2023 (12) TMI 282 - HC - Income Tax

Scrutiny of ITR by the Faceless Assessment Officer - Rectification petition to rectify the mistake of double dis-allowance in the intimation - As argued though the respondent had not considered the reply filed by the petitioner, the said reply will be considered at the time of scrutiny by the Faceless Assessment Officers in accordance with law - HELD THAT - A reading of section 143 makes it clear that if there is any corrections, errors, addition or reduction in the ITR of the Assessee, the Department has to intimate the same to the Assessee. In the present case, the respondent had intimated the error to the petitioner and also directed the petitioner to file his reply within a period of 30 days. Thereafter, as per the provisions of the Act, the respondent is supposed to have considered the said reply and make suitable modifications in his income tax returns as requested by the petitioner. However, though the reply was filed by the petitioner, the respondent not the said reply and issued the impugned intimation dated 29.07.2023. As submitted by respondent that the reply filed by the petitioner will be considered at the time of scrutiny of ITR by the Faceless Assessment Officer, which means the Faceless Assessment Officer has to consider the reply and proceed the petitioner's case with double stands i.e., (1) based on the original returns filed by the petitioner; and (2) based on the modified returns after considering the reply of the petitioner, which would ultimately create unnecessary confusion. Since the learned counsel for the respondent had submitted that the reply, which was rejected by the respondent will be considered at the time of scrutiny and for the interest of justice, this Court is inclined to pass the following orders i) The respondents are directed to consider the reply filed by the petitioner dated 23.04.2023 and accept the returns accordingly. ii) Thereafter, the Faceless Assessment Officer shall proceed further by providing opportunity of hearing before passing orders in the scrutiny assessment.

Summary

Issues:
The issues involved in the judgment are related to rectification of double disallowance in an intimation dated 29.07.2023 and the processing of refunds by either the 1st respondent or the 2nd respondent.

Rectification Petition and Scrutiny Proceedings:
The petitioner filed a writ petition seeking direction to rectify the mistake of double disallowance in the intimation dated 29.07.2023 and process refunds. The petitioner's counsel argued that the respondent issued an intimation on 06.03.2023 regarding discrepancies in the petitioner's records, to which the petitioner replied on 23.04.2023. However, without considering the reply, the impugned intimation was issued on 29.07.2023. The petitioner raised concerns about the impact of scrutiny proceedings on their stand in the Income Tax Return (ITR) and filed the writ petition on these grounds.

Legal Consideration - Section 143(1) of the Act:
The court considered Section 143(1) of the Act, which outlines the assessment process after a return is filed. The section specifies adjustments that can be made, computation of tax, determination of payable amount or refund, and the process of intimation to the assessee. The court noted that the respondent had intimated errors to the petitioner and directed a reply within 30 days. Despite the petitioner filing a reply, the respondent issued the impugned intimation without considering the reply, which was contrary to the provisions of the Act.

Court's Decision and Orders:
The court acknowledged the submissions of both parties and reviewed the materials on record. It was highlighted that the reply filed by the petitioner should have been considered before issuing the impugned intimation. The court directed the respondents to consider the petitioner's reply dated 23.04.2023 and accept the returns accordingly. Additionally, it ordered that the Faceless Assessment Officer should provide an opportunity for a hearing before passing orders in the scrutiny assessment. The writ petition was disposed of with these directions in the interest of justice, and no costs were imposed.