2025 (10) TMI 340 - AT - Income Tax

Intimation under s.143(1) invalid after s.143(2) notice; 408-day appeal delay condoned, appeal to be decided on merits

ITAT held that an intimation under s.143(1) cannot be issued after a notice for regular assessment under s.143(2) has been issued, rejecting application ... Intimation u/s 143(1) - certain adjustment on account of disallowances of employee bonus was made in accordance with the provision section 43B - whether the intimation u/s 143(1) of the Act be issued after issuance of the notice under section 143(2)? - Against the order under section 143(1) of the Act the assessee filed appeal before the learned CIT(A) which was delayed by the 408 days HELD THAT:- Intimation under section 143(1) of the Act cannot be issued once notice for regular assessment under section 143(2) of the Act is issued. Hence, in our considered opinion the principle laid down in GUJARAT ELECTRICITY BOARD [2012 (10) TMI 1187 - GUJARAT HIGH COURT] cannot be applied in the present case of the assessee. In view of the above detailed discussion, we hereby direct the learned CIT(A) to condone the delay in filing pf appeal and decide the issue a fresh on merit. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 408 days in filing an appeal against an intimation under section 143(1) ought to be condoned where the assessee pursued alternative remedies (response to CPC, rectification under section 154, and later assessment proceedings under section 143(3)) and acted under a bona fide belief that the matter would be resolved in those proceedings. 2. Whether an intimation under section 143(1) survives once a notice under section 143(2) (for scrutiny/regular assessment) has been issued, and if the legal principle relied upon (that such intimation does not survive) applies to the facts of the present case. 3. Consequential/follow-up issue: whether the appellate authority should adjudicate on merits (including claims under section 43B and related interest issues) when an appeal against a section 143(1) intimation was initially time-barred but delay is later condoned. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal (408 days) Legal framework: Filing of an appeal against an intimation under section 143(1) is governed by the relevant limitation provisions and the appellate authority's power to condone delay when sufficient cause is shown. Precedent Treatment: The Tribunal considered judicial guidance emphasising that courts/tribunals may view delay liberally where well explained and substantial justice outweighs technicalities. It cited authority recognising that delay, when satisfactorily explained, should be condoned (decision from a High Court reported at 36 taxmann.com 340 was relied upon for this principle). Interpretation and reasoning: The Court examined the chronology: (i) response to CPC proposal, (ii) issuance of intimation under section 143(1) without considering the response, (iii) filing of rectification under section 154, (iv) rejection of rectification, and (v) receipt of notice for scrutiny under section 143(2) before the rectification rejection. The assessee's course of action - pursuing statutory remedies and believing the issue could be resolved in assessment proceedings - was held to be bona fide, consistent, and not indicative of negligence or mala fide intent. The Tribunal treated the delay as arising from that bona fide belief and from active pursuit of alternate remedies rather than from inaction or deliberate default. Ratio vs. Obiter: The finding that delay should be condoned on these facts is ratio - the Tribunal's substantive decision on condonation rests on the factual matrix and legal principle favouring substantial justice over mere technical non-compliance with limitation where credible explanation exists. Conclusions: The delay of 408 days in filing the appeal is condoned. The appeal is therefore admitted for consideration on merits (directed to be decided afresh by the appellate authority). Issue 2 - Survival of section 143(1) intimation after issuance of section 143(2) notice Legal framework: The interplay between intimation under section 143(1) and notice for regular assessment under section 143(2) raises the question whether an earlier intimation remains open to challenge once a notice for scrutiny is issued. Precedent Treatment (followed/distinguished): The Tribunal noted the Supreme Court's holding (reported at 260 ITR 84) that an intimation under section 143(1) cannot be issued after issuance of notice under section 143(2). The lower authority had relied on that Supreme Court pronouncement to deny the appeal. The Tribunal distinguished the Supreme Court authority on facts: the Supreme Court's question related to the validity/issuance of an intimation after a 143(2) notice, whereas the present facts involved an intimation issued and acted upon, followed by subsequent actions (rectification application and scrutiny selection) and a bona fide belief that the matter could be resolved in assessment proceedings. Interpretation and reasoning: The Tribunal held that the Supreme Court principle relied upon by the lower authority was factually distinguishable and therefore not directly applicable to deny the assessee any remedy here. The Tribunal also observed that the issue of survival of intimation cannot be applied mechanically where the assessee has actively pursued statutory remedies and where the factual matrix suggests a reasonable expectation of resolution in assessment proceedings. Ratio vs. Obiter: The Tribunal's distinction of the Supreme Court ruling on the facts of this case is ratio with respect to the decision to condone delay and admit the appeal; its broader statements about survival of intimations in other factual matrices are obiter to the extent they do not overrule or depart from the Supreme Court authority. Conclusions: The Tribunal declined to apply the principle that an intimation does not survive once a 143(2) notice is issued, as the Supreme Court authority was factually distinguishable. Consequently, the rejection of the appeal on that ground was not sustained. Issue 3 - Adjudication on merits (section 43B deduction and interest issues) following condonation Legal framework: Deductibility of liabilities under section 43B depends on payment on or before the due date of filing return; interest under sections 234B/234C (and section 24B reference in grounds) are consequential matters linked to the correctness of assessed income. Precedent Treatment: The Tribunal did not decide the substantive legal questions on deduction under section 43B or on the correctness of interest levies because the appeal was dismissed below as time-barred; instead, the Tribunal limited itself to condoning delay and remitting the matter for fresh adjudication on merits. Interpretation and reasoning: Having condoned the delay and admitted the appeal, the Tribunal determined that the appellate authority should examine the contested deductions and interest calculations on their factual and legal merit rather than leave them unadjudicated by dismissing the appeal on limitation grounds. Ratio vs. Obiter: The direction to decide the merits afresh is ratio to the extent necessary to effectuate the condonation and to ensure substantive adjudication; the Tribunal's observations do not constitute a decision on the legal correctness of the section 43B claim or interest computations. Conclusions: The matter is remitted to the appellate authority to decide the claims (including the deduction under section 43B and any consequential interest under the relevant sections) on merits after admission of the appeal. Cross-references For Issue 1 and Issue 2: The Tribunal's condonation conclusion is interlinked with its factual distinction of the precedent relied upon by the lower authority; the factual chronology (response to CPC, section 154 rectification, selection for scrutiny, rejection of rectification) is central to both findings and to the direction to decide merits afresh.