Taxpayer can challenge section 143(1) of the Act adjustment against subsequent assessment under section 143(3) of the Act where the adjustment is retained without independent adjudication – Chennai bench of the Income-tax Appellate Tribunal

In brief

The Chennai bench of the Income-tax Appellate Tribunal (Tribunal)¹ concluded that the taxpayer is entitled to challenge the adjustment retained in the subsequent assessment order under section 143(3) of the Income-tax Act, 1961 (the Act), even if no separate appeal was filed against the intimation under section 143(1) of the Act. 

The Tribunal referred to various High Court decisions and emphasised that the proceedings under section 143(1)(a) of the Act are of a summary nature and are designed to make adjustments which are apparent from the return, whereas proceedings under section 143(3) of the Act require a deeper examination. Therefore, the Tribunal was of the view that disallowance of employees’ contribution towards Provident Fund or Employees’ State Insurance (PF or ESI) made by way of an adjustment under section 143(1) of the Act is not permissible because the issue was highly debatable at the relevant time, and such disallowance should be deleted.

This Tax Insight focuses on the Tribunal’s ruling concerning the maintainability and validity of the adjustment under sections 143(1)(a) and 36(1)(va) of the Act. The consolidated order also adjudicated separate grounds under sections 14A, 115JB and 80G of the Act.