Section 143 Income Tax Act,1961

Section 143: Return Processing and Scrutiny Assessment

While as taxpayers we try our best to be compliant with the tax and fiscal laws prevalent in the country, but many times we end-up into litigation trouble due to various kind of scrutiny proceedings being initiated by the income tax authorities. Most of the times such proceedings seem to be cumbersome due to lack of clarity that why such kind of proceedings have been initiated. There can be various reasons a person’s return could be selected for scrutiny. One such case is of regular return processing and primary scrutiny assessment.

 

Section 143(1) Income Tax Act, 1961 provides processing of ITR filed by assessee under section 139 or 142(1) of the Act. The 143(1) lays down that any return that has been filed by assessee as referred above will thereafter be processed by CPC- Centralized Processing Centre keeping in view below grounds of primary adjustment to reported income: -

-        Any kind of arithmetical error;

-        Incorrect claim as apparent on record;

-        Disallowance of loss claim in case the ITR for said year is filed on belated basis;

-        Disallowance of any expenditure or addition of income as reported by assessee in audit report furnished but which has escaped relevant effect in ITR filed;

-        Disallowance of any deduction claimed u/s 10AA or u/c VI-A heading “C-Deductions in respect of certain incomes”, in case if ITR is filed after due date as specified u/s 139;

-        Income addition based on income details apparent in Form-26AS or Form-16 or Form-16A, which happens to have not been reported in return so filed.

 

However, before making any such adjustment, intimation is to be sent to assessee allowing him to provide necessary explanations towards to proposed adjustments. Assessee is bound to submit necessary explanation within span of 30 days of issuance of such intimation. Furthermore, no such intimation be issued on or after 01.04.2018 on grounds of income addition based on Form-26AS/16/16A. Post receipt of said explanation, same is to be duly taken care off by assessing officer prior to affecting any such adjustment. However, in case if no response/explanation is received within due timeline from assessee then final processing of ITR be carried out incorporating all such proposed adjustment. The income so determined after relevant adjustment, be the final reportable income and the gross tax liability is to be assessed on the basis of such income. This gross tax liability (inclusive of interest or fees) be settled against already paid TDS-TCS, any relief as allowed u/s 90/90A/91, rebate if any allowed under part-A chapter-VIII and SAT paid, if any.

 

Once processing is completed then final intimation be issued to assessee stating the amount of refund due/demand outstanding/adjustment of loss as case may be. Such final intimation is to be issued within 9 months from end of financial year in which actual return was filed.

 

Note: Section 143(1D) provides that from A.Y. 2017-18 department shall issue intimation even if AO has already issued scrutiny notice u/s 143(2).

 

Section 143(2) Income Tax Act, 1961 authorizes Assessing Officer/Income Tax Authority not below rank of Income Tax Officer to conduct scrutiny assessment only after forthwith issuing notice u/s 143(2). The concerned authority may if it considers it expedient to do so in case of assessee suspected to have under stated income, claimed excess losses or under paid taxes, shall issue notice to such assessee, thus requiring to either be present of office of such authority or to furnish evidences or supporting documents on which he has relied to report income in his ITR. Such notice is to be served within 3 months from end of FY in which return was filed. Further, said notice could be issued post issuance of intimation as referred u/s 143(1).

 

Section 143(3) Income Tax Act, 1961 post issuance of notice u/s 143(2), AO/ITA not below rank of ITO would conduct scrutiny assessment of concerned assessee for period under consideration. Based on material & evidences as furnished by assessee in response to aforementioned notice or as have been gathered by officer himself, officer shall determine the addition to be made to assessee’s income or any proposed disallowance to loss having been claimed by assessee and accordingly final order be passed determining therewith the amount of tax payable or any refund due based on assessment u/s 143(3).

 

Exceptions to adjustment on grounds of scrutiny u/s 143(3):

 

-        Institution’s registered u/s 10(21)/(22B)/(23A)/(23B):

 

Any exemption available to such research association/news agency/association/institution, cannot be denied by A.O. even if any contravention is made by research association/news agency/association/institution. First of all, A.O. is to intimate fact of any such identified contravention to Government/prescribed authority and wait till any further notifications. It is only when that government/prescribed authority rescinds the notification granting approval/exemption and thus withdrawing the same, that the A.O. can make assessment order u/s 143(3).

 

-        Institution as registered u/s 10(23C) or 11:

In case any such institution has committed specified violation as defined u/s 12AB(4), A.O. is to first make reference of said fact to the PCIT/CIT, thus requesting them to withdraw the approval or registration. Whatever final order is passed by PCIT/CIT u/s 12AB(4), is initially to be given effect to by said A.O. and only then final order of assessment of total income or loss be pronounced by said A.O.

 

-        Institution as registered u/s 35(1)(ii)/(iii):

 

Whereincase A.O. is satisfied that activities of university/college/other institution are not in line with conditions subject to which such registration has been approved, then he may after giving reasonable opportunity of being heard to such entity, recommend the Central Government to withdraw approval so granted. Accordingly, government may by an order withdraw approval and forward final order copy to both such university/college/other institution, as well as to A.O.

 

Hope, this article has been helpful to have understanding of Section 143 providing criteria for return processing and primary scrutiny assessment procedure.