Processing of income-tax return without opportunity to be heard results in remand for fresh intimation after hearing

Processing of income-tax returns without affording opportunity to the taxpayer was held contrary to the prescribed statutory procedure and principles of natural justice, requiring that the taxpayer be intimated/show-caused and permitted to reply; consequence: the impugned intimation was set aside and the matter remitted to the processing authority/assessing officer to issue notice, consider the taxpayers response and pass a fresh intimation. The decision emphasizes procedural compliance by the processing center and that adjustments without prior hearing cannot stand.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the adjustment made while processing the return under section 143(1), resulting in addition/disallowance, was vitiated for breach of the statutory requirement to first intimate/show-cause the assessee about the proposed adjustment and consider the assessee's response.

2. What consequential relief and directions were warranted upon finding violation of natural justice and the statutory procedure governing adjustments during processing under section 143(1).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of adjustment under section 143(1) without prior intimation/opportunity

Legal framework (as discussed by the Court): The Court treated section 143(1) as requiring that, before making "impugned adjustments" while processing a return, the authority must intimate/show-cause the assessee regarding proposed adjustments and must consider the assessee's response, if any.

Interpretation and reasoning: The Court found, on the record, that the assessee was not given any opportunity before the adjustment was made while processing the return. This was held to be a violation of the principles of natural justice and also "against statutory provisions of section 143(1)". Since the adjustment was made without following the mandated procedure of prior intimation and consideration of response, the processing suffered from procedural illegality.

Conclusion: The adjustment/intimation was held to be procedurally unsustainable due to violation of natural justice and non-compliance with the statutory procedure under section 143(1).

Issue 2: Appropriate relief-remand and directions for fresh processing

Interpretation and reasoning: Having held that the statutory procedure and natural justice were breached, the Court did not adjudicate the merits of the adjustment/disallowance. Instead, it considered remand necessary so that the authority could follow the correct process: first intimate/show-cause the assessee in respect of the proposed adjustments, then consider the reply/explanation, and thereafter issue a fresh intimation under section 143(1).

Conclusion: The order under challenge was set aside and the matter was restored to the authority for fresh action in accordance with section 143(1), after issuing intimation/show-cause and considering the assessee's response. The appeal was allowed for statistical purposes.

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