Typographical Error in ITR Regarding First Opted Year Cannot Deny Section 115BAC New Tax Regime Benefit

ORDER

Ms. Astha Chandra, Judicial Member.- This appeal filed by the assessee is directed against the order dated 27-10-2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”], u/s. 250 of the Income Tax Act, 1961 (the “Act”), pertaining to Assessment Year (“AY”) 2023-24.

2. Briefly stated, the facts of the case are that the assessee is an individual and filed his return for AY. 2023-24 u/s. 139(1) of the Act on 27-07-2023, which was subsequently revised by filing the revised return of income on 20-10-2023. The assessee opted for new tax regime for determination of his tax liability for the relevant AY. 2023-24. The assessee filed Form 10-IE for the first time in AY. 2021-22 for opting of new tax regime on 03-02-2022 and has not withdrawn/opted out of the said option of new tax regime u/s. 115BAC of the Act. The assessee inadvertently stated wrong details related to filing of Form 10-IE while filing the original return of income dt. 27-07-2023 as well as revised return dt. 20-10-2023 for AY. 2023-24. In intimation u/s. 143(1) of the Act, dt. 10-01-2024, the Ld. Assessing Officer/Central Processing Unit (“AO/CPC”) denied the benefit of new tax regime u/s. 115BAC of the Act to the assessee since the assessee had mentioned in his ITR that he has opted for new retime first time in AY. 2022-23 instead of 2021-22. Also in rectification applications filed u/s. 154 of the Act on 24-01-2024, 19-042024 and 07-01-2025, the same error was committed by the assessee. Thereafter, the assessee filed another rectification application u/s. 154 of the Act on 01-02-2025 and also on 16-04-2025 mentioning correct details related to Form 10-IE opting for new tax retime u/s. 115BAC of the Act. However, vide rectification order dt. 28-04-2025 passed u/s. 154 of the Act, the benefit of section 115BAC of the Act has been denied by the Ld.AO/CPC, raising a demand/tax liability of Rs. 47,242/-.

3. Aggrieved with the rectification order, assessee filed an appeal before the Ld.CIT(A)/NFAC. The Ld.CIT(A)/NFAC, however, dismissed the appeal of the assessee observing that since in ITR, first year for opting section 115BAC of the Act is AY. 2022-23 and Form 10-IE for AY. 2022-23 is not available on record, hence benefit of new regime u/s. 115BAC of the Act cannot be granted to the assessee. The relevant observation and finding of the Ld.CIT(A)/NFAC is reproduced below:

“5. Findings and Discussion

I have carefully considered the submissions of the assessee, the documents filed, and the provisions of section 115BAC.

5.1 For an individual having income from business or profession, the option for taxation under the new regime must be exercised on or before the due date u/s 139(1) by filing Form No. 10-IE in the prescribed manner. Such option, once exercised, shall apply to subsequent assessment years.

The option under section 115BAC is year-specific and must be validly exercised in accordance with the prescribed manner for the relevant year.

The correctness of the return and corresponding Form 10-IE is verified systemically by CPC through automated matching of the ITR data and the filed forms.

5.2 In the present case:

The assessee has mentioned in the ITR for AY 2023-24 that the first year of opting for the new regime was AY 2022-23.

However, as per the records available with CPC, no Form 10-IE for AY 2022-23 exists.

The assessee’s Form 10-IE pertains to AY 2021-22, which does not automatically validate the declaration made for AY 2023-24, since the ITR itself contains contradictory information.

CPC processing is carried out strictly on the basis of data furnished in the return. If the return itself contains a self-declaration inconsistent with the statutory form data, such return cannot be modified through interpretation or assumptions.

Therefore, even if the assessee had earlier filed Form 10-IE for AY 202122, the ITR for AY 2023-24 incorrectly declared AY 2022-23 as the first opted year, leading to a mismatch between system data and ITR entries. Such a mismatch rendered the claim for the new regime technically invalid for system processing.

5.3 The assessee has contended that the error was inadvertent and should not disentitle him. However, the option under section 115BAC is statutory and must be exercised strictly in the prescribed form and manner. Courts have consistently held that procedural compliance under special concessional provisions is mandatory (refer CIT v. R. Natarajan [2006] 287 ITR 271 (Mac)and CIT v. V.R. Karpagam [2014] 373 ITR 127 (Mad)).

The CPC has acted strictly as per the ITR data and applicable system validations. No evidence is available to show that the assessee had rectified or corrected the ITR error before processing. The subsequent claim during appeal proceedings cannot override the self-declared information in the original filing.

Hence, the action of CPC in denying the new regime benefit is in accordance with law.

6. Decision

In view of the above analysis:

The ITR filed by the assessee for AY 2023-24 declared that the new regime was first opted in AY 2022-23.

No valid Form 10-IE for AY 2022-23 exists on record.

Therefore, the system rightly processed the return under the old regime.

The contention that the error was clerical and should be ignored cannot be accepted in absence of contemporaneous correction or valid revised return before processing. The provisions of section 115BAC being optional and concessional, the onus lies upon the assessee to strictly comply with prescribed procedure.

Accordingly, the processing under the old regime and resultant demand of 47,246/- is found to be in order.”

4. Dissatisfied, the assessee is in appeal before the Tribunal, raising the following solitary ground of appeal:

“1. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the demand raised by CPC while processing the Income Tax Return by denying the Tax Calculation under “New Tax Regime” as per section 155BAC.”

5. Referring to the provisions of section 115BAC of the Act, the Ld.AR submitted that section 5(i) of the Act provides that once the assessee opts for section 115BAC of the Act, it shall apply to subsequent assessment years. In the present case of the assessee, the assessee opted for the option of tax determination under new regime as per the provisions of section 115BAC of the Act first time in AY. 2021-22 by filing Form 10-IE (pg. 1-3 of the Paper Book refers). For AY. 2021-22, the CPC granted the benefit of section 115BAC of the Act to the assessee (pg. 25 of the Paper Book refers). For subsequent AY. 2022-23, the assessee again claimed the benefit of section 115BAC of the Act, which was granted in intimation u/s. 143(1) of the Act (pg. 33 of the Paper Book refers). Referring to proviso to section 5, the Ld.AR submitted that the proviso to sub-section (5) categorically debar the assessee to opt u/s. 115BAC of the Act, if opted out in clause (i) of section 5. In the present case, for subsequent assessment years, i.e., AYs. 2024-25 and 2025-26, the assessee has opted for section 115BAC of the Act and the return of the assessee for these assessment years are accordingly processed by the CPC as per the provisions of section 115BAC of the Act. The assessee has never exercised the option of withdrawal by filing Form 10-IE in this regard. The Ld.AR further relied on CBDT Circular No. C1 of 2020, dt. 13-04-2020 and submitted that in AY. 2022-23, the assessee has not withdrawn/opted out of the option u/s. 115BAC of the Act and the assessee’s return has been processed u/s. 143(1) of the Act for AY. 2022-23 under the new tax regime. He, therefore, submitted that the assessee should be taxed as per the provisions of section 115BAC of the Act under the new tax regime. In support of his claim, reliance is placed by the Ld.AR on the decision of the Surat Bench of the Tribunal in the case of Meenaben Maheshchandra Patel v. ITO  (Surat – Trib.).

6. The Ld.DR, on the other hand, supported the order of the Ld.CIT(A)/NFAC.

7. We have heard the Ld. Representatives of the Parties and perused the material available on record as well as Paper Book filed by the Ld.AR on behalf of the assessee. We have also perused the decision cited by the Ld.AR. The facts of the case are not in dispute. The assessee opted for tax determination under new tax regime u/s. 115BAC of the Act for the first time in AY. 2021-22, which was allowed by the Ld.AO/CPC in intimation u/s. 143(1) of the Act. Similarly for AY. 2022-23, the assessee’s tax liability was determined as per the provisions of section 115BAC of the Act. However, in AY. 2023-24, while filing the ITR, the assessee inadvertently mentioned the first year of opting new tax regime u/s. 115BAC of the Act as AY. 2022-23 instead of AY. 2021-22. To rectify the said error, the assessee filed rectification application(s) on 01-02-2025 and 16-04-2025. However, the Ld.AO/CPC denied the assessee’s claim and determined the tax liability of the assessee under the old tax regime. The Ld.AR has submitted that the assessee’s claim has been rejected for the reason that the assessee in its ITR for AY. 2023-24 mentioned that new tax regime was first opted in AY. 2022-23. However, as per the records available with the Ld.AO/CPC, no Form 10-IE for AY. 2022-23 existed. Admittedly, the said error was inadvertently committed by the assessee while filing his ITR for AY. 2023-24 under consideration.

8. Before us, referring to the provisions of section 115BAC (5)(i) of the Act, the Ld.AR has submitted that there is no need for the assessee to file new Form 10-IE for AY.2023-24 as the Form which was earlier filed for AY. 2021-22 shall continue unless it is specifically withdrawn by the assessee. It is the submission of the Ld.Counsel for the assessee that once the assessee has exercised the option by filing Form 10-IE for AY. 2021-22 , it shall continue for AY. 2023-24 unless it is withdrawn by the assessee himself.

9. Now coming to the relevant provisions of Section 115BAC of the Act inserted by Finance Act, 2020, w.e.f. 1^st April, 2021

“115BAC. (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 53[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:—

…………….

…………….

…………….

(5) Nothing contained in this section shall apply unless option is exercised in the prescribed manner by the person,—

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”.

10. Considering the aforestated relevant provisions of section 115BAC of the Act in light of the facts of the present case narrated above, we find some force in the arguments advanced by the Ld.AR. In our considered opinion, since the assessee has opted for new tax regime u/s. 115BAC of the Act by filing Form 10-IE for AY. 2021-22, it shall continue for AY. 2023-24 as the assessee has not withdrawn the same. Further in subsequent AYs i.e. 2024-25 and 2025-26, the assessee’s ITRs are also processed according to the provisions of section 115BAC of the Act. Hence, the assessee is eligible to be assessed as per the provisions of section 115BAC of the Act and the Ld.AO/CPC as well as the Ld.CIT(A)/NFAC are not justified in denying the claim of the assessee.

11. We find that the case of the assessee finds support from the decision of the Surat Bench of the Tribunal in the case of Meenaben Maheshchandra Patel (supra) on the impugned issue involving the similar set of facts as that of the assessee in the present case, wherein the Tribunal allowed the assessee’s option of paying tax as per the new tax regime u/s. 115BAC of the Act. The relevant extract of the Tribunal’s order is reproduced below:

“7. A perusal of the aforesaid provisions of section 115BAC of the Act would reveal that the statute had given a right to the assessees to opt for taxation under the new regime u/ s.115BAC of the Act and this option could be exercised on or after the first day of April-2021 and such option once exercised would apply to subsequent assessment years. Further, the said right to opt under the new regime has been withdrawn for the assessment year beginning on or after the first day of April-2024. The assessment year under consideration is AY 2023-24. The assessee had already exercised to get taxed under the new regime by way of filing a valid Form 10IE on 08/11/2022. Though, the said option was exercised for AY 2022-23 and was to be applicable and to continue for subsequent years also. However, the CPC did not grant the benefit to the assessee for opting for taxation under the new regime on the ground that the Form was delayed by one day so far as the AY 2022-23 was concerned. Here, the peculiar fact to be noted is that the assessee had duly exercised his option to be taxed under the new regime and the same has never been withdrawn by the assessee. He was denied the benefit of the taxation under the new regime because of delayed filing of Form 10IE for AY 2022-23. However, the said Form was well within time for AY 2023-24. There was no option to the assessee to file a fresh Form for AY 2023-24 as the option to file the Form 10IE, as noted by the CIT(A) also, could be exercised once by the assessee and that option stood exercised by the assessee on 08/11/2022. The assessee duly mentioned in the return of income for AY 2023-24 that Form 10IE was already on record and also Acknowledgement number and date of filing of the said Form and it has been duly intimated to the authorities that she has not withdrawn the exercised option of taxation under the new regime and that return may be processed and she may be taxed as per the provisions of section 115BAC of the Act. A perusal of above said provisions would reveal that the assessee had right to exercise the said option of taxation under new regime upto the AY 2023-24. Therefore, the lower authorities are not justified in not allowing the assessee to avail the benefit of the taxation under the new regime. It has been, time and again, held that the incometax authorities are not supposed to punish the litigations for their bonafide mistakes, rather they should assist the assessees to pay their due taxes and also to claim the benefit of exemptions/deductions/tax relief, if any, available to them under the statute. The Government had rolled out the new tax regime for the benefit of the citizens and the taxauthorities are supposed to help the citizens to avail such benefits instead of standing in the way as an obstacle in implementation of assessee-friendly government schemes. It has also been held, time and again, that the Department should charge only the legitimate taxes from the assessees. In this case, the assessee had duly availed the benefit of new tax regime and there was no reason for the lower authorities to deny the same.”

12. Based on the factual matrix of the case and the legal position set out above and in the absence of any contrary material/decision brought on record by the Revenue, we are of the view that the Ld.AO/CPC should have allowed the assessee’s claim of tax determination u/s. 115BAC of the Act. We, therefore, set aside the order of the Ld.CIT(A)/NFAC and direct the Ld.AO/CPC to modify the assessment accordingly. The solitary ground of appeal raised by the assessee is thus allowed.

13. In the result, the appeal of the assessee is allowed.