Intimation/ Notice/ Demand Under Section 143 (1) of Income Tax Act

Intimation/ Notice/ Demand under Section 143 (1) of Income Tax Act

1. What is the purpose of receiving intimation under section 143(1) of Income Tax Act,1961 ?

It is a intimation notice to the assessee, if any calculation mistake or mistake in filling return or claiming excessive deduction or wrong exemption has been found on the processing of the Income Tax Return. The purpose to intimate the assessee about any difference between the return filed by the assessee and as per the computation of the IT department. Therefore by intimation u/s 143(1) assessee is informed about the amount of refund or amount payable.

As per Section 143 (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, - (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub- section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee.

2. Whether the intimation under section 143 (1) is required to be send where no tax or interest or refund is payable or due?

As per provision of section 143 (1) the acknowledgment of the return shall be deemed to be intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him.

CA RISHI PRAKASH email: [email protected] 3. What is the time limit for sending intimation under section 143(1) of Income Tax Act ?

No intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.

4. What is the impact of the Notice / intimation under Section 143 (1) of Income Tax Act ?

As per Section 143 (1) such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee.

5. Is the Assessing Officer empowered to create a demand under section 143 (1) of the Income Tax Act 1961 by changing the nature and character of income as disclosed by an assessee in its return of income? As held in the case of Microsoft Regional Sales Corporation V. Addl. CIT [2009] 319 ITR (AT) 181 (Delhi). The intimation made under section 143(1) of the Income Tax Act 1961 authorizes the Assessing Officer to issue refund or raise a demand of tax along with interest due thereupon strictly on the basis of the return furnished by the assessee. If there is a mistake in computing the tax by the assessee it will fall within the scope of section 143(1) of the Act.

But issues like whether the income returned is chargeable to tax or not, applicable rate of tax, income shown as royalty or business profit or under any other head within the meaning of Double Taxation avoidance agreement between India and U. S are issues not covered under section 143(1).

In the case the Assessee “Microsoft Regional Sales Corporation” filed its return of income for the years 2003 and 2004 claiming total liability as nil based on the reason that returned income was business profit not liable to be taxed in absence of permanent establishment in India. The assessee also claimed refund of tax deducted at source and deposited under section 191 of the Act. The assessing officer sent an intimation under section 143(1) of the Act for both the assessment years at 15 per cent. The Commissioner of Appeals held that Assessing Officer had calculated the tax

CA RISHI PRAKASH email: [email protected] without making any adjustment in the returned income or in the rate at which the tax was paid by the assessee under section 191 of the Act. He dismissed the appeals holding that the assessing officer had not made any adjustment to the income and upheld the charge of interest under sections 234A, 234B, and 234C of the Act. Regular assessment was completed under section 143(3) of the Act for years 2003 and 2004 and levied tax treating amount to be in nature of royalty as per Double Tax Avoidance Agreement between India and U. S.

Thereafter, On appeals against the orders of the Commissioner (Appeals), Tribunal held that the nature and character of income as disclosed in the return of income could not be changed or substituted by another nature and character. The jurisdiction of the Assessing officer is limited to determining the tax payable or refund due on the basis of return of income and not otherwise. The fact that assessee had paid certain amount of tax under section 191 of the Act could not be a basis to create a demand by treating the returned income to be in nature of royalty while processing the return of income under section 143(1) of the Act. The action of the assessing officer was beyond the scope of section 143(1) of the Act. The intimation made by the Assessing Officer under section 143(1) of the Act was to be cancelled. Orders by both the authorities below were to be set aside.

6. Can processing u/s 143(1) be done after service of notice u/s.143(2) ?

No, as explained by Supreme Court in Commissioner of Income-tax v. Gujarat Electricity Board [2003] (260 ITR 84 (SC) that notice of regular assessment under section 143(2)(ii) can be issued even after the summary assessment u/s.143(1) , however once notice for regular assessment u/s143(2)(ii) is issued summary assessment u/s143(1) cannot be made .

CA RISHI PRAKASH email: [email protected]