ITAT Lucknow held that issuing a Section 143(1) intimation after a scrutiny notice defeats the purpose of Section 143(1) and renders the adjustment invalid. The assessment based on it was set aside.
Invalidity of Post-Scrutiny Section 143(1) Adjustments
ITAT Lucknow ruled that once a scrutiny notice under Section 143(2) is issued, any subsequent adjustment via automated intimation under Section 143(1) is invalid. The case involved adjustments made through a 143(1) intimation after scrutiny proceedings had commenced, which the Assessing Officer later adopted in the final assessment.
The tribunal held that Section 143(1) assessments are meant for non-scrutiny cases and operate mechanically.
“Initiation of scrutiny proceedings signifies election of a higher mode of assessment, precluding reliance on 143(1) adjustments”, the ITAT stated. Since the department had exercised jurisdiction under Section 143(2), it could not fall back on 143(1) for adjustments.
This decision underscores the importance of jurisdictional consistency in assessment proceedings. Practitioners should challenge any hybrid use of 143(1) adjustments in scrutinized cases, especially when the adjustment forms part of final assessment reasoning.
Citations
- Section 143(1), Section 143(2), Income Tax Act, 1961
