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

ITA 3284/MUM/2025

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The case involves Greenovoc Specialty Coatings Private Limited, which appealed against the decision of the Centralised Processing Unit (CPC) that adjusted their tax rate from 15% to 22% without proper notice or hearing. The assessee had opted for the concessional tax rate under Section 115BAB of the Income Tax Act, filing Form 10-ID with their return. The CPC's adjustment was contested on the grounds that it violated the principles of natural justice and the specific provisions of Section 143(1)(a), which allows only for prima facie adjustments without further inquiry unless a notice is issued. The Tribunal found in favor of the assessee, highlighting the procedural lapses by the CPC.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711733 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2024-2025
• Other Referred Cases: Khatau Junkar Ltd. Vs. K.S. Pathania (1992) 196 ITR 55
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA
• Assessee Lawyers: RAJESH S. ATHAVALE
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 234B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI GIRISH AGRAWAL (ACCOUNTANT MEMBER) I.T.A. No. 3284/Mum/2025 Assessment Year: 2024-25 Greenovoc Specialty Coatings Private Limited Plot No. R-406, TTC Indl. Area, S.K Formulations, MIDC, Rabale, Navi Mumbai - 400701 PAN: AAICG2249Q Vs. Centralised Processing Unit/Dy. Commissioner of Incoem Tax, Circle 15(1)(2), Aaykar Bhavan, New Marine Lines, Mumbai-400020 (Appellant) (Respondent) Appellant by Shri Rajesh S. Athavale Respondent by Shri Arun Kanti Datta, CIT D.R. Date of Hearing 03.07.2025 Date of Pronouncement 25.07.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 25/03/2025 passed by Ld.CIT(A)/ADDL/JCIT (A), Patna, for assessment year 2024-25 on following grounds of appeal : “1. The learned CIT(A) erred in directing the Centralised Processing Center (CPC)/Assessing Officer (AO) to verify whether the appellant satisfies the conditions laid down in Section 115BAB of Printed from counselvise.com 2 ITA No. 3284/Mum/2025; A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited the Income tax Act and accordingly recompute the tax liability as per extant provisions of the Income tax Act. 2. The learned CIT(A) erred in not directing the CPC/AO to compute the tax liability of the appellant as per Section 115BAB of the Income tax Act, which was opted for by the appellant while filing its return of income filed for the Assessment Year 2024-25. 3. The learned CIT(A) erred in not directing the CPC/AO to delete the tax demand worked out as per Section 115BAA of the Income tax Act. 4. The learned CIT(A) erred in not directing the learned CPC/AO to delete the additional tax demand as the same is not permissible under Section 143(1) of the Income tax Act and such adjustment cannot be made without issuing intimation to the assessee. The learned CIT(A) erred in not appreciating that the adjustment on the claim, which requires further enquiry, cannot be made as prima facie adjustment under Section 143(1) of the Income tax Act. 5. The learned CIT(A) erred in not directing the CPC/AO to delete interest under Sections 234B and 234C of the Income tax Act. 6. Each one of the above grounds of appeal is without prejudice to the above. 7. The appellant reserves the right to add, alter or amend to the above grounds of appeal.” Brief facts of the case are as under: 2. 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. Printed from counselvise.com 3 ITA No. 3284/Mum/2025; A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited The Centralised Processing Unit (CPC) processed the return of income of the assessee by issuing intimation on 4/02/2025 under Section 143(1). The CPC without granting an opportunity of being heard to the assessee, made adjustment in tax computation by applying 22% of Tax rate. 3. Aggrieved by the intimation issued by CPC assessee preferred appeal before the Ld.CIT(A). 3.1 The Ld. CIT(A) after considering the various submissions by the assessee observed and held as under: “6.4 In view of the facts and circumstances of the case and documents uploaded by the appellant, ld assessing officer is directed to verify whether the appellant satisfies the conditions laid down in S. 115BAB of the Act and accordingly recompute the tax liability as per extant provisions of the Act. Needless to say, the assessing officer shall give due opportunity of being heard to the appellant before passing such order. Accordingly, ground no. 2 is partly allowed.” Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal. 4. 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 Printed from counselvise.com 4 ITA No. 3284/Mum/2025; 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. Printed from counselvise.com 5 ITA No. 3284/Mum/2025; A.Y. 2024-25 Greenovoc Specialty Coatings Private Limited 4.4 In support of the submission Ld.AR placed reliance on the decision of Hon’ble Bombay High Court in case of Khatau Junkar Ltd. Vs. K.S. Pathania reported in (1992) 196 ITR 55, wherein Hon’ble Court while dealing with phrase “prima facie inadmissible” in clause (iii) of section 143(1)(a) of the Act held that, the word “prima facie” means, on the face of it, the claim is not admissible. Hon’ble court held that, it also means that the claim should be such that it does not require any further inquiry before the disallowance. The Ld.AR submitted that, Hon’ble Court observed that where the claim is made that requires further inquiries, cannot be disallowed, without hearing the assessee and or giving assessee an opportunity to submit the proof in support of such claim. The Ld.AR thus submitted that, in the absence of notice being issued in respect of the issue in consideration, no adjustment can be made u/s. 143(1)(a) of Act. He also placed reliance on instruction No. 1814 dated 04/04/1989, issued by CBDT that explains the scope of the word. “word \"prima facie disallowance\" under Section 143(1) (a) of the Act as being different from a debatable issue. It clarifies that a debatable issue is one where a claim made by an assessee on the basis of a decision of a Court/Tribunal. A debatable claim cannot be disallowed by an intimation under Section 143(1)(a) of the Act.” 4.5 On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advance by both sides in the light of record placed before us. 5. 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 Printed from counselvise.com 6 ITA No. 3284/Mum/2025; 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 Printed from counselvise.com 7 ITA No. 3284/Mum/2025; 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: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "