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Facts
The assessee filed a return of income, and the Assessing Officer processed it under Section 143(1) of the Act, making an adjustment of Rs. 13,73,100/-. The assessee claimed an exemption under Section 10(10AA), which was restricted by the AO. The assessee appealed to the CIT(A) who dismissed the appeal.
Held
The Tribunal held that the adjustment made by the CPC under Section 143(1)(a) was invalid because no intimation was given to the assessee as required by the first proviso to the section. This procedural lapse led to the allowance of the appeal.
Key Issues
Whether an adjustment made under Section 143(1)(a) without providing prior intimation to the assessee is valid.
Sections Cited
143(1), 250, 10(10AA), 139, 142, 89, 90, 90A, 91
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-Ms. SUCHITRA KAMBLE
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
The captioned appeal has been filed by the assessee against the order dated 19.02.2025 passed by the Ld. ADDL/JCIT(A)-3, Hyderabad (hereinafter referred to as "CIT(A)" for short), passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as "the Act" for short) for the Assessment Year (AY) 2022- 23.
The assessee has raised the following grounds of appeal:
1. The Ld. Addl. JCIT(A) grossly erred on facts and in law in dismissing the appeal without adjudicating the preliminary issue raised regarding the violation of statutory provision of Sec 143(1) of the Income-tax Act 1961 in the form of non-issue and service of the notice by the Ld. Assessing Officer u/s 143(1)(a) of the Act before making the adjustment of Rs.13,73,100/-
2. The Ld. Addl. JCIT(A) grossly erred on facts and in law in not considering and adjudicating the raised ground in the appeal that the addition made by the Ld. Assessing Officer is without jurisdiction and authority of law.
3. The Ld Addl. JCIT(A) has grossly erred in law and is not justified in confirming the addition made by the Ld AO without deciding the involved question of law and not allowing the exemption exceeding Rs. 3 lakhs u/s 10(10AA)(ii) of the Act considering the invalid Gazette Notification No.50588 E dated 31.05.2002 issued by CBDT effective 01.04.1998
3. On merit also, the exemption claimed by the appellant exceeding Rs. 3 lakhs is allowable.”
The brief facts of the case are that the assessee, who is an individual, filed his return of income for the year under consideration on 27.12.2022, declaring a total income of Rs.27,43,160/-. The return was processed by the Assessing Officer u/s 143(1) of the Act, vide intimation order dated 31.01.2023, determining total income of the assessee at Rs.41,16,260/-. The assessee claimed the exemption u/s 10(10AA) of Rs.16,73,092/- in the return of income filed; however, the Assessing Officer restricted the exemption claimed u/ 10(10AA) to the extent of Rs.3,00,000/- vide intimation order u/s 143(1) of the Act dated 31.01.2023.
Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A) who dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
On going through the record, we find that an adjustment of Rs.13,73,100/- has been made by the CPC, Bangalore u/s.143(1) of the Act. The Ld. Counsel for the assessee argued that before making adjustment u/s.143(1)(a) of the Act, no notice has been given to the assessee. The Ld. DR could not bring anything on record to prove that any prior intimation has been issued to the assessee before making the adjustment.
We have gone through the provisions of Section 143(1) of the Act which reads as under: “143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub- section (1) of section 139; (iv) disallowance of expenditure 82[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 83[section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:
Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;
(b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, 84[any relief allowable under section 89,] any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: …...."
As per the provisions of the Act, an intimation has to be given to the assessee whether in writing or in electronic mode before making such adjustments. Here, in this case, the assessee was not given any intimation as per 1st proviso to section 143(1)(a) of the Act and CPC straight away made adjustments in 143(1) proceedings and communicated to the assessee by reducing the refund claimed by the assessee which is against the prescribed procedure laid down in the Act. Hence, the appeal of the assessee is hereby allowed owing to procedural lapse on account of failure to intimate the assessee of such adjustments either in writing or in electronic mode.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 17.07.2025