Standard Castings Private Limited Vs ITO (ITAT Delhi)
Section 143(1) Intimation Merges into 143(3) Scrutiny—AO Must Rectify Apparent Punching Error & Cannot Retain CPC Adjustment; CIT(A)’s ‘Not Maintainable’ View Reversed
The Assessee filed return for AY 2018-19 declaring NIL income under normal provisions and ₹5.57 crore as book profit u/s 115JB. CPC processed the return u/s 143(1) and computed income at ₹7,08,56,368, because an apparent punching mistake occurred—long-term & short-term capital gains of ₹12.07 crore were wrongly entered in Schedule BP, Row 3c (other sources) instead of Row 3b (capital gains). Consequently, set-off of business loss of ₹12.03 crore was not allowed.
The Assessee filed a rectification u/s 154, but CPC transferred rectification rights to the Jurisdictional AO. Subsequently, the case was selected for full scrutiny. The AO accepted all computations in the regular assessment u/s 143(3), made no additions, accepted the capital-gains working, yet retained the incorrect 143(1) adjustment and continued to determine income at the CPC-computed figure.
Before CIT(A)/NFAC, the Assessee argued:
- the typing error was apparent,
- the 143(1) intimation merged into 143(3) once scrutiny was completed,
- the AO was duty-bound to rectify the mistake and give effect to correct computation of income.
CIT(A), however, dismissed the appeal stating that the grievance “does not emanate from the 143(3) order” and relied on Sadish Paul (Chennai ITAT), holding the appeal not maintainable.
Tribunal’s Findings
ITAT held that CIT(A)’s approach was incorrect & distinguishable:
1. Doctrine of Merger Applies
Once scrutiny assessment is completed, the 143(1) intimation merges with 143(3) and no longer survives independently. AO, having full jurisdiction, must correct visible mistakes and compute income on the basis of the accepted scrutiny findings, not the CPC processing.
2. Typographical Punching Error Is an “Apparent Mistake”
The Assessee had no income from other sources, and capital gains were correctly declared in Schedule CG. Only Schedule BP was mis-punched. AO, having accepted the computation in scrutiny, ought to have rectified the 143(1) error.
3. CIT(A) Misapplied Sadish Paul
The Tribunal clarified that Sadish Paul dealt with a case where a 154 rectification order existed; here, no rectification was done, and the regular assessment order subsumed the CPC intimation.
4. AO’s Retention of Incorrect 143(1) Demand Was “Uncalled For & Negligence”
Since the Assessee declared all income correctly and the scrutiny order accepted it, AO’s refusal to rectify was held unsustainable.
Result
