Introduction: When One Wrong Click Costs 8% Tax
In today’s digital compliance environment, a single wrong selection on the income-tax portal — such as filing Form 10-IB instead of Form 10-IC — can change the company’s tax rate from 22% to 30%, creating unexpected tax demands, interest, and penalties.
This issue has surfaced repeatedly, and the recent Mumbai ITAT ruling in ACIT v. Magik Kraft (P.) Ltd. [[2025] 179 taxmann.com 632 (ITAT Mumbai)] provides much-needed relief and guidance.
Understanding the Legal Framework
Section 115BAA of the Income Tax Act, 1961, allows domestic companies to pay tax at 22%, provided they exercise this option by filing Form 10-IC as per Rule 21AE of the Income-tax Rules, 1962.
To avoid confusion, here’s the quick mapping:
| Applicable Section | Concessional Rate | Prescribed Form | Applicable Entity |
|---|---|---|---|
| Section 115BA | 25% | Form 10-IB | Certain domestic manufacturing companies (before 115BAA regime) |
| Section 115BAA | 22% | Form 10-IC | All domestic companies (subject to conditions) |
| Section 115BAB | 15% | Form 10-ID | New manufacturing companies incorporated after 1.10.2019 |
Filing the wrong form — even if the intention is correct — leads to denial of the concessional rate by CPC systems, as the technical validation is form-specific.
Case Summary: ACIT v. Magik Kraft (P.) Ltd.
The assessee, a domestic company, had opted for the 22% rate under Section 115BAA but inadvertently uploaded Form 10-IB instead of Form 10-IC. Consequently, CPC processed the return at 30%, raising a demand.
Before the Commissioner (Appeals), the assessee pleaded that the lapse was purely technical, not substantive. The CIT(A) agreed, holding that:
“Filing of Form 10-IC is a procedural requirement. Once substantive eligibility is established, such an inadvertent filing error can be rectified.”
The CIT(A) directed the Assessing Officer to allow the assessee to file Form 10-IC correctly and grant the concessional rate after verifying compliance.
The assessee complied by submitting Form 10-IC electronically and manually, after which the ITAT upheld the CIT(A)’s reasoning — confirming that the benefit of Section 115BAA could not be denied merely for a procedural lapse.
Why This Matters: The Systemic Gap
Currently, the income-tax portal offers no online rectification path for replacing an incorrect form (e.g., 10-IB instead of 10-IC). The CPC processes the return based on whatever form is uploaded, and no online correction mechanism exists even through Revised Return or Rectification u/s 154.
Thus, taxpayers and professionals often face a dead end — unless they:
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Approach the Jurisdictional Assessing Officer (JAO) with a written application, citing CIT(A) or ITAT precedents; and
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File the correct form electronically (if portal window allows) and manually (if closed) to demonstrate bona fide compliance.
Procedural Path: Practical Guidance for Rectification
If your client or company has made such an error, the following steps can help ensure lawful correction before escalation:
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Identify the error clearly — Verify which form was uploaded and for which section the concessional rate was claimed.
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Check CPC processing status — Whether the return has been processed u/s 143(1) or assessment completed.
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Prepare an application to the Jurisdictional AO —
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Explain the bona fide mistake.
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Quote ACIT v. Magik Kraft (P.) Ltd. and earlier relief-based precedents (e.g., PCIT v. Wipro Ltd.).
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Attach the correct Form 10-IC duly filed/attempted electronically.
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File rectification u/s 154 or seek implementation of appellate order — The AO is empowered to give effect to such rectification if the conditions under Section 115BAA are substantively fulfilled.
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Maintain supporting evidence — E-mail trail, screenshots of filing, tax computation showing intent to opt for Section 115BAA, and copy of acknowledgment.
This practical approach can often prevent the need for appeal, saving significant time and litigation cost.
Analytical Insight: Substance Over Form
The decision reinstates a core judicial principle — procedural errors cannot override substantive rights.
Where the taxpayer:
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Meets all eligibility criteria under Section 115BAA, and
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Demonstrates clear intent to opt for concessional taxation,
then an inadvertent e-filing lapse should not defeat statutory relief.
The ITAT has reaffirmed that substance must prevail over technical form, especially in automated systems where human error has no corrective outlet.
Important Points
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Double-verify form mapping before submission:
Even experienced teams confuse 10-IB with 10-IC due to similar nomenclature. Implement internal pre-filing checklists. -
If error occurs: Act promptly—apply to the JAO with precedent-based support before escalation.
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Systemic recommendation: CBDT and CPC should consider enabling a correction mechanism or permitting post-facto validation when intent and conditions are demonstrably satisfied.
Conclusion
The Magik Kraft ruling is more than an isolated relief — it’s a precedent of fairness in a system that sometimes penalizes genuine human error.
It reminds professionals that timely rectification, proper representation, and awareness of remedial jurisprudence can protect clients from avoidable tax burdens.
