2025 (3) TMI 720 - AT - Income Tax

Notice u/s 143(2) for scrutiny assessment and AO subsequently processed the return u/s 143(1) making adjustment of income -Two proceedings initiated simultaneously HELD THAT - We find that the assessee company filed its return on 29.11.2018. AO issued notice on 22.09.2019 u/s 143(2) of the Act to verify the issue under CASS with regard to claim of amounts allowable as deduction in Schedule BP and defaults in TDS as well as duty draw back. DCIT CPC-Bangalore subsequent to the issue of notice u/s 143(2) has processed the return of income and has issued intimation u/s 143(1)(a) of the Act dated 25.12.2019. The issue for adjudication is whether once the scrutiny assessment u/s 143(3) has commenced vide notice u/s 143(2) can the AO conduct processing of the return u/s We find that in the case of Gujarat Electricity Board 2002 (10) TMI 5 - SUPREME COURT has decided this issue in favour of the assessee

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the delay in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] due to Covid-19 should be condoned.

2. Whether the issuance of notice under Section 143(2) of the Income Tax Act, 1961, precludes the processing of the return under Section 143(1)(a) and the subsequent adjustments made to the income.

3. Whether the adjustments made to the income under Section 143(1)(a) by the Deputy Commissioner of Income Tax (DCIT) Centralized Processing Center (CPC) Bangalore are valid.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay Due to Covid-19

The relevant legal framework involves the discretion of appellate authorities to condone delays in filing appeals if sufficient cause is shown. The Court considered an affidavit from the Managing Director of the assessee company explaining the delay due to Covid-19 and related lockdowns. The Court found reasonable cause for the delay, condoning it and admitting the appeal. This decision aligns with general principles of fairness and justice, particularly during extraordinary circumstances like a pandemic.

2. Issuance of Notice Under Section 143(2) and Subsequent Processing Under Section 143(1)(a)

The legal framework involves Sections 143(1) and 143(2) of the Income Tax Act, 1961. Section 143(1) provides for summary assessment without any human intervention, whereas Section 143(2) involves scrutiny assessments. The Court examined the precedent set by the Supreme Court in "Commissioner Of Income-Tax vs Gujarat Electricity Board," which held that once proceedings under Section 143(2) have commenced, the summary proceedings under Section 143(1)(a) are not warranted.

The Court found that the assessee had filed its return on 29.11.2018, and a notice under Section 143(2) was issued on 22.09.2019 for scrutiny assessment. Despite this, the DCIT CPC Bangalore processed the return under Section 143(1)(a) and issued an intimation on 25.12.2019. The Court agreed with the assessee's argument that simultaneous proceedings under both sections are not permissible, as supported by the Supreme Court's reasoning that once a regular assessment is initiated, summary proceedings are redundant.

3. Validity of Adjustments Made Under Section 143(1)(a)

The adjustments made included various income additions and disallowances. The legal question was whether these adjustments were permissible under the summary assessment process of Section 143(1)(a) when a notice under Section 143(2) had already been issued. The Court, following the Supreme Court's decision, concluded that the adjustments made under Section 143(1)(a) were invalid as the regular assessment process had already commenced. The Court thus deleted the adjustments made under Section 143(1)(a).

SIGNIFICANT HOLDINGS

The Court held that the issuance of notice under Section 143(2) precludes the processing of the return under Section 143(1)(a). The Court emphasized the principle that once a regular assessment proceeding is initiated, there is no need for a summary proceeding under Section 143(1)(a). The Court's reasoning was based on the Supreme Court's interpretation, which stated, "The converse is not available; a regular assessment proceeding having been commenced under Section 143(2), there is no need for a summary proceeding under Section 143(1)(a)."

The final determination was that the appeal of the assessee was allowed, and the adjustments made under Section 143(1)(a) were deleted. The Court's decision reinforces the precedence of regular assessment proceedings over summary assessments when both are initiated.