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Facts
The assessee, GFCL EV Products Limited, filed its return for AY 2023-24 opting for the beneficial tax regime under section 115BAB. The company had filed Form 10ID in the previous year and believed it was eligible for this regime. However, the return was processed under section 143(1) without considering this option, leading to denial of the beneficial tax rate.
Held
The Tribunal held that once the option under section 115BAB is exercised, it continues for subsequent years without needing to refile Form 10ID annually. The eligibility for this section involves factual verification regarding commencement of manufacturing, which cannot be determined through a summary adjustment under section 143(1) without affording the assessee an opportunity of being heard. The denial of the benefit and the higher tax rate without prior intimation violated principles of natural justice.
Key Issues
Whether the assessee is eligible for the concessional tax rate under section 115BAB, and whether the denial of this benefit and application of a higher tax rate through section 143(1) processing without prior intimation is valid.
Sections Cited
115BAB, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal is filed by the Assessee against the appellate order dated 19.11.2025 passed by the ADDL/JCIT (A)-10 Mumbai, relating to the Assessment Year 2023-24. The assessee has raised the following grounds of appeal: 2. 1) Ground 1-Ground pertaining to the denial of the eligibility under section 115BAB of the Act.
1. In the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the main condition stipulated in section 115BAB is required to be complied is that the Company should have commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024 viz. in the subsequent year II. In the facts and circumstances of the case and in law, the learned CIT(A) erred in observing and concluding that the appellant has not fulfilled the Asst. Year : 2023-24 - 2– condition stipulated in section 115BAB that it should have commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024, when, in fact, the appellant had started production before 31st March, 2024. The Appellant prays that the Id. AO be directed to hold that the appellant is eligible under section 115BAB of the act. 2) Ground 2-Ground of appeal pertaining to the denial of tax rate under section 115BAB of the Act In the facts and circumstances of the case and in law, the learned CIT(A) erred denying the beneficial tax rates under section 115BAB of the Act on income offered to tax under the head "income from other source" by holding that since no manufacturing or production activities took place during the relevant assessment year, the main condition u/s 115BAB is not satisfied and the Appellant is not entitled to the beneficial tax rates prescribed under this section. The Appellant prays that the Id. AO be directed to apply the tax rates specified under section 115BAB to the Appellant. 3) Ground 3-Ground of Appeal pertaining to prior intimation to the appellant before the adjustment under section 143(1). In the facts and circumstances of the case and in law, the learned CIT(A) erred in stating that since there was no adjustment to the total income of the appellant there was no necessity to give prior adjustment notice to the appellant as the conditions stipulated in proviso to section 143(1)(a) are not applicable to section 143(1)(b) of the Act. The CIT (A) as well as the Deputy Director of Income Tax, CPC has treated the issue of tax rate determination as an adjustment, whereas the determination of the appropriate tax rate is a matter requiring detailed examination and cannot be adjusted summarily under the said section. The Appellant prays that the Id. AO be directed to quash the intimation issued under section 143(1) of the Act and grant tax rates specified under section 115BAB to the Appellant. 4) Ground 4- General ground 1. Each of the above Ground of Appeal is independent and without prejudice to the other Grounds of Appeal preferred by the Appellant. Asst. Year : 2023-24 - 3– II. The Appellant craves leave to add, alter, vary, omit, substitute or amend one or more of the above Grounds of Appeal at any time before or at the time of proceedings so as to enable the Honorable Panel to decide these Appeal according to law.
3. The fact of the case is that the assessee has filed the return of income for AY 2023-24 on 30.10.2023 declaring the total income of Rs.4,44,816/-. The assessee company had exercised the option u/s. 115BAB for and from AY 2022-23 and uploaded the Form 10ID on 31.10.2022. The return of income was processed u/s.143(1) on 26.04.2024 without any further adjustments in the returned income. However, while processing the return u/s.143(1) for AY 2023-24, the option exercised under section 115BAB was not considered though the assessee company had opted for new tax regime u/s.115BAB in AY 2022- 23 and Form 10ID was filed on 31.10.2022 viz before the due date of return for AY 2022-23.
4. Heard the argument of both the parties and perused the material available on record.
At the outset, both the parties fairly submitted that the issue raised by the assessee in the present appeal stands covered by the order of the Tribunal in the assessee’s own case in 2020-21 dated 28.10.2025. For the sake of ready reference, the operative portion of said order is reproduced as under:
“…8. We have carefully considered the rival contentions and perused the material available on record. It is an admitted position that the assessee had duly exercised the option under section 115BAB of the Act for the immediately preceding assessment year 2022-23 by filing Form No. 10ID within the prescribed time. Once the option under section 115BAB is exercised, it continues to apply for all subsequent assessment years, and there is no requirement under the Act or the Rules to file Form No. 10ID Asst. Year : 2023-24 - 4– again for each year. Therefore, for the year under consideration, being the second year of claim, the assessee was eligible to continue under the concessional tax regime prescribed under section 115BAB of the Act. We further note that the issue as to whether the assessee had actually commenced manufacturing or production activity within the meaning of section 115BAB(2)(a) is a matter requiring factual verification. Such an issue is inherently debatable and does not constitute a mistake apparent from the record which can be adjusted while processing a return under section 143(1) of the Act. The scope of prima facie adjustments under section 143(1) is limited only to apparent arithmetical or factual errors discernible from the return and accompanying documents. The eligibility of the assessee for the concessional rate under section 115BAB, depending upon the date and nature of commencement of manufacturing activity, cannot be decided without affording an opportunity of hearing to the assessee and not through a mechanical adjustment under section 143(1) of the Act. We are of the considered view that the action of CPC in applying a higher tax rate of 30% without prior intimation or opportunity of being heard is in violation of the principles of natural justice. When an assessee is being subjected to a higher or additional tax liability, it is only fair, reasonable and in the interests of justice that the assessee is afforded an opportunity to explain its position before any such adjustment is made. In the present case, admittedly, no such opportunity was given to the assessee before substituting the concessional rate of 22% with the normal rate of 30%. The impugned action of CPC therefore cannot be sustained either in law or on facts. We also note that in the immediately preceding year, the same claim under section 115BAB had been accepted by the Department while processing the return under section 143(1). In such circumstances, it was incumbent upon the CPC to maintain consistency and not to deviate from the accepted position without granting an opportunity of hearing. The suo motu denial of benefit in the second year, without any change in the factual matrix or legal position, is unjustified and contrary to settled principles of natural justice and fair play. In view of the foregoing discussion, we are of the considered opinion that the issue relating to the applicability of concessional tax rate under section 115BAB of the Act could not have been the subject matter of adjustment under section 143(1) of the Act without giving any opportunity of hearing and the action of the CPC as well as the order of the CIT(A) upholding such action are unsustainable.
In the result, the appeal of the assessee is allowed…” Asst. Year : 2023-24 - 5–
In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is allowed.