Income Tax--Current Issues
Practice Update
V.K. Subramani
VALIDITY OF REASSESSMENT PROCEEDINGS AFTER
INTIMATION UNDER SECTION 143(1) WITHOUT ANY ADDITIONAL INFORMATION/EVIDENCE
When the ITR is filed under section 139 or in response to
notice under section 142(1) such ITR would be processed under section 143(1).
Some of the adjustments are prima facie which are apparent on perusal of ITR
and those could be adjusted by way of increase or decrease to the returned
income. They are (i) any arithmetical error; (ii) any incorrect claim, if such
incorrect claim is apparent from the information in the ITR; (iii) disallowance
of loss relating to earlier year set off when the ITR of that year was filed
beyond the 'due date' specified under section 139(1); (iv) disallowance of
expenditure or increase in income based on the information indicated in the
audit report; (v) disallowance of deduction claimed under section 10AA or under
Chapter VI-A (under the heading 'C-Deduction in respect of certain
incomes) when the ITR is filed beyond the 'due date' specified in section
139(1); and (vi) addition to income based on Form 26AS or Form 16A or Form 16
when it is not included in the total income correctly.
The first proviso to section 143(1) says that no adjustment
could be made without an intimation being given to the assessee of such
adjustment either in writing or in electronic mode. The second proviso says
that any response received from the assessee shall be considered before
making any adjustment. It also says that time limit for such response as 30
days from the date of such intimation of the proposed adjustment. The third
proviso says that no such adjustment be made from the assessment year 2018-19,
where there is discrepancy between the contents of Form 26-AS vis a vis the
respective income admitted in the ITR.
One of the contentious issues has been the validity of
invoking section 147 after processing the ITR under section 143(1) without any
further information or evidence. With CPC processing the ITRs in computer aided
environment, there could be no chance of omitting the prima facie additions
listed in section 143(1). But there are legal decisions to hold that intimation
under section 143(1) has no application of mind of the Assessing Officer and
issue of notice for reassessment hence would not amount to change of opinion as
there was no opinion per se in the case.
The Finance Act, 2021 has changed the procedure for
reassessment by seeking preliminary enquiry and granting an opportunity to the
assessee for providing explanations to deny escapement of income by inserting
section 148A. This would not however apply to proceedings initiated post-search
and seizure cases.
It is worth noting that in CIT v. Orient Craft Ltd.
(2013) 354 ITR 536 (Del) : 2013 TaxPub(DT) 1623 (Del-HC) it was held that
in the absence of any tangible material in the possession of the assessing
authority after issuing intimation under section 143(1), it is not permissible
to invoke reassessment proceedings.