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Facts
The assessee company, Aalidhara Texfab Pvt. Ltd., filed its return of income for AY 2023-24 opting for taxation under section 115BAB at 15%. The CPC processed the return under section 143(1) and levied tax at 22% under section 115BAA, contrary to the assessee's option. The CIT(A) confirmed the CPC's action.
Held
The Tribunal held that the AO-CPC failed to provide an intimation to the assessee regarding the adjustment made, which is a mandatory requirement under the first proviso to section 143(1) of the Act. Therefore, the adjustment was not as per the mandate of the law. The decision in Arham Pumps vs. DCIT was also relied upon.
Key Issues
Whether the CPC erred in processing the return of income by levying tax at 22% u/s 115BAA instead of 15% u/s 115BAB as opted by the assessee, without providing mandatory intimation.
Sections Cited
143(1), 115BAA, 115BAB
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Before: SHRI T. R. SENTHIL KUMAR & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 31.12.2024, by the Commissioner of Income-tax (Appeal), Addl/JCIT(A) - 9, Mumbai [in short ‘CIT(A)’] for the Assessment Year (AY) 2023-24.
Grounds of appeal
raised by the assessee are as under: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of learned assessing officer (CPC) by processing the return of income levying tax @ 22% u/s 115BAA of the Act instead of 15% u/s 115BAB opted by the assessee company in its return of income.
2. It is therefore prayed that assessee company be taxed at concessional rate of 15% u/s 115BAB as opted by it and the demand raised by the AO CPC may please be deleted.
/AY.2023-24 Aalidhra Texfab Pvt. Ltd.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in course of hearing of the appeal.”
The facts of the case in brief are that the assessee filed its return of income for AY 2023-24 on 31.03.2023, declaring total income at Rs.49,38,050/-. The said return was processed by the Assessing Officer (in short, ‘AO’), Central Processing Centre (CPC) on 22.12.2023 wherein the CPC determined the tax payable at 22% u/s 115BAA instead of 15% u/s 115BAB of the Act. While filing the return, the assessee had opted for taxation @ 15% u/s 115BAB of the Act. Against the said processing u/s 143(1) of the Act, the assessee filed appeal before the CIT(A) (Addl./JCIT(A)-6, Mumbai). The CIT(A) confirmed the order of the CPC by referring to the provisions of section 115BAB of the Act and stating that in Form 10-ID, date of commencement of manufacturing / production has been given as 14.10.2023. He observed that there was no income from manufacturing in AY 2023-24. He dismissed the appeal of the assessee.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted that while filing the return for the year under consideration, the appellant had opted for taxation at the rate of 15% u/s 115BAB of the Act and had also filed application in Form No. 10-ID on 31.10.2023. The assessee had filed its return of income and Form 10-ID before the due date of filing the return of income. In the intimation u/s 143(1) of the Act, the CPC allowed the claim of assessee wherein the taxation option opted u/s 115BAB of the Act was allowed. However, the rate was calculated @ 22% u/s 115BAB of the Act instead of 15% /AY.2023-24 Aalidhra Texfab Pvt. Ltd. u/s 115BAB of the Act. The ld. AR submitted that the assessee had wrongly mentioned the date of commencement as 14.10.2023 instead of 25.02.2020. The assessee had filed evidence in this regard before CIT(A), which was not considered. Further, the ld. AR submitted that as per the proviso to section 143(1) of the Act, no adjustment could be made unless an intimation is given to the assessee of such adjustment either in writing or through electronic mode. No such intimation was given to the assessee regarding the adjustment or incorrect claim made by the assessee. In this regard, the ld. AR relied on the decision of the Ahmedabad Tribunal in case of Arham Pumps vs. DCIT, (2022) 140 taxmann.com 204.
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue relied on the orders of CPC and CIT(A).
We have heard both the parties and perused the materials available on record. We have also deliberated upon the decision relied upon by the ld. AR. The AO-CPC processed the return filed by the assessee on 22.12.2023 wherein the CPC determined the tax payable at 22% u/s 115BAA instead of 15% u/s 115BAB of the Act. While filing the return, the assessee had opted for taxation @ 15% u/s 115BAB of the Act. However, the AO-CPC had not issued any intimation to the assessee of such adjustment either in writing or in electronic mode. The revenue has not controverted the above fact. Therefore, the above adjustment was not as per the mandate of section 143(1) of the Act. It would be proper to reproduced provisions of section 143(1) of the Act for ready refence and clarity:
/AY.2023-24 Aalidhra Texfab Pvt. Ltd. “143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: — (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure 82[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 83[section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: (underline is ours) Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;” 6.1 It is clear from a plain reading of the section that a return can be processed u/s 143(1)(a) of the Act by making six types of adjustments only. However, the first proviso to section 143(1)(a) makes it clear that no such /AY.2023-24 Aalidhra Texfab Pvt. Ltd. adjustment shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. Therefore, intimation of the proposed adjustment is a statutory requirement without which no adjustment could be made. Such mandatory obligation has not been fulfilled by the AO-CPC before making the adjustment. Therefore, the impugned order is not valid in the eyes of law. The decision relied upon by the ld. AR in case of Arham Pumps (supra) is also directly on the issue and is in favour of assessee. In view of the facts and the decision cited supra, the grounds raised by the assessee are allowed and the order of CIT(A) is set aside.
7. In the result, the appeal of the assessee is allowed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 19/08/2025.