2025 (7) TMI 427 - AT - Income Tax

Lower rate of Tax - Computation of the tax liability as per new tax regime u/s 115BAA - as submitted declaration in the Form 10-IC is in name of Chairman on behalf of the assessee while Form is not digitally signed/ verified by him - HELD THAT - As clarified that in the login of e-file income tax portals tax payers can submit details of its key persons on the portal and register their respective digital signature. The tax payer has to sign any return / form after selecting key person as required under the law and designated as a principal contact as only one person can sign the form. The assessee has registered three key persons on the income tax portal i.e. i) Mr Chandrasekaran Natarajan ( Chairman ) ii) Mr Eruch Kapadia ( CFO ) and iii) Mr Saurabh Agarwal ( Director). It has been demonstrated before us that if uploaded form is downloaded today then all the contents of the downloaded form will remain the same except the name of signatory person will changes automatically and the name and PAN of the key person who at the time of login is the principal contact trying to download the form. This fact has also been accepted by the LD. DR that this is system generated the change that once signatory part of the downloaded Form undergoes a change the downloaded acknowledgment remains constant with the original verifier s PAN even when the principal contact is changed on the portal to re-download the Form 10-IC. Thus if the Form 10-IC uploaded on 21/11/2022 is downloaded today under all the three different profiles i.e. all three key person being taken as principal contact all the contents of the form will remain the same but the name and PAN of the person who has digitally signed the form undergoes change. Assessee has also submitted both the downloaded from wherein Profile Chairman Profile CFO Profile Director has been given and also attached the complete Form 10-IC alongwith acknowledgements downloaded upon changing / modifying the principal contact details on the Income Tax portal. Thus there was not infirmity and ld. AO has erred in denying the benefit of new tax regime u/s.115BBA. Accordingly order of the ld. CIT (A) is confirmed and appeal filed by the Revenue is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the assessee is entitled to claim the benefit of the lower tax rate under Section 115BAA of the Income Tax Act for the Assessment Year (AY) 2023-24 when the declaration in Form 10-IC was originally filed and digitally signed by the Chairman but the downloaded form subsequently showed a different signatory due to a technical glitch in the income tax e-filing portal;
• Whether the Form 10-IC filed in the preceding AY 2022-23, which was accepted by the tax authorities, can be relied upon for subsequent years including AY 2023-24 without fresh filing or withdrawal of the option;
• Whether the denial of the benefit of Section 115BAA by the Assessing Officer (AO) and Central Processing Centre (CPC) on the ground of alleged discrepancy in the signatory of Form 10-IC is justified in law and on facts;
• Whether the procedural technicality related to the principal contact designation and digital signature on the e-filing portal can invalidate the claim of the new tax regime under Section 115BAA.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to benefit of Section 115BAA for AY 2023-24 despite discrepancy in signatory on Form 10-IC

Relevant Legal Framework and Precedents: Section 115BAA of the Income Tax Act provides an option for domestic companies to be taxed at a concessional rate of 22% subject to certain conditions. The option must be exercised by filing Form 10-IC in the first year of claim, and the option continues for subsequent years unless withdrawn. The form must be digitally signed and verified by an authorized signatory.

Court's Interpretation and Reasoning: The Tribunal examined the facts that the assessee company had filed Form 10-IC for AY 2022-23 digitally signed by the Chairman, Mr. Chandrasekaran Natarajan, who was also the principal contact on the portal at that time. The form was accepted by the CPC without objection. For AY 2023-24, the return was filed continuing the option under Section 115BAA, but the CPC/AO denied the benefit citing a discrepancy in the signatory name on the downloaded Form 10-IC, which showed Mr. Eruch Kapadia (CFO) as the signatory due to a technical glitch in the portal related to the principal contact designation.

The Tribunal noted that the form's contents remain unchanged and only the displayed signatory name changes depending on the principal contact selected at the time of download. The PAN and original verification remain consistent. This was demonstrated by the assessee through screenshots and multiple downloads under different profiles (Chairman, CFO, Director). The Tribunal held that this technical issue does not affect the validity of the original filing or the option exercised.

Key Evidence and Findings: The assessee produced the original Form 10-IC filed on 21/11/2022 digitally signed by the Chairman, the acknowledgment from CPC confirming acceptance, and screenshots showing the change in signatory name upon re-downloading the form under different principal contact profiles. The AO's show-cause notice and the CPC's denial of benefit lacked any substantive reason beyond the technical discrepancy.

Application of Law to Facts: Since the law requires filing of Form 10-IC once to exercise the option under Section 115BAA and the option continues for subsequent years unless withdrawn, the original valid filing sufficed. The discrepancy arose only due to the portal's functioning and did not invalidate the original digital signature or verification. The Tribunal applied the principle that procedural technicalities should not defeat substantive rights when the statutory requirements are otherwise complied with.

Treatment of Competing Arguments: The Revenue argued that the discrepancy in the signatory name on the downloaded Form 10-IC for AY 2023-24 amounted to non-compliance and invalidated the claim of the concessional tax rate. The Tribunal rejected this argument on the ground that the original form was correctly filed and accepted, and the change in displayed signatory was a system-generated artifact unrelated to the actual verification.

Conclusion: The Tribunal concluded that the assessee is entitled to the benefit of Section 115BAA for AY 2023-24 despite the technical glitch in the portal showing a different signatory on the downloaded Form 10-IC.

Issue 2: Continuity of option under Section 115BAA once exercised in AY 2022-23

Relevant Legal Framework and Precedents: The option to be taxed under Section 115BAA once exercised in the first year continues for subsequent years unless withdrawn. The Income Tax Rules and Forms prescribe filing Form 10-IC in the first year and no fresh filing is required for subsequent years.

Court's Interpretation and Reasoning: The Tribunal observed that the assessee had exercised the option in AY 2022-23 by filing Form 10-IC, which was accepted by the CPC and AO. The assessee did not withdraw the option for AY 2023-24 and continued to file the return opting for the new tax regime. The Tribunal held that the benefit of Section 115BAA must continue for AY 2023-24 unless there is a valid withdrawal or non-compliance.

Key Evidence and Findings: The tax audit report, return of income, and Form 10-IC filed for AY 2022-23 and the continuation of option in the return for AY 2023-24 were considered. The AO had accepted the option in AY 2022-23 without objection.

Application of Law to Facts: The Tribunal applied the statutory provision that the option once exercised continues unless withdrawn. Since there was no withdrawal or valid reason to deny the benefit, the option remains valid for AY 2023-24.

Treatment of Competing Arguments: The Revenue's contention that the discrepancy in Form 10-IC for AY 2023-24 amounts to non-exercise of option was rejected as the original filing for AY 2022-23 was valid and the option was not withdrawn.

Conclusion: The Tribunal confirmed that the option under Section 115BAA exercised in AY 2022-23 continues to be valid for AY 2023-24.

Issue 3: Validity of denial of benefit of Section 115BAA by AO and CPC

Relevant Legal Framework and Precedents: The AO and CPC are required to process returns and grant benefits as per law and accepted declarations. Denial of benefit requires valid reasons and cannot be based on mere technical or procedural discrepancies without prejudice to substantive compliance.

Court's Interpretation and Reasoning: The Tribunal found that the AO and CPC denied the benefit of Section 115BAA for AY 2023-24 without providing any substantive reasons other than the alleged discrepancy in signatory name on the downloaded Form 10-IC. The Tribunal held that this denial was erroneous and contrary to the facts and law.

Key Evidence and Findings: The impugned intimation u/s 143(1) showed acceptance of set-off of losses but denial of concessional tax rate without reasons. The assessee's rectification application and submissions explaining the technical glitch were not properly considered by the AO.

Application of Law to Facts: The Tribunal applied principles of natural justice and statutory compliance, emphasizing that denial of benefits must be supported by valid grounds. The technical portal issue did not justify denial of the benefit.

Treatment of Competing Arguments: The Revenue's reliance on the signatory discrepancy was rejected as the Tribunal accepted the assessee's explanation and evidence of system-generated changes.

Conclusion: The Tribunal held that the denial of benefit by AO and CPC was unjustified and confirmed the appellate order allowing the benefit.

Issue 4: Effect of procedural technicality relating to principal contact and digital signature on e-filing portal

Relevant Legal Framework and Precedents: The Income Tax e-filing portal requires registration of key persons and designation of a principal contact for digital signatures. The digital signature must be by an authorized person. However, the law does not envisage invalidation of filings due to system-generated display anomalies.

Court's Interpretation and Reasoning: The Tribunal recognized that the portal's functionality causes the signatory name on downloaded forms to change based on the principal contact selected at the time of download. This is a system-generated feature and does not affect the authenticity or validity of the original filing.

Key Evidence and Findings: The assessee demonstrated through multiple downloads under different profiles that the form contents remained identical except for the signatory name. The PAN and verification remained constant, confirming the original digital signature's validity.

Application of Law to Facts: The Tribunal applied the principle that procedural technicalities should not defeat substantive compliance and rights. The digital signature and filing were valid and accepted in the original year.

Treatment of Competing Arguments: The Revenue's argument that the discrepancy invalidated the filing was rejected as it was based on a misunderstanding of the portal's functioning.

Conclusion: The Tribunal held that the procedural technicality does not affect the validity of the Form 10-IC or the assessee's entitlement to the concessional tax rate.

3. SIGNIFICANT HOLDINGS

The Tribunal held verbatim:

"Once Form 10-IC has been filed in the preceding assessment year which is followed in the subsequent assessment years also, then there is no reason to deny any benefit of Section 115BAA. The intimation u/s. 143(1) for AY 2023-24 on the ground that Form 10-IC was not filed or which was filed later on the demand of the ld. AO, then it was found that it was signed by other person. It has been clarified that, in the login of e-file income tax portals, taxpayers can submit details of its key persons on the portal and register their respective digital signature. The taxpayer has to sign any return / form after selecting key person as required under the law and designated as a principal contact as only one person can sign the form. The assessee has registered three key persons on the income tax portal... if uploaded form is downloaded today, then all the contents of the downloaded form will remain the same except the name of signatory person will changes automatically and the name and PAN of the key person who at the time of login is the principal contact trying to download the form. This fact has also been accepted by the LD. DR that this is system generated the change..."

Core principles established include:

• The option under Section 115BAA once exercised and accepted in the first year continues for subsequent years unless withdrawn;
• Technical glitches or procedural anomalies in the e-filing portal that do not affect the substantive digital signature or verification cannot invalidate the filing or deny benefits;
• The AO and CPC must provide valid reasons for denial of benefits and cannot rely solely on system-generated discrepancies;
• Procedural technicalities should not override substantive compliance and rights of the taxpayer.

Final determinations on each issue were in favor of the assessee, confirming the appellate order allowing the benefit of the concessional tax rate under Section 115BAA for AY 2023-24 and dismissing the Revenue's appeal.