CPC adjustments under section 143(1)(a) invalid without mandatory prior intimation to assessee

The ITAT Kolkata held that adjustments made by CPC under section 143(1)(a) were invalid due to non-compliance with the first proviso requiring prior intimation to the assessee. The case involved a mismatch between the income tax return and tax audit report. The tribunal found that CPC failed to issue mandatory prior intimation before making adjustments, as evidenced by documentary records and e-proceedings from the Income Tax portal. Since the revenue department did not follow the prescribed process of providing written or electronic intimation and allowing thirty days for response, the intimation under section 143(1)(a) was deemed invalid. The assessee's appeal was allowed.

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Issues:
1. Whether adjustments made in intimation u/s 143(1) are beyond the scope of the section.
2. Whether the order passed violated the first proviso to section 143(1) by not providing necessary intimation to the appellant before making adjustments.
3. Whether the disallowance of deductions and addition to income by the AO, CPC were justified.
4. Whether the CIT(A) erred in not accepting the submissions made by the appellant.

Analysis:

Issue 1:
The appeal challenged adjustments made in the intimation u/s 143(1) as beyond the scope of the section. The appellant argued that adjustments were made without proper intimation, making them bad in law. The CIT(A) upheld the adjustments based on a mismatch between the return and tax audit report. The Tribunal found that no intimation was given to the assessee before making adjustments, as required by the first proviso to section 143(1)(a). The failure to provide prior intimation rendered the adjustments invalid under the Act.

Issue 2:
The appellant contended that the order violated the first proviso to section 143(1) by not giving necessary intimation before making adjustments. The Tribunal agreed with the appellant, finding that no intimation was issued by the CPC as required by law. The failure to comply with the proviso rendered the intimation invalid.

Issue 3:
Regarding the disallowance of deductions and addition to income, the appellant argued that the actions of the AO, CPC were unjustified. The CIT(A) upheld the disallowances based on a mismatch between the return and tax audit report. The Tribunal, however, found that the adjustments were not made in compliance with the provisions of section 143(1)(a) due to the lack of prior intimation, rendering them invalid under the Act.

Issue 4:
The appellant raised concerns about the CIT(A) not accepting their submissions and explanations. The Tribunal found in favor of the appellant, allowing the grounds of appeal and ultimately allowing the appeal. The decision was based on the failure to provide prior intimation before making adjustments, as required by law.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of complying with the provisions of section 143(1)(a) by providing prior intimation before making adjustments. The failure to do so rendered the adjustments invalid under the Act.

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