Scope of section 143(1) processing limits disallowance of section 11 exemption for delayed Form 10B filing.

Processing a return under section 143(1) is limited to the incorrect claims apparent from the return and the information available with it. Mere non-filing of Form 10B within the due date under section 139(1) does not, by itself, make the exemption claim under section 11 an incorrect claim capable of adjustment at the processing stage. On that basis, disallowance of the exemption was treated as beyond the scope of section 143(1), and the CPC adjustment was held invalid with the intimation to be amended in favour of the assessee.

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Issues: Whether, while processing a return under section 143(1) of the Income-tax Act, 1961, the CPC could disallow exemption under section 11 on the ground that the audit report in Form 10B was not filed within the due date under section 139(1) and was not available before processing.

Analysis: Adjustment under section 143(1) is confined to the kinds of incorrect claims specified in the return on the basis of the information available therein. Mere non-filing of the audit report in Form 10B does not, by itself, constitute an incorrect claim warranting adjustment while processing the return. Following the coordinate bench decision relied upon, the disallowance of exemption on this ground was held to be beyond the scope of section 143(1).

Conclusion: The adjustment made by the CPC was held to be invalid and the intimation was directed to be amended in favour of the assessee.

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