M.P. Madhyam Vs DCIT (CPC) (ITAT Indore)
The assessee filed two appeals against separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), both dated 18.10.2022, arising from the processing of returns under Section 143(1) by the Central Processing Centre (CPC), Bengaluru for Assessment Years 2016-17 and 2017-18. The appeals challenged the validity of the adjustments made under Section 143(1), including denial of revenue expenditure, denial of deduction under Section 11(1)(a), and levy of interest under Sections 234B and 234C.
Assessee’s Contentions
The assessee argued that the Section 143(1) intimations issued by CPC were invalid because, before they were issued, the Assessing Officer had already initiated scrutiny assessment proceedings by issuing notices under Section 143(2) on 21 July 2017 for Assessment Year 2016-17 and 9 August 2018 for Assessment Year 2017-18.
It was contended that once the returns had been selected for scrutiny, the CPC could not continue parallel proceedings under Section 143(1) or make adjustments while the scrutiny assessment was pending. The assessee relied on various judicial decisions, including those of the Gujarat High Court, the Supreme Court and the Calcutta High Court.
Revenue’s Stand
The Revenue did not dispute that notices under Section 143(2) had already been issued before the CPC passed the impugned orders under Section 143(1). However, it argued that the additions made through the Section 143(1) intimations were subsequently made in the assessments completed under Section 143(3) and, therefore, the Section 143(1) orders had merged with the regular assessment orders.
