Healthware Pvt. Ltd. Vs DCIT (ITAT Hyderabad)
Section 143(1) Adjustment Merges into 143(3) Scrutiny- Hyderabad ITAT Confirms Principle – Scrutiny Assessment Overrides CPC Intimation
ITAT Hyderabad allowed the appeal by holding that deduction of Rs.23,67,760/- was rightly allowable once accepted in scrutiny assessment u/s 143(3).
Assessee had originally disallowed Rs.23,67,760/- u/s 40(a)(ia) in AY 2017-18 due to non-deduction of TDS. During the year under consideration, TDS was deposited & deduction claimed. CPC, while processing return u/s 143(1), disallowed the claim & reduced returned loss. CIT(A) upheld CPC’s adjustment holding that no evidence was filed.
Before Tribunal, Assessee pointed out that in scrutiny assessment u/s 143(3) dated 05.04.2021, AO had verified records & allowed deduction.
Tribunal held that once the claim has been examined and accepted by AO in the scrutiny assessment u/s 143(3), the adjustment made by CPC u/s 143(1) does not survive. It is a settled law that when a regular assessment u/s 143(3) is made, the intimation u/s 143(1) of the Act merges with such assessment & has no independent existence. Tribunal noted that AO had indeed allowed the claim in scrutiny proceedings. Accordingly, CPC’s adjustment & CIT(A)’s order could not survive.
Tribunal thus set aside CIT(A)’s order & allowed the appeal, confirming that Assessee was entitled to deduction of Rs.23,67,760/- as already allowed u/s 143(3).
