E SELVAN TEXTILES PVT. LTD.,TIRUVANNAMALAI vs. DCIT, CIRCLE-1,, VELLORE

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ITA 2496/CHNY/2026Status: DisposedITAT Chennai02 July 2026AY 2020-216 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal held that the CIT(A) erred in dismissing the appeal in limine without properly assessing the delay and that the CPC's rectification order violated Section 154(3) by enhancing liability without a hearing. The matter was restored to the CIT(A) for fresh adjudication.

What were the facts?

The assessee company opted for tax under Section 115BAA and filed its return. The CPC initially granted the benefit but later, during rectification for TDS credit, withdrew the concessional tax rate without notice. The CIT(A) dismissed the appeal due to a perceived delay.

What were the issues?

Whether the CIT(A) was justified in dismissing the appeal on delay without proper assessment, and whether the CPC's rectification order violated principles of natural justice and Section 154(3) by changing the tax regime without notice.

Which sections of the Income-tax Act were involved?

Section 115BAA,Section 154,Section 154(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 18.06.2026Pronounced: 02.07.2026

आयकर अपीलीय अधिकरण, ‘सी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI श्री जॉजज जॉजज के, उपाध्यक्ष एवं श्री एस.आर.रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 2496/Chny/2026 ननिाारण वर्ा / Assessment Year : 2020-21 E Selvan Textiles Private The Deputy Commissioner of Limited, vs. Income Tax, No.1, Thennamara Street, Circle 1 Arani, Tiruvannamalai - 632 301 Vellore. [PAN: AAECE-2059-E] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/Appellant by : Shri. M. Karunakaran, Advocate प्रत्यर्थी की ओर से/Respondent by : Shri. Manjunath H.S, Addl. CIT सुनवाई की तारीख/Date of Hearing : 18.06.2026 घोर्णा की तारीख/Date of Pronouncement : 02.07.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM :

The present appeal has been preferred by the Assessee against the order dated 23.02.2026 passed by the Learned Commissioner of Income Tax (Appeals), Addl/JCIT(A)-12, Mumbai [hereinafter referred to as “the Ld. CIT(A)”], arising from the rectification order dated 13.05.2025 passed by the CPC, Bengaluru (Assessing Officer) [hereinafter referred to as “the AO”], u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2020-21.

:-2-: ITA. No:2496/Chny/2026 2. The sole ground raised by the assessee is that the CPC, Bengaluru, has denied tax benefit u/s.115BAA of the Act in the rectification petition filed by the assessee for granting correct TDS amount, without providing an opportunity to the assessee for the increase in demand for the A.Y. 2020-21. 3. Brief facts of the case emanating from the records are that the assessee is a Private Limited Company, filed its return of income on 31.03.2021 admitting an income of Rs.1,30,26,260/- for the A.Y.2020-21. While filing the return of income the company has opted to pay tax u/s.115BA of the Act and filed form 10-IC also on the date of filing the return i.e. 31.03.2021. Thereafter, an intimation dated 10.08.2022 was issued by the Central Processing Centre (hereafter referred to as “CPC”) by accepting the returned income and the computed taxes, but allowed the prepaid taxes of Rs.25,50,463/- instead of Rs.34,35,853/- as claimed by the assessee and raised a demand of Rs.9,50,900/-. The assessee filed its response by selecting “Disagree with Demand” in the outstanding demand response option and furnished the explanation. Since no response was received from CPC, the assessee submitted response through rectification option on 12.02.2025 by seeking rectification of the intimation with correct amount of prepaid taxes of Rs.34,35,853/-. The CPC while rectifying the intimation u/s.154 given the credit of prepaid taxes of Rs.34,35,853/-, computed the tax on total income at regular rate instead of tax computation u/s.115BAA of the Act as given in the intimation u/s.143(1) of the Act and raised a demand of Rs.14,57,700/-. Further rectification has been sought by the assessee on 19.05.2025 and the same has been rejected by passing an order u/s.154 of the Act dated 14.11.2025. 4. Aggrieved by the rectification order u/s.154 of the Act passed by the CPC, the assessee preferred an appeal before the ld.CIT(A) on 11.02.2026 with a delay in filing an appeal of 25 days and also explained the delay in Form 35 filed.

:-3-: ITA. No:2496/Chny/2026 5. At the outset, we observed that the ld.CIT(A) dismissed the appeal filed by the assessee without condoning the delay in limine, observing that the assessee filed an appeal with delay of 243 days. Aggrieved by the impugned order of the Ld.CIT(A), the assessee is in appeal before us.

6.

The ld.AR submitted that the ld.CIT(A) erred in dismissing the appeal in limine by denying condoning the delay of 243 days, without appreciating that the assessee had filed the said appeal with a delay of only 25 days. Further, the assessee also had explained the reasons for delay in Form 35 itself. Further, the ld.AR argued that the rectification order has been passed denying the claim of concessional rate of tax u/s.115BAA, without giving an opportunity to the assessee. In view of the above, the ld.AR prayed that the Tribunal may be pleased to set aside the order of ld.CIT(A) and remit the issues to the file of the ld.CIT(A). Further, ld.AR assured the bench that the ld.AR will represent on behalf of the assessee before the ld.CIT(A) to complete the appellate proceedings effectively.

7.

Per contra, the ld.DR submitted that the assessee had filed the return of income and also Form 10-IC to claim the concessional rate of tax after the due date provided for filing the return of income and hence the CPC has rightly rejected the claim of the assessee.

8.

We have heard the rival parties and perused the material available on record and gone through the orders of the lower authorities. The short controversy arising for our consideration is two fold: firstly, whether the Ld.CIT(A) was justified in dismissing the appeal in limine on the ground of delay without properly appreciating the actual period of delay; and secondly, whether the issue relating to denial of concessional tax rate u/s.115BAA of the Act while passing the rectification order u/s.154 of the Act requires fresh adjudication.

:-4-: ITA. No:2496/Chny/2026 9. On perusal of the records, we find that the assessee had originally filed its return of income for the Assessment Year 2020-21 on 31.03.2021 declaring a total income of Rs.1,30,26,260/-. Simultaneously, the assessee had also filed Form No. 10-IC opting for taxation under section 115BAA of the Act. It is an undisputed fact that the intimation issued u/s.143(1) dated 10.08.2022 accepted the returned income and computed the tax liability by granting the benefit of section 115BAA of the Act . However, the CPC allowed prepaid taxes of only Rs.25,50,463/- as against the claim of Rs.34,35,853/-, resulting in a demand. Subsequently, upon the assessee filing an application u/s.154 seeking grant of correct credit of prepaid taxes, the CPC, while allowing the additional tax credit, altered the basis of tax computation by withdrawing the concessional rate available u/s.115BAA and recomputed the tax liability at regular rates, thereby enhancing the demand.

10.

At this juncture, it is pertinent to note that the rectification proceedings u/s.154 are confined to rectification of mistakes apparent from the record. The scope of such proceedings is limited and does not extend to reviewing or revisiting issues which are debatable or require detailed examination of facts and law. Prima facie, the original intimation issued u/s.143(1) had accepted the assessee's claim u/s.115BAA. Therefore, while considering the assessee's request for grant of additional TDS credit, the CPC travelled beyond the scope of the rectification proceedings by modifying the tax regime applicable to the assessee without putting the assessee on notice or affording an opportunity of being heard. Section 154(3) of the Act specifically mandates that where a rectification order has the effect of enhancing an assessment, reducing a refund or otherwise increasing the liability of the assessee, such order shall not be passed unless the authority concerned has given notice to the assessee of its intention to do so and allowed the assessee a reasonable opportunity of being heard.

:-5-: ITA. No:2496/Chny/2026 11. In the present case, the records placed before us do not indicate that any such opportunity was afforded to the assessee before denying the benefit of section 115BAA and enhancing the demand. Consequently, there appears to be a violation of the mandatory requirement prescribed u/s.154(3) of the Act as well as the principles of natural justice.

12.

We further find merit in the contention of the assessee that the Ld.CIT(A) has dismissed the appeal in limine without properly appreciating the factual position regarding the period of delay. The assessee has consistently contended that the appeal before the Ld.CIT(A) was filed with a delay of only 25 days and that an application explaining the reasons for such delay was duly incorporated in Form No. 35. However, the impugned order reveals that the Ld.CIT(A) proceeded on the premise that there was a delay of 243 days. There is nothing on record to indicate the basis on which such delay was computed or whether the explanation furnished by the assessee was examined.

13.

The power to condone delay is intended to advance substantial justice. It is a settled principle that procedural requirements should not defeat a meritorious cause, particularly when the delay is not inordinate and a reasonable explanation has been offered. The appellate authority is expected to adopt a liberal approach while considering condonation applications so that disputes are adjudicated on merits rather than being rejected on technical grounds. In our considered view, the dismissal of the appeal in limine without properly determining the actual period of delay and without examining the explanation offered by the assessee has resulted in denial of effective appellate remedy. The contention of the Ld.DR that the assessee had filed the return of income and Form No. 10-IC beyond the prescribed due date, thereby rendering it ineligible for the benefit u/s.115BAA, involves examination of factual and legal aspects which have not been adjudicated by the Ld.CIT(A). Since the first appellate authority has not rendered any finding on the merits of the issue, we refrain from expressing any opinion thereon.

:-6-: ITA. No:2496/Chny/2026 14. Considering the totality of facts and circumstances of the case, and in the interest of substantial justice, we deem it appropriate to set aside the impugned order of the Ld.CIT(A) by condoning the delay in filing the appeal by the assessee and restore the matter to his file with a direction to dispose of the appeal afresh on merits, after affording adequate opportunity of being heard to the assessee and by passing a reasoned and speaking order in accordance with law. The assessee is directed to extend full cooperation and furnish all necessary documents and submissions before the Ld.CIT(A) without seeking unnecessary adjournments.

15.

In the result, appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the court on 02nd July, 2026 at Chennai.

Sd/- Sd/- (जॉजा जॉजा के) (एस. आर. रघुनार्था) (GEORGE GEORGE K) (S. R. RAGHUNATHA) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनांक/Dated, the 02nd July, 2026. Devadas आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. पवभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF Digitally signed by DEVADAS DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.07.07 17:24:40 +05'30'

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