The Assessee is Allowed to Opt for Old Regime Despite Filing Form 10-IE for New Regime

Held by Hon’ble Income Tax Appellate Tribunal

In the matter of

Akshay Nitin Malu v. Income-tax Officer

(IT Appeal No.1651 (PUN) of 2024)

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The Assessee is an Individual engaged in the business of manufacturing. For FY 2022-23, the Assessee decided to opt for a new regime under Section 115BAC of the Act and therefore, filed Form 10-IE of the Act on 18.07.2022. However, while filing a return of Income, the Assessee realised that the old regime is more beneficial and therefore, filed ITR under the old regime and claimed deduction of Additional Depreciation and Deduction under Chapter VI-A of the Act. While processing the return on 07.08.2023, the CPC processed the return under the new regime and denied the claim of additional deduction and Chapter VI-A deductions. The Assessee filed the appeal against the CPC order, however, the Appellate Authority upheld the action of CPC and held that once a new regime is opted, the same can’t be withdrawn during the assessment year. 

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Hon’ble ITAT held that the case is not where the Assessee filed a return under the new regime and later on revised the return to withdraw the option. The same practice is not permissible. The Assessee has originally filed the return under the new regime, and The Return was processed on 07.08.2023, which is much after the date of filing of the return.  Therefore, the assessee cannot be forced to adopt the new regime. 

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Accordingly, the order of the Ld. Addl./JCIT(A) is set aside.

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1. Brief Facts of the case:

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• The Assessee is an individual engaged in the business of manufacturing cloth on Looms.

• For A.Y. 2022-23, the Assessee opted for a new regime under Section 115BAC of the Income Tax Act, 1961 (“The Act”) and filed a declaration in Form 10-IE on 18th July, 2022.

• However, while filing income tax return, the Assessee realised that the old regime is more beneficial and accordingly, filed return under the old regime and claimed the following deductions:
  • Additional Depreciation u/s 32(1)(iia): INR 71,31,899/-
  • Deductions under chapter VI-A: INR 1,63,260/-

• While processing the return on 07.08.2023, the CPC denied the claim of additional depreciation and Chapter-VI-A deductions and assessed the income under the new regime on the ground that the Assessee has opted for the new regime by filing for  10-IE.

• On appeal, the Appellate Authority upheld the action of CPC and held that once a new regime is opted for, the same can’t be withdrawn during the assessment year. 

• Therefore, the Assessee filed an appeal before the Hon'ble Income Tax Appellate Tribunal.

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2. Contention of the Appellate

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The Appellate contended that:

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• Although the Form 10-IE was filed, the return was furnished under the old regime. 

• Further, the Assessee does not satisfy all the conditions required to avail the benefit of section 115BAC of the Act. Therefore, the CPC and the appellate authority erred in disregarding the return filed under the old regime and in disallowing the relevant claims.

• When the Assessee has not fulfilled the conditions specified under Section 115BAC of the Act and has filed the return of income under the old regime, then Ld. Addl./JCIT(A) was not justified in upholding the action of the CPC.

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3. Contention of the Respondent

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The Respondent contended that:

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• Section 115BAC of the Act does not provide for withdrawal of the exercised option during the same year.

• Such a section only allows withdrawal of the option in the year after the year in which the option is exercised. Therefore, the grounds raised by the assessee should be dismissed.

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4. Analysis made by the Hon’ble ITAT:

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Hon’ble ITAT held that:

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• The Assessee decided to opt for the new Regime of taxation u/s 115BAC of the Act for FY 2022-23 and therefore filed Form No.10-IE on 18.07.2022 as per the requirement u/s 115BAC(5)(i) of the Act. 

• However, the assessee filed his return of income on 20.07.2022 under the old regime of taxation and declared a Total Income of INR 24,01,740/-.

• CPC processed the return of income and determined the total income at Rs.. 64,41,940/- as per the new regime of taxation on the ground that the assessee had exercised the option by filing the requisite Form No.10-IE. 

• The Return was processed on 07.08.2023, which is much after the date of filing of the return. 

• It is not a case where the assessee has filed Form 10-IE and also filed the return under the new tax regime, and thereafter filed a revised return withdrawing the option, which, according to us, is not permissible in the said previous year and the assessee can change the option only in the next year. 

• However, the assessee has opted for the old regime after filing the Form 10-IE.

• Therefore, the assessee cannot be forced to adopt the new regime. 

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5. Final Order

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Hon’ble ITAT held that:

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• Ld. Addl./JCIT(A) was not justified in upholding the action of the CPC in processing the return of income, determining the total income at Rs. 64,41,940/- under the new regime of taxation. 

• Accordingly, the order of the Ld. Addl./JCIT(A) is set aside, and the grounds raised by the assessee are allowed.

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