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Facts
The assessee, Pinnaccle Educational Trust, filed a 'NIL' income return for AY 2023-24, which was processed under Section 143(1) by the CPC, computing an income. The CIT(A) partly allowed the assessee's appeal, holding that less than the required 85% of income was applied for charitable purposes, making the balance taxable. Crucially, a notice for scrutiny assessment under Section 143(2) was issued on 19.06.2024, *before* the intimation under Section 143(1) was issued on 05.10.2024.
Held
The Tribunal, relying on Supreme Court and High Court precedents, held that once a notice under Section 143(2) for scrutiny assessment has been issued, no intimation under Section 143(1) can be validly issued thereafter. Thus, the intimation under Section 143(1) issued in this case, being subsequent to the Section 143(2) notice, was deemed bad in law and quashed.
Key Issues
Whether an intimation under Section 143(1) can be validly issued after a notice for scrutiny assessment under Section 143(2) has already been issued for the same assessment year.
Sections Cited
11, 143(1), 143(2), 143(3), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Addl/JCIT(A)- 10, Mumbai [hereinafter referred to as Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2023-24 dated 28.02.2025, which has been passed against the intimation order u/s 143(1) of the Act, dated 05.12.2024. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the Ld. CIT(A) erred in charging to tax the whole of balance amount of Rs. 1,44,96,604/- which is 15.60% of the aggregate income whereas out of which 15% is exempt as per the provisions of section 11 and I.T.A. No.: 591/KOL/2025 Assessment Year: 2023-24 M/s. Pinnaccle Educational Trust. only 0.6% of the aggregate income should have been charged to tax due to non-application of income during the year.
For that even otherwise the case of the assessee is selected for scrutiny and therefore the intimation u/s 143(1) was itself bad in law since all the issues were subject matter of scrutiny.”
Brief facts of the case are that the assessee had filed the return of income showing “NIL” income and the same was computed u/s 143(1) of the Act by the CPC of ₹2,79,61,360/- on 05.12.2024. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who vide the impugned order partly allowed the appeal of the assessee as according to him the assessee did not apply at least 85% of the aggregate income for charitable purpose which worked out to 84.40% and the balance amount of ₹1,44,96,604/- was taxable for the year and had directed the Assessing Officer (hereinafter referred to as Ld. 'AO') to modify the intimation accordingly.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival contentions were heard and the submissions made have been examined. At the outset, the Ld. AR drew our attention to the fact that the intimation was issued on 05.10.2024 while prior to it a notice u/s 143(2) of the Act was issued on 19.06.2024. The Ld. AR relied upon the decision of the Hon'ble Supreme Court in the case of Vodafone Idea Ltd. vs. Assistant Commissioner of Income-tax [2020] 116 taxmann.com 393 (SC)/[2020] 273 Taxman 91 (SC)/[2020] 424 ITR 664 (SC)[29-04-2020] and also upon the decision of Hon'ble Calcutta High Court in support of the claim that once a notice u/s 143(2) of the Act was issued, no processing u/s 143(1) of the Act could have been carried out subsequent to the issuance of notice u/s 143(2) of the Act. I.T.A. No.: 591/KOL/2025 Assessment Year: 2023-24 M/s. Pinnaccle Educational Trust. 424 & 426/IND/2022 order dated 30.08.2023 in which reliance has been placed upon the following decisions including the decision in the cases of (1) Paras Kuhad vs. DCIT Circle -7, ITA/260/JP/2022 ITAT, Jaipur, (2) Gujarat Poli-Aux Electronics Ltd. vs. DCIT, 222 ITR 140 (Gujarat High Court), (3) Vodafone Idea Limited vs. ACIT & Orrs 424 ITR 664 (SC) and (4) CESC Ltd. vs. DCIT 134 Taxman 647 (Cal) in support of the claim that once a notice for scrutiny was issued, no adjustment u/s 143(1) of the Act could have been made. The relevant extracts from the decisions in the cases of Vodafone Idea Ltd. (supra) and CESC Ltd. (supra) being the orders relied upon by the assessee are as reproduced hereunder: Vodafone Idea Limited vs. ACIT:
“18. The exercise of power under sub-sections (2) and (3) of Section 143 of the Act is thus premised on non-acceptance of what is evident from the return itself and to ensure that there is no avoidance of tax in any manner. The dimension of such power is far greater and deeper than mere adjustments to be made in respect of what is available from the return. Once such scrutiny is undertaken and proceedings are initiated by issuance of a notice under sub-section (2) of Section 143, it would be anomalous and incongruent that while such proceedings so initiated are pending, the return be processed under sub-section (1) of Section 143, which may in a given case, entail payment of refund. Logically, the outcome of the exercise initiated through notice under sub-section (2) of Section 143, must determine whether any refund is due and payable. If the return itself is under probe and scrutiny, such return cannot be the foundation to sustain a claim for refund till such scrutiny is not complete. Considering the nature of power exercisable under these two limbs of Section 143, the inescapable conclusion is that the processing of return under sub-section (1) of Section 143 must await the further exercise of power of scrutiny assessment under sub-sections (2) and (3) of Section 143. If the power under sub-section (2) of Section 143 of the Act is initiated in a manner known to law, there cannot be any insistence that the processing under sub-section (1) of Section 143 I.T.A. No.: 591/KOL/2025 Assessment Year: 2023-24 M/s. Pinnaccle Educational Trust. be completed and refund be made before the scrutiny pursuant to notice under sub-section (2) of Section 143 is over.” CESC Ltd. vs. DCIT:
“11. The Division Bench judgment of this Court, quoted hereinabove, answers the controversy raised before me squarely. The decision of the Apex Court noticed above, in my view, takes the matter a step further inasmuch as resorting to summary procedure under section 143(1)(a) after issuance of a notice under section 143(2) for regular assessment has been forbidden. If the Department cannot, after issuing a notice under section 143(2) for regular assessment, resort to the summary procedure under section 143(1)(a) can it not be said that the rectification of an intimation issued under the aforesaid section is also not permissible because in either case it would amount to activating section 143(1) of the Act which according to the judgment of the Apex Court is not permissible after issuance of a notice under section 143(2).
Regular assessment for the assessment years 1990-91 and 1992-93 under section 143(3) has been completed disallowing appropriates contingency reserve as a business expenditure and appeals therefrom are pending. A further question therefore arises whether assessment or the provisional assessment or to be more precise, the assessment made on the basis of the return itself under section 143(1)(a) the Act accepting appropriation to contingency reserve as an allowable expenditure merged in the order passed under section 143(3) of the wherein the aforesaid appropriation to contingency reserve was disallowed? What was accepted in the intimation has been rever(s)ed in regular assessment and the assessee has preferred an appeal which is pending. I am firmly of the view that this is a case where the theory (of) merger is bound to apply because the intimation issued under section 143(1)(a) is no longer operative in respect of the assessment years 1991 and 1992-93. The only order which is effective and operative is the one passed under section 143(3) of the Act. The order passed under section 143(1)(a) ceased to be operative and merged in the final order. I am supported in my view by the following judgments.”
We have considered the submissions made. In view of the judicial pronouncements the issue is now settled that once a notice u/s 143(2) of the Act has been issued, no intimation u/s 143(1) of the Act could have been issued thereafter. The Ld. DR could not controvert either the facts of the case or bring any other decision to our knowledge. Hence, I.T.A. No.: 591/KOL/2025 Assessment Year: 2023-24 M/s. Pinnaccle Educational Trust.
the appeal of the assessee is allowed and the intimation u/s 143(1) of the Act issued is hereby quashed.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 29th September, 2025. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 29.09.2025 Bidhan (Sr. P.S.) I.T.A. No.: 591/KOL/2025 Assessment Year: 2023-24 M/s. Pinnaccle Educational Trust. Copy of the order forwarded to:
M/s. Pinnaccle Educational Trust, Elitte Institute of Engineering and Management, Karnamadhabpur, Sodepur, North 24 Parganas, West Bengal, 700113. 2. DCIT, Circle 1(1), Exempt, Kolkata.
Addl/JCIT(A)-10, Mumbai.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order