Section 143(1) intimation invalid due to lack of mandatory notice before income adjustments and refund reduction

The ITAT Ahmedabad held that an intimation under section 143(1) was invalid due to procedural violations. The CPC made adjustments to the assessee's total income and reduced the refund claim without providing the mandatory notice required under the first proviso to section 143(1)(a). The assessee should have been given an opportunity to respond to proposed disallowances before adjustments were made. Since the CPC failed to issue the required intimation and directly proceeded with adjustments, the entire proceedings under section 143(1) were vitiated and invalid in law. The assessee's appeal was allowed.

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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.

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