TaxTMI 
TaxTMI 
2026 (10) TMI 40
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....rn was filed at Nil income. Subsequently on 28.09.2019 assessment proceedings were initiated by issuance of notice under section 143(2) of the Act. Further intimation under section 143(1) of the Act (after processing the return) was passed on 09.02.2020. Subsequently, the assessee realized that there was an apparent mistake committed while filing return of income by claiming exemption under section 10(23C)(vi) of the Act whereas the assessee's case fell within the provision of section 10(23C)(iiiad) of the Act as the assessee's gross receipts were less than Rs. 1 crore. However, the rectification application moved by the assessee came to be rejected and a demand of Rs. 3,88,775/- came to be raised against the assessee. Thereafter, the assessment order was passed under section 143(3) of the Act on 17.03.2021 wherein the income as per the intimation under section 143(1) of the Act was accepted without making any further addition under section 143(3) of the Act. 2.1 Aggrieved, the assessee carried the matter to the learned First Appellate Authority (hereinafter called the learned "NFAC") challenging the assessment order passed under section 143(3) of the Act by mechanically retaini....
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....ed Authorized Representative (hereafter called the 'learned AR') further submitted that moreover the AO had passed a non-speaking order under section 143(3) of the Act by mechanically retaining the adjustment made by the CPC, Bangalore in the intimation under section 143(1) of the Act which was devoid of any reasons and was passed by completely ignoring the submissions of the assessee. 3.1 It was further argued by the learned AR that it was completely illegal on the part of the AO to adopt the adjustment made under section 143(1) of the Act in the order passed under section 143(3) of the Act, although notice under section 143(2) of the Act was issued prior to the passing of intimation under section 143(1) of the Act. Inviting my attention to the dates in this regard, it was submitted that the notice under section 143(2) of the Act was issued on 28.09.2019 whereas the intimation under section 143(1) of the Act was passed on 09.02.2020 and the assessment order under section 143(3) of the Act incorporating the prima-facie adjustment made under section 143(1) of the Act was passed on 17.03.2021 which was against the settled law in this regard. It was submitted that the issue as to w....
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.... the Act which, as per settled law, is not legally permissible. It is seen that the case of the assessee is squarely covered by the judgment of the Hon'ble Calcutta High Court in the case of C.E.S.C. Ltd. v/s DCIT (supra) wherein the operative part is extracted below: "5. After the AO issued the notices u/s 143(2) for A.Y.2016-17 & 201718 the CPC passed the impugned orders u/s 143(1) on 21.02.2018 & 31.03.2019 respectively. Therefore, the impugned orders passed by the CPC u/s 143(1) are subsequent to the returns of income already taken up for scrutiny by the AO. The Hon'ble Gujarat High Court in case of Gujarat Poli-Aux Electronics Ltd. vs. DCIT (supra) has held in para 15 & 16 as under: "15. Mr. Shah, learned Counsel has placed reliance on the decision of Calcutta High Court in the case of Modern Fibotex India Limited v. Dy. C.I.T., 212 ITR 496. In view of the Calcutta High Court when once notice under Section 143(2) has been issued there is no scope for Assessing Officer either to make prima facie adjustment on the basis of the return as filed or issue intimation under Section 143(1)(a) of the Act. Emphasis is given to the omission by the legislature with re....
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.... the courts would be failing to perform their duty if relief were refused without adequate reasons." 16. In this view of the matter, we are of the opinion that after issuance of notice under Section 143(2) of the Act, it is not open for the Assessing Officer to make adjustment or to pass order under Section 143(1) of the Act but has to make assessment in accordance with law, i.e., under Section 143(3) of the Act." 6. Thus, the Hon'ble High Court has held that after issuing notice u/s 143(2) of the Act it is not open for the AO to make adjustment or to pass the order u/s 143(1) of the Act but has to make the assessment in accordance with provisions of section 143(3) of the Act. Therefore, once the proceedings u/s 143(3) are initiated by the AO by issuing notice u/s 143(2) then the AO has no jurisdictional to initiate parallel proceedings of processing the return u/s 143(1) of the Act. The Hon'ble Supreme Court in case of Vodafone Idea Limited vs. ACIT 424 ITR 664 has also observed in para 18 as under: "18. The exercise of power under sub-sections (2) and (3) of Section 143 of the Act is thus premised on non-acceptance of what is evident from the return itself and t....
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....tion of an intimation issued under the aforesaid section is also not permissible because in either case it would amount to activating section 143(1) of the Act which according to the judgment of the Apex Court is not permissible after issuance of a notice under section 143(2). 12. Regular assessment for the assessment years 1990-91 and 1992-93 under section 143(3) has been completed disallowing appropriates contingency reserve as a business expenditure and appeals therefrom are pending. A further question therefore arises whether assessment or the provisional assessment or to be more precise, the assessment made on the basis of the return itself under section 143(1)(a) the Act accepting appropriation to contingency reserve as an allowable expenditure merged in the order passed under section 143(3) of the wherein the aforesaid appropriation to contingency reserve was disallowed ? What was accepted in the intimation has been revered in regular assessment and the assessee has preferred an appeal which is pending. I am firmly of the view that this is a case where the theory merger is bound to apply because the intimation issued under section 143(1)(a) is no longer operative in....