Assessee wrongly opted out of new tax regime eligible for chapter VIA deductions

Assessee who inadvertently opted out of new tax regime eligible for deductions under chapter VIA though not claimed in the return of income – ITAT

In a recent judgment, ITAT Chennai has held that assessee,who inadvertently opted out of new tax regime, was eligible for deductions under chapter VIA of the Income Tax Act, 1961 (the Act) even though the deductions were not claimed by the assessee in the return of income.

ABCAUS Case Law Citation:
4688 (2025) (08) abcaus.in ITAT

Important Case Laws relied upon by Parties:
Goetze (India) Ltd v CIT
CIT v Abhinitha Foundation (P.) Ltd.
Ramco Cements Ltd. v DCIT
CIT v Pruthvi Brokers  & Shareholders Private Ltd. 

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming CPC intimation u/s 143(1) of the Act assessing the income under old tax regime without any deduction under Chapter VIA.

The appellant assessee was a doctor having professional income and income from other sources. The assessee had exercised the option for the “new tax regime” in terms of provisions of section 115BAC of the Act and filed Form No. 10IE in terms of rule 21AG relevant to AY 2021-22.

The assessee filed return of income under section 139(1) for the relevant Assessment Year i.e. AY 2023-24 without any claim for deduction under chapter VIA as the assessee wanted to continue to opt for the “new regime” and had accordingly filed the return of income Even in the income tax return, in the column, “option for current assessment year”, the assessee had provided the answer as “continue to opt”.

However, the assessee had inadvertently again filed the Form No. 10IE for the relevant Assessment Year by opting to withdraw from the option of filing taxes under the “new regime”.

Since the Form No.10IE was filed by the assessee withdrawing the option for “new tax regime”, the CPC, while processing the return, had calculated the tax payable as per “old regime” and raised a demand u/s 143(1) of the Act.

Aggrieved by the demand, the assessee filed an appeal before the CIT(A) and contended that since the CPC had treated the return as filed under the “old regime”, the assessee was eligible for deductions under chapter VIA. Even though the deductions were not claimed by the assessee in the return of income, the assessee was still eligible to claim the deductions under chapter VIA during the course of the appellate proceedings and the same should be allowed.

Also, the the assessee placed the proof of claim of deduction under chapter VIA under section 80C and under section 80TTB. The CIT(A), however, dismissed the appeal by holding that there was no discrepancy in the order passed by CPC u/s 143(1) of the Act.

Before the Tribunal the assessee contended that she was eligible to claim the deduction under chapter VIA of the Act and prayed that the deductions be given effect to and the demand raised by the CPC be set aside. 

The Tribunal observed that it is trite law that a fresh claim of deduction made before the FAA has to be entertained by him as laid down by the Hon’ble Supreme Court and various High Courts and ITATs. In all these decisions, the consistent view had been taken that an assessee can make a claim of deduction for the first time before the appellate authorities and the appellate authorities are bound to entertain the same.

Following the judgments rendered by the Hon’ble Supreme Court as well as the Hon’ble High Courts, the Tribunal opined that the FAA ought to have considered the claim of deductions made under Chapter VIA, in tune with the “old regime” and should have re-computed the income of the assessee after giving effect to the claim of deduction made under Chapter VIA.

Accordingly, the Tribunal allowed the appeal of the assessee and directed the Assessing Officer to recompute the income by allowing the deduction claimed under Chapter VIA of the Act.

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