Prior intimation under section 143(1)(a) is mandatory; failure invalidates CPC adjustments and bars duplicate additions.

An intimation-based adjustment under section 143(1)(a) cannot be sustained where the statutory proviso requiring prior intimation and consideration of the assessee's response was not complied with; absence of such prior notice renders the adjustment invalid. Separately, a recovery of previously written-off bad debts that has been recognized in the profit and loss account and supported by financial schedules and audit report cannot be subjected to a duplicate income addition absent evidence to the contrary; on these bases the adjustment is to be deleted.

---

---

Issues: (i) Whether the adjustment made by the Centralized Processing Centre (CPC) u/s. 143(1)(a) of the Income-tax Act could be sustained without prior intimation/show cause notice to the assessee; (ii) Whether, on merits, the amount of Rs. 2,88,06,410/- representing recovered bad debts was chargeable as additional income where the assessee had credited the recovery to profit and loss account.

Issue (i): Whether the CPC could make the adjustment under section 143(1)(a) without issuing prior intimation to the assessee.

Analysis: The statutory provisos to the processing provision require that no adjustment under clause (i) to (vi) of section 143(1)(a) be made unless an intimation proposing such adjustment is given to the assessee and any response so received is considered. The factual record does not demonstrate that the CPC issued the requisite prior intimation or afforded the assessee an opportunity to respond before making the adjustment.

Conclusion: The adjustment made by the CPC without prior intimation cannot be sustained; conclusion is in favour of the assessee.

Issue (ii): Whether the recovered amount of Rs. 2,88,06,410/- was properly chargeable as an additional income on merits despite the assessee having credited it to the profit and loss account.

Analysis: The assessee produced the financial statement schedules showing recognition of bad debt recovery in the profit and loss account and the audit report corroborating such recognition. The reconciliation of Schedule 14 and Schedule 17 demonstrates the recovery's accounting treatment. The Department has not established any contrary position on the record.

Conclusion: The recovered amount was already recognized and offered as income in the profit and loss account; conclusion is in favour of the assessee.

Final Conclusion: Both the procedural defect (absence of prior intimation) and the merits (recognition of recovery in profit and loss account) support deletion of the adjustment and dismissal of the revenue's appeal.

Ratio Decidendi: An adjustment made in the intimation under section 143(1)(a) of the Income-tax Act, 1961 is invalid unless the statutory proviso requiring prior intimation and consideration of the assessee's response is complied with; where an amount of recovery is already recognized in the profit and loss account, a duplicate addition is not justified.

---