CPC Adjustment Merges With Section 143(3) Scrutiny Assessment: ITAT Mumbai

National Stock Exchange of India Limited Vs DCIT Circle-7(1)(1) (ITAT Mumbai)

Summary: ITAT Mumbai allowed the appeal of National Stock Exchange of India Limited concerning a CPC adjustment of Rs. 35,23,99,063 towards “Abandoned Project Expenses written off and claimed as deductible expenditure.” The assessee had filed its return for AY 2020-21 declaring total income of Rs. 2049,74,12,520, which was processed under Section 143(1) at Rs. 2084,98,11,580 after adjustments. The Tribunal noted that the Revenue never doubted the expenditure itself; the dispute concerned whether it was allowable as business expenditure under Section 37 or was capital expenditure. The assessee had filed its objection to the proposed Section 143(1) adjustment on 29.09.2021, but CPC did not respond to it and apparently passed the final intimation without considering the objection.

The assessee also filed a rectification application under Section 154, but no order was passed on it. Meanwhile, the case was selected for complete scrutiny and an assessment order under Section 143(3) read with Section 144B was passed on 28.09.2022 without making the disputed addition. The Tribunal held that non-consideration of the assessee’s response and non-disposal of its rectification application violated the requirements referred to in Section 143(1), rendering the CPC action unsustainable. It further applied the doctrine of merger, holding that once scrutiny assessment under Section 143(3) had been completed, the CPC adjustment merged into that assessment and only the Section 143(3) order survived.