ITAT Mumbai Confirms Deletion of ₹2.99 Crore Addition Adopted From Section 143(1) Intimation

DCIT Vs Leela Lace Holdings Private Limited (ITAT Mumbai)

Summary: The Income Tax Appellate Tribunal, Mumbai Bench, considered a Revenue appeal in ITA No. 3722/Mum/2026 along with two connected appeals filed by Leela Lace Holdings Private Limited for Assessment Year 2017-18. The Revenue challenged the order of the CIT(A), NFAC, which had deleted an addition of Rs. 2,99,65,837/- under the head “Income from Business or Profession”. The assessee had filed its return on 29.11.2017 declaring total income of Rs. 3,92,00,550/-. The return was processed by CPC, Bengaluru, under Section 143(1), pursuant to an intimation dated 16.03.2019 determining total taxable income at Rs. 6,91,66,390/-.

However, scrutiny proceedings had already commenced when notice under Section 143(2) was issued on 09.08.2018. The assessment was subsequently completed under Section 143(3) on 11.12.2019 at the same total income of Rs. 6,91,66,390/-. Before the CIT(A), the assessee pointed out that its return disclosed NIL income under “Business and Profession”, whereas the assessment order contained Rs. 2,99,65,837/- under that head without discussion or reasoning and had merely adopted the figure appearing in the Section 143(1) intimation. The CIT(A), after examining the ITR-6 acknowledgment, computation and assessment order, held that the addition was without merit and directed recomputation in accordance with the returned income, subject to other valid adjustments. Before the Tribunal, the Revenue contended that the assessee had not appealed against the Section 143(1) intimation and therefore could not challenge the adjustment during the Section 143(3) proceedings. The assessee submitted that the Section 143(1) intimation was issued after scrutiny proceedings had commenced, that rectification applications under Section 154 had also been filed and rejected, and that once the scrutiny assessment was completed, the earlier intimation merged with the Section 143(3) assessment. Reliance was placed on decisions including Geecee Ventures Ltd., Innovsources Services Pvt. Ltd., Gujrat Poly-Avx Electronics Ltd. and National Stock Exchange of India Ltd.