Loading judgment…
Facts
The assessee filed its return for A.Y. 2018-19, claiming a deduction of Rs.23,67,760/-, which was earlier disallowed under Section 40(a)(ia) in A.Y. 2017-18 due to non-deduction of tax at source, but TDS was deposited in the current year. The Centralised Processing Centre (CPC) disallowed this claim under Section 143(1), and the First Appellate Authority (FAA) upheld the disallowance. However, the same deduction was subsequently allowed by the Assessing Officer in a scrutiny assessment under Section 143(3) for the same assessment year.
Held
The Tribunal held that once a regular assessment under Section 143(3) is completed, the intimation issued under Section 143(1) merges with it and loses its independent existence. Since the Assessing Officer had already allowed the deduction in the Section 143(3) assessment, the CPC's adjustment under Section 143(1) and the FAA's order upholding it could not be sustained. Thus, the assessee was entitled to the deduction.
Key Issues
Whether a deduction disallowed by CPC under Section 143(1) can be upheld when the same claim was subsequently allowed by the AO in a scrutiny assessment under Section 143(3) for the same assessment year, considering the principle of merger of assessments.
Sections Cited
40(a)(ia), 143(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by M/s. Healthware Pvt. Ltd. (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT (A)- 1, Chandigarh, (“Ld. First Appellate Authority”), dated 24.03.2025 for the A.Y. 2018-19.
The assessee has raised the following grounds of appeal :
1. 3. The brief facts of the case are that, the assessee company filed its return of income for A.Y. 2018–19 on 16.10.2018 declaring a business loss of Rs.75,21,678/-. During the immediately preceding assessment year (A.Y. 2017–18), the assessee had disallowed an amount of Rs.23,67,760/- under section 40(a)(ia) of the Income Tax Act, 1961 (“the Act”) due to non-deduction of tax at source. In the year under consideration, the assessee deposited the requisite TDS and accordingly claimed deduction of Rs.23,67,760/- in its return.
However, the Centralised Processing Centre (“CPC”), while processing the return under section 143(1) of the Act vide intimation dated 04.01.2019, disallowed the claim thereby reducing the returned loss to Rs.51,53,918/-.
Aggrieved with the order of CPC, the assessee filed appeal before the Ld. First Appellate Authority. The Ld. First Appellate Authority dismissed the appeal holding that the assessee failed to substantiate that the said amount was disallowed in the preceding year and that the corresponding TDS was deposited during the current year.
Aggrieved with the order of Ld. First Appellate Authority, the assessee is in further appeal before us. The Learned Authorised Representative (Ld. AR) invited our attention to page no.46 of the order of Learned Assessing Officer (“Ld. AO”) passed under section 143(3) of the Act on 05.04.2021 for the same year. It was submitted that in the said scrutiny assessment, the Ld. AO has duly examined the claim and allowed deduction of Rs.23,67,760/- to the assessee after verifying that the same was disallowed in A.Y. 2017–18 and the corresponding TDS was deposited during the year under consideration. The Ld. AR further submitted that once the claim has been accepted by the Ld. AO in the regular assessment, the intimation under section 143(1) of the Act disallowing the same loses its force. Reliance was placed on the principle that a regular assessment order under section 143(3) of the Act merges with the intimation under section 143(1) of the Act. Accordingly, the Ld. AR pleaded that the order of the Ld. First Appellate Authority, which has affirmed the adjustment made under section 143(1) of the Act , deserves to be set aside and the assessee’s appeal be allowed.
Per contra, the Learned Departmental Representative (Ld. DR) supported the order of the Ld. First Appellate Authority. It was submitted that the assessee failed to furnish necessary details and evidences before the first appellate authority to substantiate that the amount of Rs.23,67,760/- was disallowed in the preceding year and that the requisite TDS was deposited during the current year.
The Ld. DR contended that the Ld. First Appellate Authority has given a categorical finding that no evidence was filed before him, and therefore, the order passed by the Ld. First Appellate Authority requires to be upheld.
We have considered the rival submissions and perused the material available on record. We have also gone through the page no. 46 of the assessment order passed under section 143(3) of the Act dated 05.04.2021 and we find that the Ld. AO has allowed the deduction of Rs.23,67,760/- to the assessee. Once the claim has been examined and accepted by the Ld. AO in the scrutiny assessment under section 143(3) of the Act, the adjustment made by CPC under section 143(1) of the Act does not survive. It is a settled law that when a regular assessment under section 143(3) of the Act is made, the intimation under section 143(1) of the Act merges with such assessment and has no independent existence. Consequently, the order of the Ld. First Appellate Authority upholding the CPC adjustment cannot be sustained. Therefore, in view of the above discussion, we hold that the assessee is entitled to deduction of Rs.23,67,760/- as already allowed by the Ld. AO under section 143(3) of the Act. Accordingly, the order of the Ld. First Appellate Authority is set aside and the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. 8.