Old tax regime denied despite filing Form 10-IEA in previous PY - First year of business. Rectification or Appeal?
Looking for views from tax professionals/people who have dealt with a similar issue.
Facts:
AY 2024-25: I had no income under the head PGBP, so I filed ITR-2.
Before filing the return, I filed Form 10-IEA (Opting Out) on 20-Jul-2024 for AY 2024-25. The form was successfully e-verified and an acknowledgement was generated.
AY 2025-26: I had business income only because of F&O trading loss (non-speculative business loss) and a small intraday speculative profit, so I filed ITR-3 within the due date.
In the ITR-3, I specifically selected:
Form 10-IEA already filed in AY 2024-25.
Mentioned the acknowledgement number and filing date.
Selected “Continue to opt out of the new tax regime.”
Despite this, CPC processed my return under the new tax regime, denied all old regime deductions/exemptions, converted my claimed refund into a demand, and raised a demand of about ₹33.5k (overall impact ~₹1 lakh including refund).
Earlier, CPC had issued an e-proceeding seeking clarification regarding Form 10-IEA. I responded explaining that Form 10-IEA had already been filed, but the final 143(1) intimation still applies the new regime.
My questions are:
- Has anyone seen this exact issue before?
- Does filing Form 10-IEA in a year where there was no PGBP make it invalid when business income first arises in the following year?
- Is this more likely to be a CPC processing issue or a legal interpretation?
Would you recommend:
- Rectification u/s 154,
- Direct appeal before CIT(A), or
- Both (to protect limitation)?
Are there any CBDT circulars, FAQs, tribunal rulings or case laws on this specific fact pattern?
Would really appreciate views from anyone who has handled a similar matter.