AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 368
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.... 2. That Learned Additional Commissioner of Income Tax (Appeals) gravely erred in rejecting the grounds of appeal raised by the appellant without adjudicating on the relevant issues submitted during the course of hearing of appeal. 3. That the Appellant craves to add, amend, alter, modify OR DLEETE any OR all of the grounds of appeal before OR at the time of hearing." 3. At the outset, ld. Counsel for the assessee submitted that assessee has opted for the concessional rate of tax @15% u/s. 115BAB for the first time at the time of filing return of income for A.Y. 2023-24 and such option exercised by the assessee on the prescribed form has been accepted by the Revenue authorities. Reference was made to the order of ld.CIT(A) 19.08.2025 u/s. 250 of the Act for A.Y. 2023-24 accepting the claim of assessee exercising the valid option for concessional rate of tax 115BAB of the Act and the assessee being liable to tax @15%. He submitted that for the subsequent period the assessee is not required to exercise option again because as per section 115BAB(viii) of the Act the option once exercised shall apply to subsequent assessment years and therefore the CPC grossly erre....
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.... be computed at the rate of twenty-two per cent: Provided also that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply to the person as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the following conditions shall apply, namely:- (a) the company has been set-up and registered on or after the 1st day of October, 2019, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024 and,- (i) the business is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of a company, business of which is formed as a result of the re-establishment, reconstruction or revival by the person of the business of any such undertaking as is referred to in section 33B, in the circumstances an....
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....f gas into cylinder; (v) printing of books or production of cinematograph film; or (vi) any other business as may be notified by the Central Government in this behalf; and (c) the total income of the company has been computed,- (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or subclause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M; (ii) without set-off of any loss or allowance for unabsorbed depreciation deemed so under section 72A where such loss or depreciation is attributable to any of the deductions referred to in sub-clause (i). Explanation.-For the removal of doubts, it is hereby clarified that in case of an amalgamation, the option under sub-section (7) shall remain valid in case of the amalgamated company only and if the conditions contained in sub-section (2) are continued to be satisfied by such ....
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.... or before the due date specified under sub-section (1) of section 139 for furnishing the first of the returns of income for any previous year relevant to the assessment year commencing on or after 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years: Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. Explanation.-For the purposes of section 115BAA and this section, the expression "unabsorbed depreciation" shall have the meaning assigned to it in clause (b) of sub-section (7) of section 72A." 6. Now before us, ld. Counsel for the assessee contended that in compliance to section 115BAB(7) assessee has first time opted for this concessional rate of tax u/s. 115BAB of the Act in the return filed for A.Y. 2023-24. It was submitted within the prescribed time limit provided u/s. 139(1) of the Act on Form No.10-ID stands filed on 24.10.2023. Copy placed at pages 34 and 35 of the paper book for A.Y. 2023-24 and CPC made similar addition against which the assessee preferred appeal before ld.CIT(A) and was able to succeed. Finding ....
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....ed the ITR on 30.12.2023, in which the appellant has opted for taxation under section 115BAB. The CPC, while processing this return under section 143(1) on 21.05.2024, applied the tax rate of 22% under section 115BAA instead of 15% under section 115BAB. 7.1.2. From the compliance point of view, both substantive and procedural requirements of section 115BAB(7) read with Rule 21AF stood complied with before the statutory deadline. The conditions under section 115BAB(2) include incorporation on or after 01.10.2019, commencement of manufacturing before 31.03.2024, non-usage of second-hand plant beyond prescribed limits, and waiver of certain exemptions/deductions. The appellant has demonstrated that all such conditions are satisfied. The only point of dispute relates to the inadvertent initial filing of an incorrect form, which was rectified promptly. It is well settled that substantive eligibility cannot be defeated by a minor procedural lapse, especially where intention is clear and compliance is completed within time. 7.1.3. Once an assessee has filed its original return within 139(1) and validly exercised the option by furnishing Form 10-ID within that time, the l....
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....5, which obligates revenue authorities to assist taxpayers in claiming legitimate reliefs. 7.1.6. Again, section 143(1)(a) of the Act explicitly mandates that before making any adjustment to the returned income, the CPC must provide the assessee with a prior Intimation and a reasonable opportunity to respond. This safeguard is built into the statute to ensure adherence to the principles of natural justice and to prevent unilateral alterations that may adversely affect the taxpayer. In the present case, however, no such notice or opportunity was extended to the appellant. As a result, the appellant was deprived of the chance to explain and clarify the bona fide clerical mistake of initially filing Form 10-IC instead of Form 10-ID, a mistake that was in fact rectified on the very same day. The denial of this statutory opportunity not only caused prejudice to the appellant but also renders the adjustment procedurally defective and legally unsustainable. Such omission goes to the root of the matter and vitiates the entire adjustment made under section 143(1). 7.1.7. Considering the facts, legal provisions, and judicial precedents, it is held that the appellant duly ex....
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.... 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 a....