PCIT Must Apply CBDT Condonation Circular Universally to All Assessment Years to Mitigate Genuine Hardship for Form 10IC

PCIT Must Apply CBDT Condonation Circular Universally to All Assessment Years to Mitigate Genuine Hardship for Form 10IC

Issue

Whether a Central Board of Direct Taxes (CBDT) Circular issued under Section 119(2)(b) to condone delays in filing Form 10IC to mitigate genuine hardship is applicable universally to all assessment years (including Assessment Year 2023-24), or whether it should be strictly restricted only to the specific assessment years expressly mentioned in the circular.

Facts

• The Option: The assessee intended to opt for the concessional tax rate for domestic companies under Section 115BAA, which requires the electronic filing of Form 10IC.

• The Delay: Due to an oversight by the accountant, neither the income tax return nor Form 10IC was filed within the statutory due date prescribed under Section 139(1).

• The Filing: The assessee subsequently filed a belated return under Section 139(4). However, the online portal did not permit the submission of Form 10IC since the system required it to be filed strictly within the Section 139(1) deadline.

• Condonation Application: To rectify this, the assessee filed an application under Section 119(2)(b) before the Principal Commissioner of Income Tax (PCIT) seeking a condonation of the delay in filing Form 10IC.

• The Rejection: The PCIT rejected the application, citing that CBDT Circular No. 17/2024 (dated 18.11.2024) specifically addressed delays for other years and did not explicitly explicitly mention Assessment Year 2023-24.

• The Challenge: The assessee challenged this rigid restriction, arguing that beneficial circulars meant to alleviate hardship should be interpreted broadly.

Decision

• Circular Is Prospective and Universal: The High Court held that the CBDT Circular dated 18.11.2024, issued to mitigate genuine hardships of taxpayers, must apply to all Assessment Years. The reference to specific assessment years within the text of the circular was merely incidental.

• No Artificial Boundaries: The operational scope of the Circular dated 18.11.2024 cannot be confined strictly to AY 2022-23. It will continue to apply to all such cases of delay—even for periods after its date of issuance—unless the CBDT explicitly provides otherwise.

• Clarification on Other Circulars: It was noted that the prior Circular dated 01.10.2024 did not contain any specific stipulations regarding the condonation of delay for filing statutory forms, including Form 10IC.

• Impugned Order Set Aside: The Supreme Court/High Court set aside the PCIT’s restrictive rejection order. The PCIT was directed to reconsider the assessee’s case on its merits and in accordance with the law, treating the beneficial circular as fully applicable to AY 2023-24.

Key Takeaways

• Beneficial Circulars Demand Liberal Interpretation: Circulars issued by the CBDT under Section 119(2)(b) are beneficial pieces of administrative relief designed to mitigate “genuine hardship.” They must be interpreted liberally to advance justice rather than being restricted by literal omissions of a specific assessment year.

• Procedural Lapses Do Not Negate Substantive Rights: A technical delay in filing Form 10IC (even due to an accountant’s error) can be condoned by the tax authorities if genuine hardship is proven, ensuring that eligible domestic companies are not permanently stripped of concessional tax rates.

• Ongoing Application: Relief circular for statutory forms remains active and applicable to successive assessment years unless the CBDT issues an explicit notification to withdraw or limit its powers.