2026 (1) TMI 1485 - HC - Income Tax

Validity of ICDS adjustment in intimation under Section 143(1) quashed for lack of prior notice and opportunity to be heard

Validity of ICDS adjustment in an intimation under Section 143(1) is examined: failure to give the required written or electronic intimation of the ... Validity of ICDS adjustment made in an intimation u/s 143(1) - intimation being passed without complying with the jurisdictional requirements of the first and second proviso to Section 143(1) - breach of the principles of natural justice HELD THAT:- It is apparent from a perusal of the above reproduction that the first and second proviso to Section 143(1) of the IT Act specifically provides that no adjustment shall be made unless an assessee is given an intimation of the adjustment either in writing or in electronic mode and the response received from the assessee must be considered before making any such adjustment. In the present case, admittedly the Petitioner has not been given any intimation of the ICDS adjustment before passing the impugned intimation. The proposed adjustment u/s 143(1)(a) of the IT Act on 14 December 2022 did not raise any issue with regard to the ICDS adjustment and no opportunity of being heard was granted to the Petitioner on this issue before the intimation was passed. This is, therefore, a clear breach of the principles of natural justice, and in any event in contravention of the jurisdictional requirements laid down in the first and second proviso to Section 143(1). Department in their Affidavit-in-reply have accepted the fact that no notice for the proposed adjustment was issued on the ICDS adjustment. Hence, on this ground alone the adjustment made in the intimation in respect of the ICDS adjustment is liable to be quashed and set aside. Issues: Whether the ICDS adjustment made in an intimation under Section 143(1) of the Income-tax Act, 1961 was made without complying with the jurisdictional requirements of the first and second proviso to Section 143(1) (i.e., without giving intimation to the assessee and considering the assessee's response), and whether that adjustment is liable to be quashed.Analysis: Section 143(1), read with its first and second provisos, mandates that no adjustment under Section 143(1)(a) shall be made unless an intimation of the proposed adjustment is given to the assessee in writing or electronic mode and any response received from the assessee is considered before making the adjustment. On the facts found in the record, no intimation was served on the assessee in respect of the ICDS adjustment and the department has not disputed that no notice for the proposed adjustment was issued; consequently, the statutory pre-conditions for making the adjustment were not complied with. The absence of the required intimation and opportunity to respond constitutes breach of the jurisdictional requirements and of the principles of natural justice. The availability of appellate or alternate remedies does not preclude relief by writ where there is such a breach and where effective adjudication has not occurred in a timely manner.Conclusion: The ICDS adjustment made in the intimation under Section 143(1) is quashed and set aside; the writ petition is allowed insofar as the impugned ICDS adjustment is concerned.