ADJUSTMENTS TO BE MADE BY SOFTWARE TO THE RETURNED INCOME WHILE PROCESSING UNDER SECTION 143(1)
Where a return of income has been made under section 139, or in response to a notice under section 142(1), the total income or loss shall be computed after making any/all of the following exhaustive list of adjustments:-
(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under section 139(1).
(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if return is furnished beyond the due date specified under section 139(1)
(vi) (As per Finance Act, 2018 this adjustment cannot be made for Assessment Year 2018-19 and subsequent Assessment Years)
No adjustment shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode
Further response received from the assessee, if any, shall be considered before making any adjustment, and in case where no response is received within 30 days of the issue of such intimation, such adjustments shall be made.
2. Intimation under section 143(1) shall be sent in the following three cases only:
(i) Where tax or interest or fee under section 234F is found payable on the basis of the return, after making the adjustments referred to in Section 143(1), if any, and after giving credit to the taxes and interest and fee under section 234F paid; or
(ii) Where any tax or interest is found refundable on the basis of the return, after making the adjustments referred to in Section 143(1), if any, and after giving credit to the taxes and interest paid; and
(iii) Where adjustments referred to in section 143(1) have been made resulting in increase/ reduction of loss declared by the assessee and so no tax or interest and fee under section 234F is payable by the assessee and no tax or interest is refundable to the assessee.
In any other case, acknowledgment of filing of return of income is deemed as an intimation under section 143(1)
3. No revision under section 263/264 can be made against the intimation under section 143(1). Intimation and deemed intimation under section 143(1) can be rectified under section 154.
4. An appeal can be filed to CIT(A) against the intimation under section 143(1).
5. The intimation under section 143(1) is deemed as notice of demand under section 156. Thus, demand in the intimation should be paid within 30 days from the date of receipt of such intimation. In case of failure, the assessee shall be deemed to be an assessee in default.
6. As per section 143(1), the intimation for tax payable/refundable shall not be sent after the expiry of 1 year from the end of the financial year in which return is filed. However, the limitation of 1 year shall not apply to issue of cheque of refund.
SECTION 143(1D); PROCESSING OF RETURN IN CASE OF SCRUTINY
If return is filed having a claim of refund and case is selected for scrutiny under section 143(2), then the refund shall be granted to the assessee under section 143(1). The Income Tax Department cannot stop the refund till the completion of assessment under section 143(3). The return shall be processed under section 143(1) even if the case is selected for scrutiny and there is a refund.
However, to protect the interest of revenue under section 241A has been inserted, wherein Assessing Officer has been given:
- Power to withhold the refund under section 143(1)
- Up to the date on which assessment is made under section 143(3)
- Only in cases where Assessing Officer is of the opinion that the grant of refund is likely to adversely affect the interest of revenue (e.g. massive tax evasion detected or assessee is a habitual tax offender)
- But in this case Assessing Officer has to take previous approval of CIT
- And has to record reasons as to how the grant of refund will affect the interest of revenue
SECTION 143(3); REGULAR/SCRUTINY ASSESSMENT
1. For making the assessment under section 143(3) the Assessing Officer is required to serve a notice under section 143(2). This notice has to be served within 6 months from the end of the Financial year in which return is furnished.
2. Notice under Section 143(2) need not be necessarily issued by the Jurisdictional Assessing Officer. The prescribed Income Tax Authority can issue the notice under section 143(2) in electronic form or in paper form. Such notice can be signed in manuscript by the Prescribed Income Tax Authority.
Prescribed Income Tax Authority is I.T.O. and above officers designated by CBDT to issue the notices centrally.
3. The "hearing" in assessment/reassessment proceeding can be through communication of data and documents through electronic mode.
4. Where no return of income has been furnished, notice under Section 143(2) cannot be issued and consequently assessment under section 143(3) is not possible. This is because notice under section 143(2) can be issued only if the assessee has filed return under section 139 or in response to a notice issued under section 142(1).
5. The Assessing Officer can reduce the income below the returned income and can assess the loss higher than the returned income under section 143(3).
6. GOETZE (INDIA) LTD. (SUPREME COURT): A claim can be made before the Assessing Officer in the assessment proceedings only through a revised return and not through a letter. Therefore, if a deduction has not been claimed in the return and the assessee wants to claim the said deduction in the assessment proceedings then he can do so, only by filing a revised return.
7. First Proviso to Section 143(3); Assessing Officer cannot himself disallow the exemption under section 10(21) / 10(22B) / 10(23A)/ 10(23B)/ 10(23C) while making an assessment under section 143(3). He can under section 143(3) disallow the exemption under the said section only if the Government / prescribed Authority has rescinded the notification of exemption. Assessing Officer shall intimate the contraventions to Government / prescribed authority who shall withdraw the exemption.
8. Second Proviso to Section 143(3): Assessing Officer is empowered to recommend to the Central Government to withdraw the approval under Section 35(1)(ii)/Section 35(1)(iii) in case the Assessing Officer finds that such institution is not complying with the conditions subject to which approval was granted to it. On the recommendation of the Assessing Officer, the Central Government will cancel the approval granted under section 35(1)(ii)/(iii)
9. In terms of Section 10(23C) and section 13, exemption under Section 10(23C) or 11 or 12 shall not be available for the previous year in which commercial receipts exceeds 20% of total receipts, whether or not the approval granted or notification issued for such charitable/religious institutions has been cancelled. Accordingly, as per Section 143(3), Assessing Officer shall also disallow exemption under Section 10(23C) or 11 & 12 by operation of law where the First proviso to section 2(15) becomes applicable i.e. commercial/business receipts exceed 20% of total receipts.
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