GREENOVOC SPECIALTY COATINGS PRIVATE LIMITED ,NAVI MUMBAI vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE 15(1)(2), MUMBAI, MUMBAI

Each one of the above grounds of appeal

The assessee is a private limited company engaged in the manufacturing of anti corrosion coating paint and heat insulation coating paint. The assessee filed its income tax return disclosing taxable income at Rs.3,17,39,020/-, for the year under consideration on 30/10/2024. As the assessee is engaged in manufacturing activity, it opted for concessional rate of tax under sub-section (2) of the Section 115BAB of the Act, filing From 10- ID, alongwith the return of income. The assessee alleged that the assessee fulfil all necessary conditions u/s.115BAB of the Act.

The only issue alleged by the assessee is in respect of computing tax liability of assessee as per normal provision of the Act, whereas the assessee adopted tax liability as per section 115BAB of the Act. 4.1 The Ld.AR submitted that, CPC accepted option of the assessee as per section 115BAB of the Act. However, while computing the tax liability the CPC applied 22% instead of 15%. The Ld.AR submitted that, CPC can only made prima facie adjustment on the income tax return filed by the assessee and once CPC accepted assessee’s claim under section 115BAB, the rate of tax cannot be as per any other provisions of the Act. It is submitted that, the CPC cannot sit and verify, whether the A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited assessee satisfied the condition u/s.115BAB of the Act, without issuing any notice. The Ld.AR emphased that, assessee did not receive any notice or intimation, proposing to make such adjustment of rate of tax in the hands of the assessee. 4.2 He submitted that, section 143 confers power to pass intimation to rectifying arithmetical mistakes, or any disallowances permissible u/s.143(1) of the Act on the face of it. He submitted that, the CPC is permitted only to rectify arithmetical mistakes and prima facie adjustment in the return, based on the documents accompanying the return of income that includes tax audit report. The Ld.AR submitted that, the assessee filed Form 10ID along with the return of income and opted for 15% concessional rate of corporate tax as per section 115BAB of the Act. It is further submitted that, the assessee filed return of income within the due date as per section 139(1) of the Act, and having accepted the said option in the intimation the CPC cannot compute tax at any other rate other than 15%. He submitted that, if at all any adjustment is to be made, a notice should have been issued to assessee to represent its claim. 4.3 As per the first proviso to Section 143(1), the CPC cannot make any adjustments which are permissible there under unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. The CPC has applied 22% tax rate on the business profit declared for the Assessment Year 2024-25 as per Section 115BAA of the Act and determined the tax liability instead of 15% as per Section 115BAB.

The issue alleged by the assessee is that before making adjustment not being “prima facie” in nature, while processing the return of income u/s.143(1) of the Act, notice must be issued A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited and an opportunity of being heard must be granted to the assessee in accordance with the proviso section 143(2)(a) of the Act. 5.1 In the present facts of the case it is noted that the assessee opted for concessional rate at 15% u/s.115BAB of the Act by filing Form 10ID along with original return of income. Subsequently, while processing the return of income CPC computed the rate of tax at 22%. 5.2 It is a well settled law that, before making any adjustment which results in increase in the tax liability or reduction in the refund claim or loss, the assessee has to be served with a notice, even if the assessment is completed u/s 143(1)(a) of the Act. The proviso to section 143(1)(a) specifically provides that no adjustment shall be made unless (as specified in clause (a) to section 143(1) of the Act) intimation is given to the assessee of such adjustments either in writing or in an electronic mode. In case the response is received from the assessee within a period of 30 days from the date of such intimation, the same should be considered before making any adjustment. 5.3 The principles of natural justice demand that, before passing any order which has the effect of enhancing the liability of assessee, an opportunity of hearing should be given to the assessee. In the instant case there is nothing on record to suggest that the notice was served on the assessee before applying 22% rate of tax as against 15% u/s.115BAB offered by the assessee on the income returned. We thus find that such adjustment made in a unilateral proceedings is in violation of the principles of natural justice, as A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited well as mandate of Section 143(1)(a) of the Act, hence, the same is unsustainable. Accordingly all the grounds raised by the assessee stands allowed. Ground no.5 raised by the assessee is consequential in nature and therefore do not require adjudication. Accordingly the appeal filed the assessee stands allowed. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 25/07/2025 Sd/- Sd/- (GIRISH AGRAWAL) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 25/07/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to: