2022 (9) TMI 1321 - AT - Income Tax

Adjustments made u/s. 143(1)(a) after issuance of notice u/s. 143(2) - AO taken cognizance of the fact of issuance of notice u/s 143(2) upon removing the demand created u/s 143(1) - HELD THAT - CIT(A), while adjudicating the appeal totally skipped the issue raised before him in respect to the merger of the 143(1) order dated 25.03.2019 into the subsequent order dated 20.12.2019 passed u/s 143(3). Assessee further submitted that no soon the proceedings u/s 143(2) are commenced the impact and effect of intimation u/s 143(1) totally vanishes and such an intimation becomes nonest. Based on these set of arguments of the assessee submitted that on this score along the order in appeal deserve to be set a side and be declared having merged into the order u/s. 143(3) passed in the case of the assessee. As the issue was technical and of verification of facts, the ld. DR was directed to submit the status report in the matter. DR filed a copy of the letter dated 23.08.2022 written by the ld. AO explaining the status of the intimation as per records Since, the very basis being the intimation dated 25.03.2019 is not reflected on the system and the consequent demand or adjustment already merged into the order of the AO passed u/s. 143(3) of the Act. There cannot remain any grievance on account of intimation dated 25.03.3019. Even the ld. AO has submitted a factual report and submitted that the intimation u/s. 143(1) dated 25.03.2019 is not reflected in to the online system and consequent demand there upon also. Thus, once the intimation which the very cause of the grievance of the assessee is not reflected and existed on records the consequent grievance also not existed and thus the appeal of the assessee becomes infructuous. Appeal of the assessee is allowed.

Summary

Issues Involved:
Adjustments made by CPC under section 143(1)(a) of the Income Tax Act, jurisdiction of notice u/s 143(1)(a) during pendency of regular assessment proceedings u/s 143(2) & (3), merger of orders u/s 143(1) and u/s 143(3), impact of intimation u/s 143(1) after notice u/s 143(2), technical aspects of the appeal.

Detailed Analysis:

Adjustments made by CPC under section 143(1)(a):
The appeal was filed against the order of the National Faceless Appeal Centre, Delhi, for the assessment year 2017-18, which arose from the order passed by the Assistant Commissioner of Income tax, CPC, Bangalore. The assessee contested the adjustments made by CPC, resulting in an addition of Rs. 4,37,99,929 to the total income. The grounds raised by the assessee included arguments regarding the completion of assessment under section 143(3), the Doctrine of Merger, and the rectification application filed against the intimation. The assessee argued that the adjustments made were uncalled for and deserved to be deleted, as they were not reflected in the order passed under section 143(3).

Jurisdiction of notice u/s 143(1)(a) during pendency of regular assessment proceedings u/s 143(2) & (3):
The assessee contended that the proceedings leading to the order were without jurisdiction as they were initiated and concluded during the pendency of regular assessment proceedings under section 143(2) & (3). The notice u/s 143(1)(a) was issued before the notice u/s 143(2), which the assessee argued was not permissible. Citing legal precedents, the assessee claimed that adjustments or orders under section 143(1) should not be made after the issuance of a notice under section 143(2), and assessment should be done under section 143(3) after detailed scrutiny.

Merger of orders u/s 143(1) and u/s 143(3):
The assessee emphasized that the order passed under section 143(1) merged into the final order passed under section 143(3, and therefore, the adjustments made under section 143(1) should be considered null and void. The nature of power under section 143(1) was distinguished from that under sections 143(2) and 143(3), highlighting the need for detailed scrutiny and confrontation of findings in the latter.

Impact of intimation u/s 143(1) after notice u/s 143(2):
The assessee argued that once the proceedings under section 143(2) commenced, the impact and effect of the intimation under section 143(1) vanished, rendering it non-existent. The appeal contended that the intimation dated 25.03.2019 did not reflect in the system and had merged into the order passed under section 143(3), making the appeal infructuous.

Technical Aspects of the Appeal:
Considering the technical aspects and without delving into the merits of the issue, the appeal of the assessee was allowed based on the observations made regarding the non-existence of the intimation on record and the consequent demand. The appeal was allowed, and it was concluded that there was no grievance due to the non-existence of the intimation, making the appeal infructuous.

Conclusion:
The appeal of the assessee was allowed based on technical aspects, including the jurisdiction of notice u/s 143(1)(a) during pending assessment proceedings, the merger of orders u/s 143(1) and u/s 143(3), and the impact of the intimation u/s 143(1) after notice u/s 143(2). The detailed analysis highlighted the legal arguments presented by the assessee regarding the adjustments made by CPC and the subsequent proceedings leading to the appeal decision.