Prior notice is mandatory before making a section 143(1) adjustment; absence of intimation invalidates the processing.

Processing a return under section 143(1) requires only the specified adjustments and prior intimation to the assessee before any adjustment is made under the first proviso to section 143(1)(a). Where the adjustment was triggered without such prior notice, the mandatory procedure was not followed and the defect affected the legality of the processing itself. The absence of notice also breached audi alteram partem. The intimation under section 143(1) was therefore invalid and liable to be quashed.

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Issues: Whether the intimation under section 143(1) of the Income-tax Act, 1961 was valid when the adjustment was made without prior notice to the assessee as required by the first proviso to section 143(1)(a).

Analysis: The adjustment was made while processing the return under section 143(1), but the revenue itself acknowledged that due to technical issues the adjustment notice was not triggered before processing. The statutory scheme permits only specified adjustments and requires intimation to the assessee before making such adjustment. Since no prior notice was issued, the mandatory procedure was not followed. The defect went to the legality of the processing itself and offended the requirement of audi alteram partem.

Conclusion: The intimation under section 143(1) was invalid and liable to be quashed. The issue is decided in favour of the assessee.

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