Shikhar Enterprises Vs ITO (ITAT Raipur)
Summary: The Income Tax Appellate Tribunal, Raipur Bench, in M/s. Shikhar Enterprises Vs ITO, allowed the assessee’s appeal for Assessment Year 2019-20 and deleted an additional adjustment of ₹75,88,188 made by the Centralized Processing Centre (CPC) while processing the return under Section 143(1) of the Income Tax Act, 1961. The Tribunal found that the show-cause notice dated 31 December 2019 proposed an adjustment of only ₹1,13,800 relating to employees’ contributions towards ESI and provident fund. However, the final intimation dated 26 May 2020 reflected total additions of ₹75,88,188. The assessee contended that this substantial additional adjustment was made without issuing a corresponding show-cause notice or providing an opportunity to respond. The Tribunal held that an adjustment beyond what was communicated to the assessee could not be sustained without complying with the mandatory statutory procedure and the principles of natural justice.
The assessee challenged the order of the Additional/Joint Commissioner of Income Tax (Appeals), Kochi, dated 17 March 2026. During the hearing, counsel drew attention to the proposed adjustment notice and demonstrated that the disallowance specifically communicated under Section 143(1)(a)(iv) was confined to ₹1,13,800. The final CPC intimation nevertheless contained a considerably larger adjustment. The Revenue relied upon the orders of the subordinate authorities. The central question before the Tribunal was whether such an adjustment could survive when the assessee had never been informed of the proposed addition or given an opportunity to explain it.
The Tribunal relied principally upon the Bombay High Court’s decision in Rallis India Limited Vs Central Processing Centre and Ors., dated 19 January 2026. In that case, the High Court examined the first and second provisos to Section 143(1) and held that an assessee must receive prior intimation of a proposed adjustment, either in writing or electronically, and that the response received must be considered before making the adjustment. The High Court had quashed an ICDS adjustment of ₹1,284.67 crore because the relevant issue had not been included in the earlier notice. It also referred to Whirlpool Corporation Vs Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1, concerning the maintainability of writ petitions despite alternative remedies where the principles of natural justice have been violated.
The Tribunal further referred to Bax India Ventures Pvt. Ltd. Vs Central Processing Centre and Ors., decided on 2 February 2026, where the Bombay High Court followed Rallis India Limited and reiterated that prior notice is a mandatory jurisdictional requirement for an adjustment under Section 143(1)(a). Applying these binding judicial precedents to the assessee’s case, the ITAT concluded that the additional adjustment of ₹75,88,188 could not be sustained without issuing a notice covering that adjustment. Consequently, the Tribunal deleted the addition, set aside the order of the Additional/Joint CIT(A), and allowed the assessee’s appeal. The decision reinforces the requirement that CPC processing cannot result in uncommunicated adjustments and that the assessee must have an opportunity to respond to the specific adjustment ultimately made.
Cases Discussed
1. Whirlpool Corporation Vs Registrar of Trade Marks, Mumbai (Supreme Court); (1998) 8 SCC 1 — Relied upon through the Bombay High Court’s decision in Rallis India Limited for the principle that violation of natural justice is a recognised exception to the rule requiring exhaustion of an alternative remedy.
2. Rallis India Limited Vs Central Processing Centre and Ors. (Bombay High Court); Writ Petition (L) No. 37314 of 2025; 19/01/2026 — Followed for holding that the first and second provisos to Section 143(1) require advance notice of the specific proposed adjustment and consideration of the assessee’s response before making the adjustment.
3. Bax India Ventures Pvt. Ltd. Vs Central Processing Centre and Ors. (Bombay High Court); Writ Petition (L) No. 43004 of 2025; 02/02/2026 — Followed for the proposition that an adjustment made without complying with the mandatory prior-intimation requirement under Section 143(1)(a) is liable to be quashed.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the assessee emanates from the order of the Ld.ADDL/JCIT(A), Kochi, dated 17.03.2026 for the assessment year 2019-20 as per the grounds of appeal on record.
2. The Ld. Counsel for the assessee at the time of hearing has brought to the notice of the Bench at Page 67 of the paper book, wherein show cause notice has been sent to the assessee proposing adjustment u/s. 143(1)(a) of the Income Tax Act, 1961 (for short ‘the Act’), dated 31.12.2019 and therein, as per the said show cause notice, the Column-(iv) pertains to disallowance of expenditure indicated in the audit report but not taken into account in computing the total income, such proposed disallowance pertains to only ESI & PF amounting to Rs.1,13,800/-. The said part of the show cause notice is extracted as follows:
Part-A — Adjustments u/s 143(1)(a)
| Sl. No. | Schedule | Error Description | Amount in Income Tax Return | Amount as computed | Variance on account of Proposed adjustment |
|---|---|---|---|---|---|
| (i) Arithmetical error in the return u/s 143(1)(a)(i) | |||||
| 1 | SCHEDULE BP | In schedule BP, Sl. No. A26. Total [sum of amounts entered in specified BP items] are inconsistent | 0 | 113800 | 113800 |
| 2 | Schedule OI | In Schedule Part A-OI, Sl. No. 6.1 Total (total of 6a to 6d) and sum of Sl. No. 6a to Sl. No. 6d are inconsistent | 0 | 113800 | 113800 |
| (iii) Incorrect claim u/s 143(1)(a)(ii) | |||||
| 1 | SCHEDULE BP | In schedule BP, Sl. No. 14, amounts debited to the profit and loss account, to the extent disallowable under section 36 (8t of Part A-OI) is not consistent with amount shown in Sl. No. 8 total amount disallowable under section 36 (total of 6a to 6g) of Schedule OI. | 0 | 113800 | 113800 |
(iv) Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return-143(1)(a)(iv)
| Sl. No. | Particulars | Amount in Income Tax Return | Amount Mentioned in Form Annexure 3CD | Proposed adjustment to total income |
|---|---|---|---|---|
| 1 | Any sum received from employees as contribution to any provident fund or superannuation fund or any fund set up under ESI Act or any other fund for the welfare of employees to the extent not credited to the employees account on or before the due date [36(1)(va)] | 0 | 113800 | 113800 |
3. Simultaneously, the Ld. Counsel demonstrates that in the order of the Ld.ADDL/JCIT(A) also, at Page 29, he has considered the aforesaid extracted part of the show cause notice of disallowance of Rs.1,13,800/- on ESI & PF. However, when the final intimation u/s.143(1) of the Act dated 26.05.2020 was issued to the assessee therein, in Annexure of profit and loss account at Sr. No.39, the total additions made were Rs.75,88,188/-. The Ld. Counsel contended that without issuance of any show cause notice, without providing any opportunity of hearing, without complying with the principles of natural justice, the CPC/A.O could not have made the addition of Rs.75,88,188/- when the actual variation proposed was in respect of ESI/PF for Rs.1,13,800/-.
4. Per contra, the Ld. Sr. DR relied heavily on the orders of the sub-ordinate authorities.
5. We find that the Hon’ble High Court of Bombay in the case of Rallies India Limited Vs. Central Processing Centre & Ors., Writ Petition (L) No.37314 of 2025, dated 19.01.2026, had observed that from perusal of Section 143(1) of the Act including “1st & 2nd proviso” provides that no adjustment shall be made unless an assessee is given an intimation of the adjustment either in writing or in electronic mode and the response received from the assessee must be considered before making any such adjustment. Further, the Hon’ble Court also refers to the judgment of the Hon’ble Apex Court in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 (SC), wherein the ruling was that the breach of principles of natural justice is one exception that is consistently applied in negating a challenge in a writ petition on the ground of alternate remedy. Therefore, the principles of natural justice are of so paramount important that even if there is alternate remedy still when it is question of violation of such principle of natural justice, the writ petition shall always be maintainable. The relevant paras of the said judgment are extracted as follows:
“4. The learned Counsel for the Petitioner invited our attention to the provisions of Section 143(1) of the IT Act where the first and second proviso require an intimation to be given to the assessee either in writing or in electronic mode before making any adjustment under Section 143(1) of the IT Act and that the response received from the assessee shall be considered before making any adjustment. The Petitioner pointed out that the intimation is passed making an ICDS adjustment of Rs.1284,66,97,880/- without issuing a notice for the proposed adjustment on this issue. Attention was invited to the notice issued on 14 December 2022 [for proposed adjustments] which dealt only with three issues, i.e., Section 36(1)(va), Section 145A and Section 35(1)(iv). After considering the Petitioner’s reply, no adjustment was made on these three issues in the intimation. The ICDS adjustment made in the intimation did not form part of the notice for proposed adjustment and therefore, the ICDS adjustment is made without following the jurisdictional requirements of the first and second proviso to Section 143(1) of the IT Act. On this ground itself the adjustment should be quashed, was the submission. Further, our attention was also drawn to paragraphs 9 and 10 of the Affidavit-in-reply filed by the Respondents where they have not disputed the fact that a notice for the proposed adjustment was not issued to the Petitioner in respect of the ICDS adjustment.
5. The learned Counsel for the Petitioner also pointed out that a Suo Motu ICDS adjustment of Rs. 1,15,08,631/- was made by the Petitioner in its return of income based on clauses 13(d) and 13(e) of the Tax Audit Report and the ICDS adjustment made by Respondent No. 1 of Rs. 1284.66 crores is made by computing the totals of figures reported by the auditor under clause 13(e) of the Tax Audit Report in an erroneous and arbitrary manner. Further, the Petitioner pointed out that the adjustment made in the intimation is highly debatable and beyond the scope and jurisdiction of Respondent No. 1 under Section 143(1) of the IT Act.
6. The Respondents, on the other hand, pointed out that the Petitioner has an alternate remedy by way of appeal which it has availed, and therefore, should pursue it before the CIT(A) instead of seeking relief by this Petition. The Respondent referred to the alternative contention of the Petitioner in this Petition and pointed out that the Court should grant a direction to Respondent No. 4 to dispose off the appeal in a time bound manner.
7. Secondly, the Respondent pointed out that the present petition is filed belatedly as the intimation under Section 143(1) was passed on 29 July 2023 and the Petitioner has approached this Hon’ble Court only in the month JANUARY 19, 2026 Darshan Patil 56-WP(L)-37314-2025.doc of November 2025. Therefore, the petition be disposed off with a direction to the Petitioner to pursue the appellate remedy. This is more so because if the Petition is disposed off by this Court the appeal of the Petitioner challenging the order passed under Section 143(3) would become infructuous.
8. In rejoinder, the learned Counsel for the Petitioner pointed out that it has filed this Petition as it has not obtained any redressal before any appellate forum and since the intimation is non-est and passed in breach of principles of natural justice and contrary to the statutory requirements stipulated in the first proviso to Section 143(1), such intimation should be quashed. The assessment order has not made any other additions except considering the total income as per the intimation. Pursuant to the order of Respondent No. 4 on 27 September 2025, the Petitioner filed an appeal before the Income Tax Appellate Tribunal (for short ‘Tribunal’) in ITA no. 7688/Mum/2025 on 24 November 2025 and if the ICDS adjustment in the intimation is quashed by this Court then the Tribunal as a consequence of the order of this Court will have to pass a consequential order deleting the addition in appeal against the assessment order.
9. We heard the learned Counsel for the parties and perused the record. Although multiple grounds are raised in the present writ petition JANUARY 19, 2026 Darshan Patil 56-WP(L)-37314-2025.doc challenging the intimation and the adjustment made therein, we propose to confine ourselves only to the issue of the impugned intimation being passed without complying with the jurisdictional requirements of the first and second proviso to Section 143(1) of the IT Act.
10. Section 143 of the Act, in so far as it is relevant for our purpose, reads thus:-
“143.(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:-
(a) the total income or loss shall be computed after making the following adjustments, namely:-
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure [or increase in income] indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under [section 10AA or under any of the provisions of Chapter VI-A under the heading “C.-Deductions in respect JANUARY 19, 2026 Darshan Patil 56-WP(L)-37314-2025.doc of certain incomes”, if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:]…”
(emphasis supplied)
11. It is apparent from a perusal of the above reproduction that the first and second proviso to Section 143(1) of the IT Act specifically provides that no adjustment shall be made unless an assessee is given an intimation of the adjustment either in writing or in electronic mode and the response received from the assessee must be considered before making any such adjustment. In the present case, admittedly the Petitioner has not been given any intimation of the ICDS adjustment before passing the impugned intimation. The proposed adjustment under Section 143(1)(a) of the IT Act on 14 December 2022 did not raise any issue with regard to the ICDS adjustment of Rs. 1284,66,97,880/-, and no opportunity of being heard was granted to the Petitioner on this issue before the intimation was passed. This is, therefore, a clear breach of the principles of natural justice, and in any JANUARY 19, 2026 Darshan Patil 56-WP(L)-37314-2025.doc event in contravention of the jurisdictional requirements laid down in the first and second proviso to Section 143(1) of the IT Act. Further, the department in their Affidavit-in-reply have accepted the fact that no notice for the proposed adjustment was issued on the ICDS adjustment. Hence, on this ground alone the adjustment made in the intimation in respect of the ICDS adjustment of Rs. 1284,66,97,880/- is liable to be quashed and set aside.
12. As regards the Revenue’s arguments on the Petitioner having already exercised an alternate remedy, we feel that the same does not debar the Petitioner from invoking the jurisdiction of this Court. The breach of principles of natural justice is one exception that is consistently applied in negating a challenge in a writ petition on the ground of alternate remedy [see Whirlpool Corporation v. Registrar of Trade Marks, Mumbai (1998) 8 SCC 1 (SC)]. In the present case more than two years have elapsed since the Petitioner availed of the alternate remedy and yet no effective hearing of the Petitioner’s appeal has taken place. The Petitioner’s appeal against the order under Section 143(3) was disposed off summarily without dealing with the merits of the adjustment made. The Petitioner has undertaken to withdraw the appeal before Respondent No. 3 within a period JANUARY 19, 2026 Darshan Patil 56-WP(L)-37314-2025.doc of 15 days from this order, which undertaking is accepted. In these circumstances we have entertained and disposed off the present petition.”
6. This very decision has been further followed in the case of Bax India Ventures Private Limited Vs. Central Processing Centre, Writ Petition (L) No.43004 of 2025 by the Hon’ble High Court of Bombay again dated 02.02.2026. The relevant paras are extracted as follows:
“11. In the conclusion we have reached, we find support from our Judgement in Rallis India Limited Vs. Central Processing Centre [Writ Petition (L) No. 37314 of 2025]. Paragraph 11 of the said Judgement is relevant and reads as under :
“11. It is apparent from a perusal of the above reproduction that the first and second proviso to Section 143(1) of the IT Act specifically provides that no adjustment shall be made unless an assessee is given an intimation of the adjustment either in writing or in electronic mode and the response received from the assessee must be considered before making any such adjustment.
FEBRUARY 2, 2026 Mansi shelke sr. 50-wp(l)-43004-2025.doc In the present case, admittedly the Petitioner has not been given any intimation of the ICDS adjustment before passing the impugned intimation. The proposed adjustment under Section 143(1)(a) of the IT Act on 14 December 2022 did not raise any issue with regard to the ICDS adjustment of Rs.1284,66,97,880/-, and no opportunity of being heard was granted to the Petitioner on this issue before the intimation was passed. This is, therefore, a clear breach of the principles of natural justice, and in any event in contravention of the jurisdictional requirements laid down in the first and second proviso to Section 143(1) of the IT Act. Further, the department in their Affidavit-in-reply have accepted the fact that no notice for the proposed adjustment was issued on the ICDS adjustment. Hence, on this ground alone the adjustment made in the intimation in respect of the ICDS adjustment of Rs. 1284,66,97,880/- is liable to be quashed and set aside.”
12. In view of this foregoing discussion, the Petition succeeds and is allowed in terms of prayer clause (a) which read thus :
“(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Article 226 of the Constitution of India calling for the records of the case leading to passing of the impugned intimation order and after going through the same and examining the question of legality thereof quash, cancel and set aside the additions in the impugned intimation order dated December 1, 2025 (Exhibit- H):”
FEBRUARY 2, 2026 Mansi shelke sr. 50-wp(l)-43004-2025.doc
13. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.”
7. Respectfully following the aforesaid binding judicial pronouncements and on examination of the facts in the case of the assesse on this ground alone, the additional adjustment made in respect of the assessee at Rs.75,88,188/- is deleted and the order of the Ld. ADDL/JCIT(A) is set aside.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 6th July, 2026.
