide written submission made the assessee has filed the return of income on 29.12.2020 thereby applying the tax rate as per Section 115BAA of the Act. The only fault of the assessee was that the assessee has not filed Form 10IC alongwith the said return. It is not disputed that for claiming tax rate under Section 115BAA of the Act, the Assessment Year 2020-21 is the very the first Assessment Year and due to the fault on the part of the System as mentioned by the assessee, it would have happened that the assessee has not filed the Form alongwith the return of income. It is not the case of the Revenue that the assessee is not entitled for the tax rate under Section 115BAA of the Act. If the assessee had filed Form 10IC within the prescribed time alongwith return of income, as held by various Hon'ble High Courts including the jurisdictional High Court, the CIT(A) has co-terminus power as that of the Assessing Officer. The CIT(A) is required to consider the report in Form 10IC and, therefore, it will be appropriate to take on record the Form 10IC and consider the same in consonance with the return of income filed by the assessee and after verifying the same, the Assessing Officer will adjudicate the issue whether the assessee is entitled for tax rate as per Section 115BAA of the Act in Assessment Year 2020-21 or not. Needless to say, the assessee be given opportunity of hearing by following the principals of natural justice.” 6. In view of the above factual position of the case and also the legal proposition emerging from the cited decisions (supra),respectfully following them, the ground of appeal raised by the assessee is restored back to the file of ld. AO with a direction to take on record the Form 10IC and consider the same in consonance with the CBDT Circular(supra) and the return of income filed by the assessee and after verifying the same, he will adjudicate the issue whether the assessee is entitled for tax rate as per Section 115BAA of the Act in AY 2020-21 or not. Needless to say, the assessee would P a g e | 10 ITA No. 369/Mum/2025 A.Y. 2021-22 Tainwala Personal Care Products Pvt. Ltd. be given opportunity of hearing following the principles of natural justice and fairplay. 7. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 06/05/2025. Sd/- Sd/- NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 06.05.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. "