Rectification requests based on automated 143(1) intimation must be examined on merits, remitting exemption claim to AO.

The dispute concerns whether an exemption claim mistakenly filed under an incorrect provision should be examined on merits despite automated processing under section 143(1). The tribunal held that automated intimation produces prima facie adjustments and does not preclude later consideration under rectification or appeal; authorities must apply mind rather than mechanically follow computerised outcomes. Reliance on administrative guidance requiring assistance to taxpayers supports substantive examination. The appellate rejection of rectification was set aside and the matter remitted to the Assessing Officer to determine eligibility for the claimed exemption on merits after affording a reasonable opportunity to be heard.

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Issues: Whether the assessee's claim for exemption made under an incorrect provision in the return (claimed under section 10(23C)(iv) instead of section 10(23C)(iiiad)) should be remanded to the Assessing Officer for examination on merits and whether the appellate order rejecting rectification under section 154 should be set aside.

Analysis: The return was processed under the automated mechanism of Section 143(1) of the Income-tax Act, 1961 which makes prima facie adjustments without application of mind. Orders under Section 154 of the Income-tax Act, 1961 and appellate orders require consideration after application of mind and cannot be dictated mechanically by the outcome of computerized processing. The assessee asserted that the claim under the correct provision was inadvertently misstated in the return and relied on prior coordinate-bench decisions and CBDT Circular No.14 (XL-35) dated 11.04.1955, which directs revenue officers to assist taxpayers to secure reliefs and is binding when beneficial to the assessee. The authorities below did not examine eligibility for exemption under the claimed provision on merits and merely followed the automated intimation. The record did not establish that the assessee met the eligibility conditions; therefore examination on merits by the Assessing Officer is necessary, after affording the assessee a reasonable opportunity to be heard.

Conclusion: The appellate order rejecting rectification is set aside and the matter is remanded to the file of the Assessing Officer to examine the assessee's claim for exemption under section 10(23C)(iiiad) of the Income-tax Act, 1961 on merits and to allow the exemption if the assessee satisfies the eligibility conditions, after providing a reasonable opportunity of hearing.

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