2024 (9) TMI 1271 - AT - Income Tax

Scrutiny assessment - Assessment u/s 143(3) concluded by making additions and determining refund due - Merger of intimation u/s 143(1) and scrutiny assessment under Section 143(3) - intimation u/s. 143(1)(a) when notice u/s. 143(2) was issued to the assessee subsequent to which, the assessment order was passed u/s. 143(3) - assessee trying to reconcile the refund/income, with the returns filed, and on perusing the Income tax portal it was noticed that the revised return of income was processed u/s 143(1) on the same day when the assessment order u/s 143(3) of the Act was passed. It is submitted that the intimation passed u/s 143(1) was not served at all and the assessee became aware of the intimation only on 26/02/2024 - HELD THAT - AR though argued on Principle of merger being applicable to the present facts of the case, we do not agree with this preposition. The reason being that, the disallowance made in the intimation under section 143(1)(a) is different from the disallowance made in the assessment order passed under section 143(3).Accordingly, the same is dismissed. Intimation passed u/s 143(1)(a) deserves to be considered on the first principles of law - Under the new sub-section (1D) the legislature provides that, notwithstanding anything contained in sub-section (1), the processing of return would not be necessary where a notice has been issued to an assessee under sub section (2). Meaning thereby, once notice under section 143(2) has been issued, the assessing officer shall not process the return under section 143(1). The original proviso to sub-section (1D) also stands substituted by the new proviso, under which, it is clarified that the new proviso under the new sub-section (1D) shall not apply to any return furnished for the assessment year commencing on or after 01.04.2017. As relevant to note that, upto 01/06/2001, section 241 of the Act enabled the Ld.AO to withhold any refund under certain circumstances. Section 241, was subsequently withdrawn w.e.f. 01/06/2001. Now on comparing the newly inserted provision under (1D) of section 143 with newly inserted section 241A, it would be further clear that, the legislature provided that, notwithstanding anything contained in sub-section(1), the processing of the return would not be necessary where a notice has been issued to assessee under sub-section(2). This would in effect mean that, once the notice u/s. 143(2) is issued, the assessing officer shall not process the return u/s. 143(1). We therefore find no reason to uphold the intimation passed u/s. 143(1)(a) dated 29/06/2021 do not have any legs to stand in the eyes of law. In any event, the assessee is in appeal against the assessment order before the CIT(A) as has been informed by the Ld.AR. We thus hold the intimation u/s. 143(1)(a) dated 29/06/2021 to be bad in law. Appeal of assessee allowed.

Issues Involved:

1. Jurisdiction and limitation of intimation under Section 143(1) of the Income Tax Act.
2. Merger of intimation under Section 143(1) and scrutiny assessment under Section 143(3).
3. Opportunity of being heard before adjustments under Section 143(1)(a).
4. Calculation and correctness of total income and tax liability.
5. Deduction under Section 80JJAA.
6. Relief under Section 90.
7. TDS credit.
8. Interest under Section 244A.

Issue-wise Detailed Analysis:

1. Jurisdiction and Limitation of Intimation Under Section 143(1):

The appellant argued that the intimation under Section 143(1) dated 26.09.2022 was without jurisdiction and barred by limitation. The Tribunal noted that the intimation was issued beyond the period of limitation prescribed under the law, which is 9 months from the end of the Financial Year in which the return is filed. Therefore, the intimation issued on 26.09.2022 was beyond the period of limitation and thus, bad in law.

2. Merger of Intimation Under Section 143(1) and Scrutiny Assessment Under Section 143(3):

The appellant contended that the intimation under Section 143(1) and the scrutiny assessment under Section 143(3) have been merged as per the provisions of Section 143(4). The Tribunal observed that the disallowance made in the intimation under Section 143(1)(a) is different from the disallowance made in the assessment order under Section 143(3). Therefore, the principle of merger does not apply in this case.

3. Opportunity of Being Heard Before Adjustments Under Section 143(1)(a):

The appellant argued that no opportunity was provided before making adjustments under Section 143(1)(a). The Tribunal noted that by virtue of the amendment inserted by Finance Act, 2016, no adjustment could be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode. Since no such intimation was issued, the adjustments made were not as per law and thus, the intimation under Section 143(1)(a) is bad in law.

4. Calculation and Correctness of Total Income and Tax Liability:

The appellant disputed the total income computed at Rs. 48,53,50,572/- and the net tax liability at Rs. 9,33,79,161/-. The Tribunal noted that the assessing officer computed the assessed income as Rs. 48,53,50,575/- and the refund to the assessee as Rs. 2,91,57,441/-. However, the assessee received a refund of Rs. 2,53,56,579/-. Since the intimation under Section 143(1) was held to be bad in law, the merits of the addition were considered academic.

5. Deduction Under Section 80JJAA:

The appellant argued that the deduction under Section 80JJAA was restricted to Rs. 2,71,12,299/- against the claim of Rs. 3,73,25,354/-. The Tribunal did not adjudicate this ground separately as it was merged with the scrutiny assessment order.

6. Relief Under Section 90:

The appellant contended that the relief under Section 90 was restricted to Rs. 2,87,73,871/- against the claim of Rs. 2,94,53,756/-. Similar to the deduction under Section 80JJAA, this ground was also not adjudicated separately as it was merged with the scrutiny assessment order.

7. TDS Credit:

The appellant argued that TDS credit was considered only to the extent of Rs. 11,32,65,988/- against the claim of Rs. 11,32,89,994/-. This ground was not adjudicated separately as it was merged with the scrutiny assessment order.

8. Interest Under Section 244A:

The appellant contended that the period for which the appellant is eligible for interest under Section 244A was not correctly quantified. Since the intimation under Section 143(1) was held to be bad in law, the merits of the addition were considered academic.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, holding the intimation under Section 143(1)(a) dated 26.09.2022 to be bad in law. The merits of the additions made in the intimation were considered academic and not adjudicated separately. The appeal was allowed in favor of the assessee.

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