2025 (12) TMI 1171 - AT - Income Tax

Prima facie tax return adjustments u/s143(1) and pending s.154 rectification on s.35(1) disallowance, MAT credit denial-remanded

The dominant issue was whether an intimation under s.143(1)(a) merged into the subsequent regular assessment under s.143(3), thereby foreclosing ... Intimation order u/s 143(1)(a) - Intimation passed u/s 143(1)(a) merge with the regular assessment u/s 143(3) or not? - disallowance of deduction claimed u/s 35(1) and not allowed MAT credit to the assessee - assessee filed a rectification application u/s 154 of the Act and the same was not acted upon - HELD THAT:- AO completed the assessment u/s 143(3) after verifications/examination of various other issues and completed the assessment by considering the total income as per intimation passed u/s 143(1)(a) of the Act instead of total income declared by the assessee in the return of income. Since the AO has merely considered the total income u/s 143(1) of the Act without addressing the grievance of the assessee in application filed u/s 154 clearly indicates that the AO by not considering the grievance of the assessee, it clearly shows that the intimation passed u/s 143(1)(a) does not merge with the regular assessment u/s 143(3). In normal situation, the intimation u/s 143(1) merges with the regular assessment u/s 143(3). In the present case, AO has not considered the grievance of the assessee raised against the intimation passed u/s 143(1), it clearly indicates that it is not merged with the regular assessment passed u/s 143(3). Considering the peculiar facts available on record, none of the authorities have addressed the grievance of the assessee raised against the intimation passed u/s 143(1) as well as rectification passed u/s 154 of the Act. AO had only adopted the total income as per intimation order u/s 143(1) and completed the assessment order, it does not mean that the same is merged with the regular assessment. Therefore, we are inclined to remit this issue back to the file of ld. JCIT(A), Kochi to consider the grievance of the assessee and adjudicate afresh by considering the relevant information contained in rectification application filed u/s 154 of the Act. Appeal of the assessee is allowed for statistical purposes. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeal against an intimation under section 143(1) could be dismissed as infructuous on the ground of 'merger' with a subsequent regular assessment under section 143(3) read with sections 144C(3) and 144B, where the Assessing Officer, while completing the regular assessment, merely adopted the income as per section 143(1) without addressing the assessee's specific grievances raised against the intimation. 2. Whether, on the facts found, the matter required remand to the first appellate authority to adjudicate the assessee's grievances arising from the section 143(1) adjustments and the pending rectification application under section 154, with an opportunity of being heard. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Dismissal of appeal against section 143(1) intimation as infructuous due to merger with section 143(3) assessment Legal framework (as discussed): The Court examined the relationship between an intimation under section 143(1)(a) and a subsequent regular assessment under section 143(3), noting that 'in normal situation' an intimation under section 143(1) merges with a regular assessment under section 143(3). The Court also considered the relevance of an assessee's rectification application under section 154 raising grievances against the intimation. Interpretation and reasoning: The Court found that the section 143(1)(a) intimation involved disallowance/non-grant of certain claims (including deduction claimed under section 35 and non-allowance of MAT credit). The assessee had filed a section 154 rectification application, but it was not acted upon. During the subsequent regular assessment, the Assessing Officer completed the assessment after examining other issues, but adopted the total income as per the section 143(1)(a) intimation instead of the returned income and, crucially, did not consider or address the assessee's grievances raised against the intimation (either through the section 154 application or otherwise). On these 'peculiar facts', the Court treated the Assessing Officer's approach as a mere adoption of the intimation figure without adjudication of the disputed intimation adjustments, and held that such non-consideration indicated absence of merger in the manner assumed by the first appellate authority. Conclusion: The Court held that, in the present case, the section 143(1)(a) intimation could not be treated as having merged with the regular assessment for purposes of rendering the appeal infructuous, because the Assessing Officer had not addressed the assessee's grievances against the intimation and had only adopted the intimation income while completing the assessment. Issue 2: Necessity of remand for fresh adjudication of grievances relating to section 143(1) adjustments and section 154 rectification application Legal framework (as discussed): The Court noted that a rectification application under section 154 'should have been disposed off within six months from the date of filing' and considered the consequence of non-disposal when a regular assessment is undertaken. It also considered the requirement of providing a proper opportunity of being heard in appellate adjudication. Interpretation and reasoning: The Court observed that none of the authorities had addressed the assessee's grievances arising from the section 143(1)(a) intimation or the rectification application under section 154. Given that the regular assessment did not resolve those grievances, the Court considered it necessary that the first appellate authority examine the grievances afresh by considering the relevant information contained in the section 154 rectification application. The Court also directed that a proper opportunity of being heard be given to the assessee. Conclusion: The Court remitted the matter to the first appellate authority to adjudicate afresh the assessee's grievances relating to the section 143(1)(a) intimation, taking into account the rectification material under section 154, and to provide the assessee a proper opportunity of being heard. The appeal was allowed for statistical purposes.