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Facts
The assessee filed a NIL income return, but the CPC processed it by disallowing a claimed deduction of Rs. 97,29,390/- under Section 80P(2)(d) for maintenance income, adding it as business income. The assessee appealed, arguing that the adjustment was made without prior intimation. The Revenue confirmed that no such notice was issued to the assessee before making the adjustment.
Held
The Tribunal held that, as per the proviso to Section 143(1) of the Income Tax Act, no adjustments should be made without prior intimation to the assessee. Since the Revenue confirmed that no such notice was issued, the adjustment made by the CPC without intimation was deemed invalid in the eyes of law.
Key Issues
Whether an adjustment made by the CPC while processing a return, disallowing a deduction claimed under Section 80P(2)(d), is valid if no prior intimation or notice was issued to the assessee as required by the proviso to Section 143(1) of the Income Tax Act.
Sections Cited
Section 250, Section 143(1), Section 80P(2)(d), Section 139, Section 142, Section 10AA, Chapter VI-A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
(Assessment Year: 2020-21) Satyagrah Chhavni Co-op. Housing Vs. Society Limited, Income Tax Officer, Lane 13, 253 Office, Building, Nr. Ward 3(3)(5), Bhav Nirzar, Satellite, Ahmedabad Ahmedabad-380015 [PAN : AAAAS 6148 N] (Appellant) .. (Respondent) Appellant represented by : Shri B.T. Thakkar, AR & Shri Mehul K. Patel, Advocate Respondent represented by: Shri Abhijit, Sr. DR Date of Hearing 03.02.2026 Date of Pronouncement 03.02.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the assessee against the order dated 10.10.2025 passed by the Ld. Addl/JCIT (A)-13, Mumbai (‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short) for Assessment Year 2020-21.
The assessee has raised following grievance by way of Ground No. 4 :- “4. The learned CIT (Appeals) erred in law and on facts in confirming action of ADIT-CPC in making the adjustment while processing the Return without intimating the assessee prior to making the adjustment while processing the Return. Therefore, the intimation is bad in law and not in accordance with provisions of the law.”
On this issue, a report has been obtained from the Revenue to confirm whether any notice was issued to the assessee before making any adjustment while processing the Return. The Revenue has submitted vide letter dated 19.01.2026 that no such notice has been issued. The reply of the Revenue is as under:-
“Subject: Furnishing of Factual report – in the case of Satyagrah Chhavni Co-op. Housing Society Ltd., PAN: AAAAS6148N – A.Y.2020-21 w.r.t. Assessee’s appeal before Hon’ble ITAT, Ahmedabad in against adjustment made u/s.143(1) of the Act – Reg.
To: ahmedabad ito itat2 <Ahmedabad.ito.itat2@incometax.gov.in> Satyagrah Chhavni Co Op Hsg Soc Ltd Vs. ITO Asst.Year : 2020-21 - 2– Date: 19/01/26 01:48 PM From: "ahmedabad.ito3.3.5” <Ahmedabad.ito3.3.5@incometax.gov.in> Sir, Kindly refer to the above. In this regard, it submitted that the assessee filed return of income on 01.12.2020, declaring total income at NIL. The CPC has processed the same vide intimation u/s. 143(1) dtd. 24.12.2021 at total income of Rs.97,29,390/-. In the return of income the Assessee has shown maintenance income of Rs. 97,29,390/-, which was claimed as deduction u/s. 80P(2)(d) of the Act by the assessee. However, while processing the ITR, the CPC has disallowed the deduction claimed by the assessee and added the amount of Rs.97,29,390/- as business income of the assessee.
Regarding proof of service of the prior intimation/notice to the assessee regarding the proposed adjustments, no such notice is visible on the ITBA at AO’s end. A copy of intimation u/s. 143(1) of the Act by the CPC and copy of ITR filed by the assessee is attached for ready reference. Regards, [XXXXXXXXXXXXXXX] ITO, Ward 3(3)(5), Ahmedabad”
In this regard, the provision of Section 143(1) 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; 98[(iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;] (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 or increase in income indicated in the audit report but not taken into account in computing the total Satyagrah Chhavni Co Op Hsg Soc Ltd Vs. ITO Asst.Year : 2020-21 - 3– income in the return; (v) disallowance of deduction claimed under 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:
Hence, owing to the provision of Section 143(1) read with its proviso, and since no notice has been issued to the assessee before making any adjustment while processing the Return, we hold that the adjustment made by the CPC without issuing any notice cannot be held to be valid in the eyes of law.
In the result, the appeal of the assessee is allowed.