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Facts
The assessee filed its return of income, which was later revised. The Assessing Officer (AO) issued a draft assessment order accepting the revised income, but later passed a final assessment order at a higher income without issuing a fresh show cause notice or amended draft order. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the AO was incorrect in enhancing the income in the final assessment order without providing the assessee with an opportunity to respond, especially after accepting the income in the draft assessment order. The CIT(A)'s dismissal of the appeal was also found to be incorrect.
Key Issues
Whether the AO erred by enhancing the assessed income in the final order without issuing a show cause notice, and whether the CIT(A) was justified in dismissing the appeal on technical grounds.
Sections Cited
143(1), 143(3), 143(3A), 143(3B)
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Income Tax Appellate Tribunal, MUMBAI “B” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI SANDEEP SINGH KARHAIL
O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 18-06-2025, pertaining to Assessment Year (AY) 2018-19, wherein the assessee has taken the following grounds of appeal:
“1. Ld.CIT(A) erred in confirming assessment made at income of Rs 95,86,335/- without considering the fact that under draft assessment order issued dated 17.03.2021 income assessable was computed at RS.68,32,695/-. Ld.AO ought not to vary income assessed in draft assessment order without issuing a show cause notice.
Ld.CIT(A) failed to appreciate that 'adjustment in interest received as per IND_AS Rs 22,27,582/- 'and' adjustment in rent Rs.16,29,695/- as per IND-AS 'both not being actual income/expense not to be considered while computing taxable income.
Ld.CIT(A) ought to have considered that if in Intimation u/s 143(1)(a) adjustment in interest received as per IND_AS Rs 22,27,582/- 'is assessed as income, while computing taxable income' adjustment in rent Rs. 16,29,695/- as per IND-AS 'be allowable as deduction.
4. It is prayed that addition made in assessment order rent Rs.16,29,695/- be deleted.
5. Appellant crave leave to add, alter or amend any ground of appeal at the time of hearing or before.”
2. Briefly stated facts of the case are that assessment in this case was completed u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 („the Act‟) vide order dt. 25-03-2021, wherein the assessed income was determined at Rs. 95,86,335/-. The assessee carried the matter in appeal before the Ld.CIT(A) and it was submitted that it has filed original return of income on 20-09-2018 declaring total income of Rs. 68,30,420/-. Thereafter, revised return of income was filed on 04-01-2019, declaring total income of Rs. 52,00,730/-. Thereafter, the assessment proceedings were initiated and notices were issued and the AO issued a draft assessment order dt. 17-03-2021, computing income at Rs. 68,33,425/- i.e., Rs.52,00,730/- as per the revised return of income as increased by certain disallowances amounting to Rs. 16,32,695/-. It was submitted that the assessee accepted the suggested variance by the AO in terms of draft order vide its submissions dt. 20-03-2021. The AO thereafter completed the assessment proceedings and passed the assessment order wherein the assessed income was determined at Rs. 95,86,335/-, after considering the income of Rs. 79,53,640/- as per intimation u/s. 143(1) of the Act dt. 27-11-2019 and making an addition of Rs. 16,32,695/-.
3. The assessee carried the matter in appeal and it was submitted before the Ld.CIT(A) that as per the draft assessment order, income was computed at Rs. 68,33,425/-. However, when the assessee received the final assessment order, it was found that the income was assessed at Rs. 95,86,335/-. It was submitted that the assessee was not issued any amended draft order or fresh show cause before passing the assessment order and, therefore, the assessee has been denied the opportunity to respond to the AO before passing of the final assessment order. Further, the submissions were made on the merits of the addition so made by the AO.
The Ld.CIT(A), however, dismissed the appeal for the reason that none of the grounds of appeal taken by the assessee emanate from the order passed u/s. 143(3) of the Act, which the subject matter of the appeal and the assessee is challenging the adjustment made during the processing of the return u/s. 143(1) of the Act, which is not the subject matter of the order passed u/s. 143(3) of the Act.
Against the said order, the assessee is in appeal before us.
Heard both the parties and considered the material on record. Firstly, we find that where the AO has issued a show cause and the draft assessment order determining the proposed income at Rs. 68,33,425/- and assessee has given its acceptance to the said income, the AO was not correct in assessing the income at Rs. 95,86,335/- without granting an opportunity to the assessee. Secondly where the AO has taken the figure of Rs. 79,53,640/- as per intimation u/s. 143(1) of the Act and has determined the final assessed income, the assessee is clearly aggrieved with the said action on the part of the AO and, therefore, where the appeal has been filed against the said action on the part of the AO, the matter is clearly emerging from the order so passed u/s. 143(3) of the Act and merely because the assessee has not filed the appeal against the intimation u/s. 143(1) of the Act, the statute does not taken away the assessee‟s right to challenge the action of the AO in terms of section 143(3) of the Act, where the income so determined u/s. 143(1) of the Act has been considered by the AO while determining the assessed income u/s 143(3) of the Act.
In the light of the same we are of the considered view that the Ld.CIT(A) was not correct in dismissing the appeal of the assessee and, therefore, the matter needs to be remitted to the file of the Ld.CIT(A) to decide the same afresh, after providing the reasonable opportunity to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 31-10-2025