The court clarified that adjustments under Section 143(1) require a prior opportunity for the assessee, which was not provided, hence the demand was invalid.

ORDER

PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / APL / S / 250 / 2024-25 / 1073254005(1) dated 13.02.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), Addl / JCIT (A)-1, Kolkata for the assessment year 2023-24. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time.

2.0 In this case through its communication dated 07.08.2025 the assessee has filed an additional ground contesting violation of its right to natural justice. It has been contested that the impugned adjustments of denial of tax credit of Rs.5,05,37,430/- did not precede issuance of an intimation u/s 143(1) of the Act. In support of admission of the additional ground the Ld.AR has placed reliance upon a plethora of judicial precedents. Upon consideration of the same we have decided to admit the impugned additional ground for admission.

3.0 As per brief factual matrix of the case Return of Income for AY- 2023-24 was processed u/s 143(1) on 08.01.2024 raising a demand of Rs.5,73,47,460/-. The impugned demand had arisen on account of non- credit of TDS claimed by the assessee amounting to Rs.5,05,37,430/-. The denial of TDS credit was based upon provisions of Rule-37BA as total receipts in Form-26AS were Rs.1567,40,67,611/- as against the receipts of Rs.930,01,55,214/-. The action of the Revenue was confirmed by the Ld.CIT(A). The assessee is assailing the appellate order on the premise that show cause u/s 143(1)(a) was not issued prior to making of the adjustment.

4.0 The Ld.DR vehemently argued in favour of the order of lower authorities. It was stated that higher receipts were appearing in Form- 26AS of the assessee as against those disclosed by the assessee in its Return of Income. The Ld.DR had argued that as per law TDS only can be allowed qua receipts which have been disclosed in the return and hence the Ld.AO had rightly made the impugned adjustments. It was argued that actually no adjustment was made and that merely the information available on records of the assessee was utilized for making the addition and raising the corresponding tax demand. The Ld.DR also drew our attention to a report dated 14.08.2025 of the Ld.AO justifying the additions made in this case. It was also argued that the CPC had issued a communication dated 05.12.2023 to the assessee u/s 139(9) conveying defects in the Return of Income on the above lines and that the same can be construed as an opportunity given to the assessee. It was submitted that in the impugned communication dated 05.12.2023 to the assessee the defect of variance in receipts in 26AS viz a viz Return of income was clearly indicated. It is the case of the Revenue that the adjustment made is justified as the assessee chose not to avail the opportunity given to it u/s 139(9).

5.0 We have heard the rival submissions in the light of material available on records. Before proceeding further, we deem it appropriate to examine statutory prescription governing section 143(1) and section 139(9) which have been found seminal to the controversy.

Section 143 . (1) of the Act

“…143. (1) Where a return has been made under section 139, or in re sponse 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; 92[***]

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;

92a [ (iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;]

93[(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 94[or increase in income]