Paliwal Diagnostics Pvt. Ltd Vs DCIT (ITAT Lucknow)

The assessee filed an appeal before the ITAT against the order dated 08.07.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC). The primary grievance was against the dismissal of an additional ground relating to an adjustment of Rs. 9,14,620 made under Section 143(1) of the Income Tax Act, 1961.

The Assessing Officer had passed an assessment order dated 20.09.2022 under Sections 143(3) read with 144B of the Act. The assessee’s total income was assessed at Rs. 12,65,32,570 as against the returned income of Rs. 12,29,19,020.

In the first appellate proceedings, the CIT(A) partly allowed the appeal by deleting an addition of Rs. 26,98,930. However, the adjustment of Rs. 9,14,620 made under Section 143(1) remained undisturbed. Aggrieved by this aspect of the order, the assessee approached the Tribunal.

Before the Tribunal, the assessee submitted that it had never received the intimation issued under Section 143(1) reflecting the adjustment. The Tribunal noted that this contention had also been raised before the CIT(A). The Revenue failed to produce any evidence establishing that such intimation had actually been issued and served upon the assessee.

The Tribunal observed that non-service of the intimation under Section 143(1) constituted a sufficient explanation for the assessee not having filed an appeal against that intimation. The Tribunal further examined the assessment records and found that the computation of taxable income in the assessment order itself referred to both the returned income and the income determined under Section 143(1). This demonstrated that the adjustment under Section 143(1) formed part of the income ultimately assessed through the assessment order.

The Tribunal held that, in the facts of the case, multiple remedies were available to the assessee, including: filing a rectification application under Section 154; appealing against rejection of such rectification; directly appealing against the intimation under Section 143(1); appealing against the assessment order where the adjustment was retained; and seeking revision under Section 264.

According to the Tribunal, the availability or non-exercise of one remedy could not justify the departmental authorities declining to adjudicate an issue raised through another legally permissible remedy. Therefore, even if the assessee had received the Section 143(1) intimation and had not appealed against it, the assessee could still challenge the adjustment while appealing against the assessment order if that adjustment had been retained therein.

The Tribunal concluded that the CIT(A) ought to have examined the adjustment of Rs. 9,14,620 on merits, provided the assessee had raised an appropriate ground in appeal. Since this had not been done, the matter relating to the Section 143(1) adjustment was restored to the file of the CIT(A) with a direction to decide the issue afresh on merits through a speaking order after granting reasonable opportunity of hearing to the assessee.

All grounds of appeal were treated as disposed of in accordance with these directions. The appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT LUCKNOW

(A) This appeal has been filed by the assessee against the impugned appellate order of learned CIT(A)/National Faceless Appeal Centre (NFAC), Delhi vide order dated 08.07.2025 for the AY 2020-21. The assessee has raised the following grounds of appeal:

“1. That the Learned CIT(A) has erred, both in law and on facts, in dismissing the additional ground raised by the Appellant and in upholding the addition of Rs. 9,14,620/-.

2. That the action of the Learned CIT(A) in dismissing the additional ground is against the principles of natural justice.

3. That the appellant reserve the right to add to, alter or modify the above grounds before or during the hearing before the Hon’ble Tribunal so as to enable the Hon’ble Tribunal to decide on the grounds raised by the appellant as per Law.”

(B) In this case, assessment order dated 20.09.2022 was passed by the Assessing Officer under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act) wherein the assessee’s total income was determined at Rs. 12,65,32,570/- as against the returned income of Rs. 12,29,19,020/-. The computation of total income is worked out in the assessment order is as under:

(C) The assessee’s appeal against the assessment order was partly allowed by the Learned CIT(A) vide impugned order dated 08.07.2025. The Learned CIT(A) deleted the addition of Rs. 26,98,930/- as per aforesaid computation of taxable income referred to in foregoing paragraphs (B) of this order. However, the assessee’s appeal against the adjustment of Rs. 9,14,620/- made by way of adjustment under section 143(1) of the Income Tax Act, 1961 (the Act) was left and undisturbed by the Learned CIT(A). The relevant portion of the order of the Learned CIT(A) is reproduced below:

(D) The present appeal has been filed by the assessee against the aforesaid impugned appellate order of Learned CIT(A). In the course of appellate proceedings in Income Tax Appellate Tribunal, a Paper Book containing the following particulars were filed from the assessee side.

(D.1) Further, written submissions were also filed from the assessee’s side which is reproduced below for the ease of reference:

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(D.1.1) At the time of hearing before us, the Learned Authorized Representative for the assessee placed reliance on the aforesaid Paper Book referred to in foregoing paragraph (D) of this order and on the aforesaid written submissions referred to in foregoing paragraph (D.1) of this order. The Learned Departmental Representative placed reliance on the assessment order and on the impugned appellate order of the Learned CIT(A).

(D.2) We have heard both sides. We have perused the materials on record. The assessee had contended before the Learned CIT(A) during the appellate proceedings in the office of the Learned CIT(A) that the assessee had not received intimation under section 143(1) of the Act showing the adjustment made by the Income Tax Department under section 143(1) of the Act. Once again, in the written submissions referred to in foregoing paragraph (D.1) of this order, the assessee has contended that the aforesaid intimation under section 143(1) of the Act was not received by the assessee. Revenue has not placed any evidence to show that the intimation under section 143(1) of the Act was actually issued and served on the assessee. If the assessee has not been served with intimation under section 143(1) of the I.T. Act, this in itself is an adequate explanation on the part of the assessee for not filing appeal against the intimation under section 143(1) of the Act. Further, in view of the written submissions referred to in foregoing paragraphs (D) of this order, we are inclined to accept the contention of the assessee that the issue regarding aforesaid addition of Rs. 26,98,930/- by way of adjustment under section 143(1) of the Act did emanate from the aforesaid assessment order dated 20.09.2022; which is further established on perusal of computation of taxable income [referred to in foregoing paragraph (B) of this order] wherein the returned income as well as income determined under section 143(1) of the Act have been indicated at Rs. 12,29,19,020/- and Rs. 12,38,33,640/- respectively, thereby confirming that adjustment made under section 143(1) of the Act is part of income assessed in the assessment order.

(D.2.1) Notwithstanding the foregoing discussion, we are of the view that the assessee had, in the present facts and circumstances of the case, multiple remedies available to the assessee, including:

(i) Application for rectification of Intimation issued under section 143(1) of the Act; under section 154 of the Act.

(ii) Appeal against the refusal to carry out rectification under section 154 of the Act. [If the assessee’s remedy exercised under (i) above is unsuccessful]

(iii) Direct appeal against the intimation under section 143(1) of the Act, under Chapter-XXA of the Act.

(iv) Appeal against the assessment order, under Chapter XXA of the Act; if the adjustment made under section 143(1) of the Act is retained in the assessment order.

(v) Revision petition under section 264 of the Act.

(D.3) It is the assessee’s choice to pursue one or more among aforesaid remedies available to the assessee as mentioned in foregoing paragraph (D.2.1) of this order. If the assessee has not opted for one or more of possible and available remedies; it is not proper on the part of Departmental Authorities to not decide the issue on merits in course of proceedings pursuant to choice of any other remedy/remedies opted for by the assessee. Therefore, even if the assessee had received intimation under section 143(1) of the Act, and even if the assessee had not filed appeal against the intimation issued under section 143(1) of the Act; it was still open for the assessee to appeal against the adjustment made in intimation under section 143(1) of the Act if such adjustment is retained in the assessment order. In view of the foregoing, we are of the view that the Learned CIT(A) was required to decide the assessee’s appeal against the aforesaid adjustment made under section 143(1) of the Act amounting to Rs. 9,14,620/-, on merits, while deciding the assessee’s appeal, if the assessee had taken a ground in the appeal filed before the Learned CIT(A) against the adjustment made in intimation under section 143(1) of the Act. In view of the foregoing discussion, the issue in dispute regarding adjustment of Rs. 9,14,620/- made under section 143(1) of the Act is restored back to the file of the Learned CIT(A) with the direction to decide this issue on merits through speaking order after providing reasonable opportunity to the assessee.

(E) All grounds of appeal are treated as disposed off, in accordance with the aforesaid directions. For statistical purposes, the appeal is allowed.

(Order was pronounced in the open court on 02/06/2026)