ASNP & Co. Vs ITO (ITAT Bangalore)
Summary: Facts. The assessee filed its return of income on 10.01.2021. The return was selected for scrutiny through CASS on the issue of large relief claimed under sections 90/91. Notice under sections 143(2) was issued on 29.06.2021, thereby commencing scrutiny proceedings. However, the very same return was subsequently processed by CPC under section 143(1), and an intimation was issued on 25.12.2021. The assessment under section 143(3) read with section 144B was subsequently completed without making any separate addition on the issue for which scrutiny had been initiated. :contentReference[oaicite:1]{index=1}
Revenue / CIT(A) Finding. The Revenue contended that sections 143(1) and 143(2) operate independently and that there was no statutory requirement that processing under section 143(1) must precede issuance of notice under section 143(2). It was also argued that the limitation for issuing notice under section 143(2) is linked to the end of the financial year in which the return is furnished and not to the date of processing under section 143(1).
The Revenue further contended that no prejudice had been caused to the assessee because the assessee had participated in the scrutiny proceedings. The assessee, however, challenged the validity of the subsequent section 143(1) intimation and the adjustments made therein.
ITAT Finding. The Tribunal noted that there was no dispute that the notice under section 143(2) dated 29.06.2021 preceded the section 143(1) intimation dated 25.12.2021. Thus, regular scrutiny proceedings had already commenced when the CPC subsequently processed the return under section 143(1).
The Tribunal relied upon the Supreme Court judgment in CIT v. Gujarat Electricity Board, (2003) 260 ITR 84 (SC), wherein it was held that section 143(1) provides a summary procedure which may be followed by a regular assessment under section 143(2). However, once regular assessment proceedings have commenced under section 143(2), there is no need for a subsequent summary proceeding under section 143(1).
Principle of Gujarat Electricity Board
The Tribunal applied the principle that the statutory scheme permits the Revenue to proceed from section 143(1) to section 143(2), but not from section 143(2) back to section 143(1).
Therefore, once the scrutiny proceedings had commenced through notice under section 143(2), the subsequent processing of the same return under section 143(1) was held to be legally impermissible.
Effect on Intimation and Adjustments
The Tribunal consequently held that the section 143(1) intimation dated 25.12.2021 was bad in law and void ab initio. All adjustments made pursuant to that intimation were directed to be deleted.
Since the AO, while completing the scrutiny assessment under section 143(3) read with section 144B, had not made any separate addition, the Tribunal directed that the returned income be accepted.
Case Relied Upon. The principal authority relied upon was:
CIT v. Gujarat Electricity Board, (2003) 260 ITR 84 (SC), 2002 (10) TMI 5 – Supreme Court, holding that while summary processing under section 143(1) can be followed by regular assessment proceedings, the converse is not permissible once proceedings under section 143(2) have commenced.
Outcome. The ITAT held the subsequent section 143(1) intimation to be void ab initio, deleted the adjustments made therein and directed acceptance of the returned income since no separate addition was made in the scrutiny assessment. The assessee’s appeal was allowed.
Ratio. Where notice under section 143(2) has already been issued and regular scrutiny proceedings have commenced, a subsequent intimation under section 143(1) in respect of the same return is void ab initio. The statutory scheme permits section 143(1) processing to be followed by scrutiny, but not scrutiny to be followed by summary processing under section 143(1).
Cases Discussed
- CIT v. Gujarat Electricity Board, (2003) 260 ITR 84 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE
The assessee has filed the present appeal against the impugned order dated 19.12.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”] for the assessment year 2020-21.
2. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the return filed by the assessee was selected for scrutiny for the reason of large relief allowed under section 90/91 of the Act. However, after considering the details and documents filed by the assessee, no addition was made on this issue vide the assessment order passed under section 143(3) r.w.s. section 144B of the Act. The learned AR submitted that, however, instead of assessing the total income of the assessee as per the return of income, the same was assessed at the income computed as per the intimation issued under section 143(1) of the Act. The learned AR submitted that in the present case the intimation under section 143(1) of the Act was issued on 25.12.2021. However, prior to the issuance of intimation under section 143(1) of the Act, the scrutiny proceedings were already initiated vide notice dated 29.06.2021 issued under section 143(2) of the Act. Thus, the learned AR submitted that once the Assessing Officer (“AO”) had initiated the scrutiny proceedings, it was open for the Centralised Processing Centre (“CPC”), Bangalore to issue intimation under section 143(1) of the Act.
3. On the other hand, the learned Departmental Representative filed the response from the Jurisdictional Assessing Officer, submitting as follows: –
“7. The argument of the Assessee is not acceptable for the following reasons:
a. The timelines for the Intimation order to be issued by the LD. CPC is one year from the end of the financial year in which the return is made and the timeline for notice u/s. 143(2) to be served on the assessee is within six months from the end of the financial year in which the return is furnished. The proviso to section 143(2) of the Act itself prescribes the limitation for issuance of notice with reference to the end of the financial year in which the return of income is furnished by the Assessee, and not with reference to the date of intimation/processing u/s 143(1). This, by itself, demonstrates that the Legislature never intended completion of processing u/s 143(1) to be a pre-condition for issuance of a valid notice u/s 143(2). Had such a sequence been intended, the Legislature would have expressly linked the limitation for issuance of notice u/s 143(2) to the date of intimation u/s 143(1), instead of the date of furnishing of the return.
b. The purpose of the notice u/s 143(2) of the Act is to enable the Assessing Officer to satisfy himself that the Assessee has not understated its income, has not computed excessive loss and has not underpaid tax, before finalizing a scrutiny assessment. This is an independent exercise of statutory jurisdiction and is distinct from the summary and mechanical processing carried out u/s 143(1) of the Act, which is undertaken by the Centralized Processing Centre (CPC) for the limited purpose of making prima facie adjustments and raising a demand/granting a refund based on the return as filed. The two provisions operate in different fields and sub-serve different purposes. There is no requirement under the Act, express or implied, that processing of the return u/s 143(1) must precede or be completed before issuance of notice u/s 143(2).
c. Administratively also, cases are selected for scrutiny under CASS on the basis of the data contained in the return as furnished by the Assessee upon filing, and the system-generated notice u/s 143(2) is issued within the limited statutory window available therefor, which runs from the end of the financial year of filing of the return. This selection and issuance process is independent of, and not contingent upon, completion of CPC processing u/s 143(1), which may take a variable period depending on verification of TDS/tax credits and other data. Accepting the Assessee’s contention would make the Revenue’s timely exercise of scrutiny jurisdiction hostage to the vagaries of CPC processing timelines – a result plainly not intended by the Legislature, more so when section 143(2) itself prescribes a limited time-window for issuance of notice.
d. Without prejudice to the above, no prejudice whatsoever has been caused to the Assessee on account of the sequence in which notice u/s 143(2) and intimation u/s 143(1) came to be issued. The Assessee was duly served with the notice u/s 143(2), participated in the assessment proceedings, and filed its submissions from time to time, without raising this objection before the Assessing Officer at the appropriate stage.
8. In view of the above discussion, the argument advanced by the Id. Counsel for the Assessee-that the notice u/s 143(2) of the Act dated 29.06.2021 is invalid for having been issued prior to processing of the return u/s 143(1) on 25.12.2021 – is factually misconceived and legally untenable. The provisions of section 143(1) and section 143(2) of the Act operate independently, and there is no statutory requirement that processing u/s 143(1) must precede issuance of notice u/s 143(2). The said ground raised by the Assessee before the Hon’ble ITAT is devoid of merit and deserves to be rejected, and the assessment order passed u/s 143(3) r.w.s. 144B of the Act dated 05.09.2022 deserves to be upheld.
9. Submitted for kind perusal and further necessary kind action.”
4. Having considered the submissions of both sides and perused the materials available on record, we find that in the present case there is no dispute regarding the fact that the return filed by the assessee was selected for scrutiny through CASS and notice under section 143(2) of the Act was issued on 29.06.2021. The assessee has also placed a copy of the said notice issued under section 143(2) of the Act in the paper book at Pages 95 – 102. Further, there is also no dispute regarding the fact that the very same return of income filed by the assessee on 10.01.2021 was processed vide intimation dated 25.12.2021 under section 143(1) of the Act by CPC. Therefore, it is evident that on the date the return of income was processed under section 143(1) of the Act, the scrutiny proceedings had already been initiated. Thus, the issue arises whether it is open to the Revenue to issue intimation under section 143(1) of the Act after initiation of scrutiny proceedings and issuance of notice under section 143(2) of the Act. We find that this issue is no longer res integra and was decided in negative by the Hon’ble Supreme Court in CIT vs. Gujarat Electricity Board, reported in (2003) 260 ITR 84 (SC). The relevant findings of the Hon’ble Supreme Court, in the aforesaid decision, are reproduced as follows: –
“5. Even otherwise, the view taken by the Gujarat High Court seems to be correct on principle. There is no dispute that section 143(1)(a) of the Act enacts a summary procedure for quick collection of tax and quick refunds. Under the scheme if there is a serious objection to any of the orders made by the Assessing Officer determining the income, it is open to the assessee to ask for rectification under section 154. Apart therefrom, the provisions of section 143(1)(a)(1) indicate that the intimation sent under section 143(1)(0) shall be without prejudice to the provisions of sub-section (2). The Legislature, therefore, intended that, where the summary procedure under sub-section (1) has been adopted, there should be scope available for the revenue, either suo motu or at the instance of the assessee to make a regular assessment under sub-section (2) of section 143. The converse is not available; a regular assessment proceeding having been commenced under section 143(2), there is no need for a summary proceeding under section 143(1)(a).”
5. Since in the present case, the notice under section 143(2) of the Act precedes the intimation issued under section 143(1) of the Act, respectfully following the decision of the Hon’ble Supreme Court in Gujarat Electricity Board (supra), we are of the considered view that the intimation issued under section 143(1) of the Act is bad in law and void ab initio. Accordingly, the adjustments made vide intimation issued under section 143(1) of the Act are not sustainable, and thus are directed to be deleted. As the AO did not make any separate addition vide assessment order passed under section 143(3) r.w.s. section 144B of the Act, we direct that the assessee’s return of income be accepted. Accordingly, the sole issue argued before us is decided in favour of the assessee.
6. In the result, the appeal by the assessee is allowed.
Order pronounced in the open court on 10-Sept-2026.
