Addition u/s 143(1) Without Prior SCN Invalid: ITAT Deletes ₹4.20 Cr Adjustment, Citing Procedural Lapse [Read Order]

Shree Maheshwari Vidyalaya (assessee), a registered charitable trust under Section 12A, filed its return of income for Assessment Year (AY) 2018-19, claiming exemption of Rs. 4,20,23,463 under Section 11(1) of the Act.

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The return was processed by the Central Processing Centre (CPC), Bangalore, under Section 143(1), and an intimation order was issued, disallowing the exemption without assigning any reasons or providing prior intimation to the assessee.

Aggrieved by the CPC intimation, the assessee appealed to the ld. Additional/Joint Commissioner of Income Tax (Appeals) [Addl./JCIT(A)]. The Addl./JCIT(A) dismissed the appeal and held that the assessee failed to file Form 10B within the prescribed time under the Act.

Aggrieved by the Addl./JCIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the audit report was filed within the due date, without delay, and that the adjustment under Section 143(1)(a) was made without issuing a mandatory show cause notice.

The two-member bench, comprising Rajesh Kumar (Accountant Member) and Pradip Kumar Choubey (Judicial Member), observed that the assessee had filed the audit report on time and there was no delay in submitting Form 10B.

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The bench further noted that no show-causenotice was issued before making the adjustment under Section 143(1)(a), which is a mandatory procedural requirement under the Act. It held that the intimation was not sustainable in law due to the procedural lapse.

The tribunal relied on the coordinate bench decision in M/s Radatha Krishna Mandir Trust Vs. The ITO(Exemption) where similar additions without prior notice were quashed. It deleted the Rs. 4.20 crore adjustment. The appeal of the assessee was allowed.

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