ITAT Slams AO for Violating Section 143(1) of Income Tax Act
The Mumbai ITAT held that the AO has no jurisdiction to make any adjustment in the final assessment order passed under Section 143(3) before receiving any response from the assessee.
ItatSection 1431Income Tax ActAoFinal Assessment OrderReal Estate MumbaiJul 14, 2024
According to Section 143 of the Income Tax Act, the AO is required to consider the response received from the assessee, if any, before making any adjustments to the income. In case no response is received within thirty days of the issue of the intimation, the adjustments can be made. However, in this case, the AO had passed the final order within two days of issuing the intimation, violating the provisions of Section 143(1).
The assessee, Add More Real Estate Developers LLP, had claimed a deduction of Rs.1,83,17,026 under Section 10(2A) as profit from a partnership firm while filing its return under Section 139(1). The AO had issued an intimation under Section 143(1) disallowing the deduction claimed.
The ITAT bench, comprising Judicial Member Anikesh Banerjee and Accountant Member Prashant Maharishi, observed that the AO had not followed the due process of law. The bench noted that the assessee was unable to comply with the notice due to technical issues with the Income-tax Portal and, therefore, the AO's adjustment of income without allowing the thirty-day time period was in violation of the Income Tax Act.
The ITAT held that the addition made by the AO was purely on the basis of the profit received by the assessee from different partnership firms, which was liable for exemption under Section 10(2A). The bench quashed the order passed by the AO and allowed the assessee's appeal.
Information
Add More Real Estate Developers LLP is a partnership firm engaged in the business of real estate development. The firm had filed its return under Section 139(1) claiming a deduction under Section 10(2A) as profit from a partnership firm.
The Income-tax Appellate Tribunal (ITAT) is an independent tribunal that deals with appeals filed against the orders of the Income-tax Department. The ITAT has the power to quash or set aside the orders passed by the AO if they are found to be in violation of the provisions of the Income Tax Act.
Frequently Asked Questions
What is Section 143(1) of the Income Tax Act?
Section 143(1) of the Income Tax Act deals with the intimation of the adjustments to the income of the assessee.
What is the time period allowed for the assessee to respond to the intimation under Section 143(1)?
The assessee is allowed thirty days to respond to the intimation under Section 143(1).
Can the AO make adjustments to the income without considering the response of the assessee?
No, the AO is required to consider the response received from the assessee, if any, before making any adjustments to the income.
What is the penalty for violating the provisions of Section 143(1)?
The ITAT has the power to quash or set aside the orders passed by the AO if they are found to be in violation of the provisions of the Income Tax Act.
Can the assessee appeal against the order passed by the AO?
Yes, the assessee can appeal against the order passed by the AO to the ITAT.
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