Mandatory vs. Directory: Validity of New Tax Regime (115BAC) for Delayed Form 10-IE

Facts

The Choice: For the Assessment Year 2021-22, the Assessee intended to opt for the “New Tax Regime” under Section 115BAC.
The Procedure: To exercise this option, the taxpayer was required to file Form No. 10-IE before the due date specified under Section 139(1).
The Delay: The Assessee filed the return and the mandatory Form 10-IE, but the form was submitted along with the return after the original Section 139(1) due date had passed.
The Conflict: The Centralized Processing Centre (CPC) ignored the 115BAC option because the form was technically “late.” It processed the return under the Old Tax Regime, resulting in a significantly higher tax demand.
Rectification: The Assessee filed a rectification application under Section 154, arguing that since the form was available on record at the time of processing, the benefit of the new regime should be granted.

Decision

Final Verdict: In favour of the Assessee.
Ratio Decidendi:
- Directory Nature of Timelines: The Tribunal/Court held that the requirement to file Form No. 10-IE within the Section 139(1) deadline is directory, not mandatory. Procedural timelines should not be used to strip a taxpayer of a substantive statutory benefit.
- Availability at Processing: It was emphasized that the Assessing Officer (AO) or CPC cannot ignore a Form 10-IE that is already available on the portal at the time of processing the return.
- Rectifiable Error: The failure to consider a form already on record constitutes a “mistake apparent from the record.” Therefore, the AO was directed to rectify the intimation under Section 154 and compute the tax as per the New Tax Regime.

Key Takeaways

Relief for Technical Lapses: This is a landmark ruling for taxpayers who missed the 10-IE deadline in earlier years. It establishes that as long as the form is filed before the return is actually processed/assessed, the beneficial tax rates of Section 115BAC cannot be denied.
Strategy for Rectifications: If a client’s return has been processed under the Old Tax Regime due to a delayed Form 10-IE, do not just appeal; file a Section 154 rectification request immediately, citing this “directory vs. mandatory” principle.
Portal Logic vs. Law: The CPC’s automated logic often rejects delayed forms. This case law provides the legal ammunition to override that automation during the appellate or rectification stage.
IT Act 2025 Transition: While the New Tax Regime has become the “default” in recent years, the principle that procedural filing dates (like under the renumbered Section 202) are directory will remain a crucial defense for various tax elections and exemptions.

IN THE ITAT AHMEDABAD BENCH ‘SMC’

Arun Gopilal Samnani

CPC Bangalore^*

Sanjay Garg, Judicial Member
and Narendra Prasad Sinha, Accountant Member

IT Appeal No. 1540 (AHD) of 2025
[Assessment year 2021-22]

APRIL 21, 2026

Biren Shah, AR for the Appellant. Smt. Ananya Kulshresth, Sr. DR for the Respondent.

ORDER

Narendra Prasad Sinha, Accountant Member.- This appeal is filed by the assessee against the order dated 04.07.2025 passed by Addl/JCIT(Appeal) – 7 Mumbai [hereinafter referred to as ‘Addl. CIT(A)’] for the Assessment Year (A.Y.) 2021-22 in the proceeding u/s. 154 of the Income Tax Act.

2. The brief facts of the case are that the assessee had filed his return of income for A.Y. 2021-22 on 28.03.2022 declaring total income of Rs.9,21,200/-. The return was processed u/s. 143(3) of the Act by the CPC on 11.04.2022 raising demand of Rs.40,840/-. The demand was raised for the reason that the return was processed as per the old tax regime instead of the new tax regime. The assessee had opted for new tax regime by filing form No. 10-IE on 22.03.2022. Thereafter, the assessee had filed a rectification application u/s. 154 of the Act, with a request to allow the benefit of the new tax regime in accordance with Form No. 10-IE filed by him. The CPC had passed an order u/s. 154 of the Act on 01.08.2024, rejecting the application of the assessee.

3. Aggrieved with the rectification order of the CPC, the assessee had filed an appeal before the first appellate authority, which was decided by the learned Addl. CIT(A), vide the impugned order and the appeal of the assessee was dismissed. Th

4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Ld. Officer, CPC, has erred in processing the return of income for Asst. Year 2021-22 under old regime though the assessee filed form 10-IE to opt for new regime on 22.03.2022.

Without prejudice to ground-1 and alternatively Ld. AO, CPC has erred in not granting benefit of deductions allowable under old regime. Therefore, the case shall be transferred to ld. Jurisdiction AO and JAO shall allow the eligible deductions and benefits under old regime based on the documents produced by assessee.

The appellant craves to leave, add, alter, modify and/or withdraw any grounds of appeal either before or during the course of the hearing.

5. The first ground pertains to processing of the return under the old regime in spite of form No. 10-IE filed by assessee opting for new tax regime. Shri Biren Shah, the Ld. AR of the assessee, explained that Form No. 10-IE was required to be filed within the due date of filing of return. In the present case, the assessee had filed the return u/s. 139(4) of the Act, along with form No. 10-IE on 23.08.2022. The Ld. AR submitted that the filing of form to opt for new tax regime was only a procedural requirement and the form No. 10-IE as filed by the assessee was duly available with the CPC at the time of processing of the return. Therefore, the CPC was not correct in overlooking the form No. 10-IE and raising demand under the old tax regime. The Ld. AR further submitted that this matter is covered by the decision of Co-ordinate bench of Pune Tribunal in the case of Akshay Devendra Birari v. Dy. CIT (Pune – Trib.) and also by the Co-ordinate bench of this Tribunal in assessee’s own case for A.Y. 2023-24 in Arun Gopilal Samnani v. ITO (Ahmedabad – Trib.)/ITA No. 2082/Ahd/2024 dated 29.04.2025.

6. Per Contra, Smt. Ananya Kulshresth, the Ld. Sr. DR submitted that the assessee was required to opt for new tax regime by filing form No. 10-IE within the time limit for due date of return u/s. 139(1) of the Act, which was not complied in the present case. Therefore, the CPC had rightly processed the return of the assessee as per old tax regime, as the form No. 10-IE was not filed within the due date.

7. We have considered the rival submissions. The only issue to be considered in the present case whether the CPC was correct in processing the return of the assessee as per old tax regime, in spite of the fact that form No. 10-IE filed by the assessee was available at the time of processing of the return. Admittedly, the assessee had failed to file the prescribed form No. 10-IE within the prescribed time limit which was the due date for filing of return u/s. 139(1) of the Act. The assessee had filed the form No. 10-IE on 28.03.2022 along with return of income. Thus, the form No. 10-IE was available with the CPC and should have been considered while processing the return u/s. 143(1) of the Act. The filing of form No. 10-IE is not a mandatory requirement. The option given to the assessee to opt for the new tax regime was only directory in nature. Therefore, the CPC was not correct in ignoring the form No. 10-IE available at the time of processing of the return. This issue is found squarely covered by the decision of Co-ordinate bench of Pune tribunal in the case Akshay Devendra Birari (supra) and also by decision of the Coordinate bench of this Tribunal in the assessee’s own case in ITA No. 2082/Ahd/2024, A.Y 2023-24. Accordingly, we direct the CPC/JAO to amend the intimation u/s. 143(1) of the Act, by taking into consideration the form No. 10-IE filed by the assessee and the tax should be levied in accordance with the new tax regime. The ground taken by the assessee is allowed.

8. The ground No. 2 taken by the assessee is only an alternative ground and in view of the decision as taken in respect of ground No. 1, this ground has become infructuous. Hence, the ground No. 2 is dismissed.

9. In the result, the appeal of the assessee is partly allowed.