Facts of the Case

The petitioner, Sarla Holdings Private Limited, filed its return of income for Assessment Year 2020-21 on 13.02.2021 within the extended due date under Section 139(1), declaring total income of ₹60,93,780 after set-off of losses and reporting book profits of ₹3,14,41,630. In the return, the petitioner expressly indicated that it had not opted for taxation under Sections 115BA, 115BAA or 115BAB.

The petitioner later claimed that the failure to opt for Section 115BAA was inadvertent, attributable to confusion during the COVID-19 pandemic and illness of key personnel. A revised return was filed on 26.03.2021, and Form 10-IC was subsequently filed on 26.04.2022 relying on CBDT Circular No.6/2022 dated 17.03.2022, which condoned delay in filing Form 10-IC for AY 2020-21.

The Assessment Unit, however, completed assessment under Section 143(3) read with Section 144B by taxing the petitioner under Section 115JB and raised demand of ₹62,17,050 along with initiation of penalty under Section 270A. A revision petition under Section 264 was rejected by the Principal Commissioner of Income Tax on 29.11.2023, leading to the present writ petition.

Issues Involved

Whether concessional tax under Section 115BAA could be availed when the assessee had expressly not opted for it in the return filed within the due date, whether filing of a revised return and Form 10-IC could cure such omission, and whether CBDT Circular No.6/2022 condoning delay in filing Form 10-IC relaxed the substantive statutory requirement under Section 115BAA(5).

Petitioner’s Arguments

The petitioner contended that the failure to opt for Section 115BAA was a bona fide and inadvertent error caused by exceptional circumstances during the COVID-19 pandemic. It was argued that there was confusion in the first year of implementation of Section 115BAA and that the CBDT itself recognized genuine hardship by issuing Circular No.6/2022. The petitioner submitted that once Form 10-IC was filed within the extended period granted by the CBDT, the benefit of Section 115BAA ought to have been allowed.

Respondent’s Arguments

The Revenue argued that Section 115BAA(5) clearly mandates that the option must be exercised in the prescribed manner on or before the due date under Section 139(1). In the present case, the petitioner had expressly selected “None of the above” against the column for opting for Section 115BAA in the return. It was contended that CBDT Circular No.6/2022 only condoned delay in filing Form 10-IC and did not relax the statutory requirement of exercising the option in the return itself.

Court Order / Findings

The Delhi High Court examined Section 115BAA and held that Sub-section (5) unambiguously requires two mandatory conditions: exercise of option in the prescribed manner and exercise of such option on or before the due date for filing the return. The Court noted that the petitioner had clearly and consciously indicated in its return that it was not opting for Section 115BAA.

The Court rejected the contention that there was no specific column in the return to opt for Section 115BAA, noting that the return form expressly required the assessee to indicate whether it had opted for Sections 115BA, 115BAA or 115BAB. The Court further held that CBDT Circular No.6/2022 only condoned delay in filing Form 10-IC where the assessee had already opted for Section 115BAA in the return, and did not dispense with the statutory requirement of exercising the option itself within time.

Accordingly, the Court found no infirmity in the assessment order or the order rejecting revision.

Important Clarification

The High Court clarified that CBDT circulars issued under Section 119 cannot override or dilute mandatory statutory conditions. Concessional tax under Section 115BAA is available only where the option is expressly exercised in the return filed within the time prescribed under Section 139(1). Delay condonation for Form 10-IC does not cure failure to opt for the regime itself.

Final Outcome

The writ petition was dismissed. The Delhi High Court upheld the assessment order denying the benefit of Section 115BAA and the order of the Principal Commissioner rejecting revision. The demand raised and consequential proceedings were sustained.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677550_SARLAHOLDINGSPRIVATELIMITEDVsPRCOMMISSIONEROFINCOMETAXDELHI7NEWDELHIANR..pdf

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