Invalidity of Section 143(1) Orders Post Section 143(2) Initiation: Appellate Tribunal Ruling

The Appellate Tribunal held that orders passed under section 143(1) by the CPC after the initiation of scrutiny assessments by the AO were invalid. The Tribunal emphasized that once scrutiny proceedings were initiated under section 143(2), the AO must make assessments under section 143(3) and not under section 143(1). As a result, the appeals of the assessee for the assessment years 2016-17 and 2017-18 were allowed, and the orders under section 143(1) were set aside.

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Issues involved:
The issues involved in this case are related to the validity of the orders passed under section 143(1) by the CPC, Bangalore for the assessment years 2016-17 and 2017-18, in light of the initiation of scrutiny assessment proceedings by the Assessing Officer (AO) through notices under section 143(2).

Issue 1: Validity of orders passed under section 143(1):
The appellant raised common grounds challenging the orders under section 143(1) for both assessment years. The contention was that the orders passed by the CPC were invalid as the AO had already initiated scrutiny assessment proceedings by issuing notices under section 143(2) prior to the CPC's orders. The appellant relied on various decisions to support this argument.

Issue 2: Merger of orders under section 143(1) with section 143(3):
The Departmental Representative (DR) did not dispute that scrutiny assessment proceedings were initiated by the AO before the CPC's orders. The DR argued that the orders under section 143(1) had merged with the subsequent orders passed under section 143(3) by the AO. This argument was based on the contention that the additions made in the assessment order were the subject matter of the appeals filed by the assessee.

Judgment Summary:
The Appellate Tribunal considered the submissions and relevant material on record. It was undisputed that the AO had initiated scrutiny assessment proceedings by issuing notices under section 143(2) for the assessment years in question. The Tribunal referred to the assessment orders passed under section 143(3) for both years, which confirmed the initiation of scrutiny assessments.

The Tribunal cited precedents, including decisions of the High Courts and the Supreme Court, to establish that once scrutiny proceedings were initiated by the AO through notices under section 143(2), the AO was precluded from processing the return under section 143(1). The Tribunal highlighted that the High Courts had held that the AO must make assessments in accordance with section 143(3) after issuing notices under section 143(2).

Additionally, the Tribunal noted that the Supreme Court emphasized that the processing of returns under section 143(1) must await the completion of scrutiny assessments initiated under section 143(2) and 143(3). The High Court's decision further clarified that orders under section 143(1) ceased to be operative once assessments under section 143(3) were completed.

In conclusion, the Tribunal held that the orders passed under section 143(1) by the CPC after the initiation of scrutiny assessments by the AO were invalid. Therefore, the appeals of the assessee for the assessment years 2016-17 and 2017-18 were allowed, and the orders under section 143(1) were set aside.

This summary encapsulates the key issues and detailed judgment of the Appellate Tribunal in the case involving the validity of orders passed under section 143(1) in light of the initiation of scrutiny assessment proceedings by the Assessing Officer.

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