Accumulation claim adjustments require proper verification and prior notice; Section 143(1) processing cannot replace regular assessment scrutiny.

An adjustment denying a claim for accumulation of income is examined in the context of an intimation under Section 143(1) of the Income-tax Act, 1961. The analysis states that where deciding the claim requires factual verification, the matter falls within regular assessment proceedings under Section 143(3), rather than the limited processing framework under Section 143(1). It also identifies the absence of a mandatory prior show cause notice before making the adjustment as a statutory procedural defect. On the stated analysis, the intimation was considered unsustainable and the adjustment was deleted in favour of the assessee.

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Issues: Whether an adjustment denying the assessee's claim of accumulation of income could be sustained in an intimation issued under Section 143(1) of the Income-tax Act, 1961 when no prior show cause notice was issued and the matter required verification appropriate to regular assessment.

Analysis: The dispute arose from an intimation under Section 143(1) of the Income-tax Act, 1961 by which the assessee's claim of accumulation of income was adjusted. The matter was not fit to be restored for factual verification within proceedings confined to Section 143(1), since such verification falls within the domain of regular assessment under Section 143(3) of the Income-tax Act, 1961. The intimation dated 30.11.2021 also showed absence of the mandatory prior show cause notice required before making such adjustment. In the absence of compliance with that statutory requirement, the intimation lacked sustainability.

Conclusion: The intimation issued under Section 143(1) of the Income-tax Act, 1961 was unsustainable and the adjustment denying the assessee's claim was deleted; the issue was decided in favour of the assessee.

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