Intimation under section 143(1) is invalid in law if it was not served to the assessee within the prescribed timelines: ITAT Ahmedabad

 

Ahmedabad Tribunal: Lesso Buildtech (ITA 1698/Ahd/2024) has held that intimation issued under section 143(1) is invalid in law as it was not served to the assessee within the prescribed timelines.

The Tribunal found that the intimation under section 143(1) was invalid and modified the final assessment order to reflect the returned loss.

Background:
Assessee is engaged in the business of trading plastics, sanitary ware, building materials, cutleries, plastic profiles, modular kitchens, kitchen appliances, etc.

The company filed its return of income for the assessment year 2020-21 on 22-02-2021, declaring a loss of Rs. 30,65,00,117/-. The return was processed under section 143(1) on 10-08-2021, determining the total loss at Rs. 28,91,48,057/-, but the intimation was not served on the assessee.

The case was taken for complete scrutiny assessment, and a reference was made to the TPO for determining the Arm’s Length Price of international transactions.

The TPO made a transfer pricing upward adjustment of Rs. 43,29,60,041/-, and the AO passed a draft assessment order under section 144C(1) on 18-09-2023, determining the income at Rs. 14,38,41,948/-.

DRP & Final Assessment:
The DRP, in its order dated 05-06-2024, deleted the TP adjustment made by the TPO. However, the DRP did not adjudicate the adjustment made under section 143(1) of the Act, as it did not emanate from the draft assessment order.

Pursuant to the DRP order, the AO passed the final assessment order determining the total income at Rs. (-) 28,91,18,057/-.

Grounds of Appeal:
The assessee raised several grounds of appeal, including the incorrect assessment of loss, the non-receipt of the intimation order under section 143(1), and the violation of principles of natural justice.

The assessee argued that the intimation order was not received within the prescribed timelines and that the AO erred in reducing the current year loss without providing any basis or reason.

The assessee also contended that the AO violated the principles of natural justice by not issuing any show cause notice and not allowing credit for tax deducted at source (TDS) amounting to Rs. 2,77,599/-.

Tribunal’s decisions:
The Tribunal noted that the intimation under section 143(1) was not communicated to the assessee and was served only after repeated grievance petitions.

The Tribunal found that the intimation was invalid in law as it was not served to the assessee within the prescribed timelines.

The Tribunal held that the AO was not correct in determining the loss at Rs. 28.91 crores based on a non-existing intimation and modified the final assessment order to reflect the returned loss of Rs. 30.65 crores.

The Tribunal allowed the grounds of appeal raised by the assessee regarding the incorrect assessment of loss and the violation of principles of natural justice.

The Tribunal noted that the issue of non-allowance of TDS credit was not arising in the final assessment order and directed the assessee to make a rectification application before the AO.

The Copy Of the order is as under:

1743678581-3HZFFX-1-TO