Facts of the Case

The assessee, Hotel Kohinoor, filed its return of income for the relevant assessment year. The return was processed by the Centralized Processing Centre (CPC) under Section 143(1) of the Income-tax Act, wherein certain adjustments and disallowances were made, resulting in increased taxable income and tax liability.

Aggrieved by the intimation issued under Section 143(1), the assessee filed an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre. Upon receiving an adverse decision, the assessee further appealed before the Income Tax Appellate Tribunal, Allahabad Bench.

Issues Involved

  1. Whether the adjustments made by CPC under Section 143(1) were within the permissible statutory scope.
  2. Whether the disallowances involved debatable issues requiring detailed examination.
  3. Whether such matters could be decided at the processing stage without scrutiny assessment.
  4. Whether the appellate authority correctly upheld the CPC’s action.

Petitioner’s (Assessee’s) Arguments

  • The adjustments made were not apparent errors but involved issues requiring proper verification.
  • Section 143(1) permits only prima facie corrections based on return data.
  • CPC exceeded jurisdiction by making substantive disallowances without inquiry.
  • Therefore, the adjustments were invalid and liable to be deleted.

Respondent’s (Revenue’s) Arguments

  • The CPC acted in accordance with statutory provisions governing return processing.
  • The adjustments were based on discrepancies apparent from the return and accompanying information.
  • The CIT(A) had already examined the matter and upheld the action.
  • Hence, no interference was warranted.

Court Order / Findings (ITAT)

  • Processing under Section 143(1) is limited to correcting apparent errors.
  • Issues requiring verification, interpretation, or adjudication cannot be resolved at this stage.
  • CPC cannot undertake a detailed examination akin to scrutiny assessment.
  • Substantive disallowances beyond prima facie adjustments are not permissible.

Important Clarification by the Tribunal

  • Section 143(1) processing is summary in nature and not a substitute for regular assessment.
  • Tax authorities must follow due process where issues are debatable or require investigation.
  • Automated adjustments cannot override principles of fair assessment.

Link to download the order   https://itat.gov.in/public/files/upload/1658402453-ita%20no.%207%20Alld%202022%20Hotel%20Kohinoor.pdf

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