2023 (12) TMI 701 - AT - Income Tax

Validity of Intimation passed u/s 143(1) - as argued assessee was not given any statutory notice required as per proviso appended to section 143(1)(a) - assessee s claim of refund was reduced by making addition in the total income - HELD THAT - We notice from the intimation order in Table-B that there is a mismatch of Rs. 2 only in the TDS claimed by the assessee with that of the 26AS report. Thus it appears that the assessee was not put to notice the disallowances proposed by CPC before initiating u/s. 143(1) proceedings. As per first proviso to section 143(1)(a), the total income or loss shall be computed after making following adjustments namely (i) arithmetical error in the return, (ii) incorrect claim which is apparent from any information in the return, then CPC is entitled to make adjustments as per 1st proviso of Section 143(1)(a) by giving an intimation to the assessee either in writing or in electronic mode before making such adjustments. In response to first proviso, when the assessee replies the same shall be considered before making any adjustments u/s. 143(1)(a) and in case, the assessee fails to response within 30 days of issue of such intimation, the CPC is empowered to make 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. Intimation passed u/s. 143(1) dated 15-07-2021 is violation of 1st proviso to section 143(1)(a) of the Act by not offering hearing to the assessee. Therefore the entire proceedings u/s. 143(1) is vitiated and invalid in law. Appeal filed by the Assessee is allowed.

Summary

Issues Involved:
1. Delay in filing appeal
2. Disallowance under section 10(10AA) of the Income Tax Act, 1961
3. Violation of statutory provision of section 143(1)(a) of the Act

Summary:
Issue 1: The appeal was filed with a delay of 27 days due to a misunderstanding by the assessee regarding the filing process. The delay was condoned, and the appeal was taken for adjudication.

Issue 2: The assessee, an individual retired from ONGC Ltd., filed the return of income for A.Y. 2020-21. The Centralized Processing Centre assessed the income under the head "salaries" and made an addition towards leave encashment under section 10(10AA) of the Act. The assessee appealed against this disallowance.

Issue 3: The assessee raised a ground that the statutory notice required under section 143(1)(a) was not provided before making adjustments. The NFAC did not address this ground but upheld the disallowance under section 10(10AA) and dismissed the appeal. The assessee contended that the proceedings were conducted without offering a hearing, violating the principles of natural justice.

The Tribunal found that the intimation passed under section 143(1) was in violation of the first proviso to section 143(1)(a) by not providing a hearing to the assessee. Citing a previous decision, the Tribunal quashed the intimation and allowed the appeal. The entire proceedings under section 143(1) were deemed invalid, and the disallowance was overturned. The appeal was allowed, and the intimation passed by the CPC was quashed.