Need To Know About Intimation Under section 143(1)

Where a return has been made under section 139 or in response to notice under section 142(1), the return is first verified through a software which compute the total income or loss after making the any or all of the following list of adjustments:

• Any arithmetical error in the return;
• An incorrect claim, if such incorrect claim is apparent from any information in the return;
• Dis-allowance 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 section 139(1);
• Dis-allowance of expenditure indicated in the audit report but not taken in computing he total income in the return;
• Dis-allowance of deduction claimed under section 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or section 80IE, if the return is furnished beyond the due date specified under section 139(1)

In simple words, if any of the above specified transaction has been occurred in your return, then the adjustment shall be made in the Intimation Under Section 143(1).

Now let us understand each adjustment with examples in very easy language

Adjustment 1:
Any arithmetical error in the return. Practically this is adjustment could be possible if the assess has filed the return manually.

Adjustment 2:
An incorrect claim, if such incorrect claim is apparent from any information in the return. Such incorrect claim can be made in the following cases:

2(a):
Claim made on the basis of the entry, in the return, which is inconsistent with another entry of the same or some other item in the return.

For Example: In the manual filing of return, assess has states the depreciation of Rs.10 Lakhs in the depreciation schedule of the Income Tax Return Filing but claimed depreciation of Rs.15 lakhs while computing the income from profit and loss of business or profession. Now, as per section 143(1), Rs.5 lakhs would be added in the returned income.

2(b): Claim made on the basis of an entry, in the return of which information is required to be furnished to substantiate such entry, has not been furnished in the return.

For Example: An assess has claimed the donation under section 80G of Rs.1 lakhs but fails to mentioned the PAN number of the donee then deduction under section 80G shall be disallowed and added by the software under section 143(1).

2(C): Claim made on the basis of an entry, in the return in respect of the deduction, where such deduction has exceeded the statutory limit as per the income tax act, which can be expressed as a monetary amount or a percentage or ratio or fraction.

For Example: An Assesses has claimed a deduction of Rs.2 Lakhs under section 80C of the income tax act, where, as per section 80C the maximum deduction allowable is Rs.1.5 lakhs, hence the excess amount claimed as deduction shall be added in the intimation under section 143(1).

Example 2: Similarly, as per section 24 of income tax Act, 1961, if a person is having a rental income then he shall be allowed to have a deduction @ 30% of rental income as repair and maintenance. So, if an assess has claimed the deduction of repair more than 30% of his rental income then the excess amount shall be added in the intimation under section 143(1).

Adjustment 3: Dis-allowance 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 section 139(1)

For Example: An assesses has filed his ITR for the AY 19-20 on 30.09.2019 by showing the following income:

	Particulars	Amount
	Current Year Income	20,00,000
Less:	Brought Forward loss of Assessment year 2018-19	13,00,000
	Returned Income	7,00,000

The ITR for the assessment year 2018-19 was filed on 31.12.2018 i.e. after the due date.

Now, since the loss claimed in the AY 19-20 is related to AY 18-19 whose return was filed after the due date. Hence the software shall disallowed Rs.13 lakhs and added in the returned income. However, before making the adjustment in the returned income, the assessing officer shall first send the intimation for the proposed dis allowance of Rs.13lakhs. The assesses shall have to respond the intimation within 30 days, if AO has not received any response from the assesses or the response received was not satisfied the AO shall added such amount the returned income and compute the total income as Rs.20lakhs.

Adjustment 4: Dis-allowance of expenditure indicated in the audit report but not taken in computing he total income in the return

For Example: In the tax audit report, Auditor of the assesses has mentioned the personal expense of Rs.2laksh and Prior period expenses of Rs.3lakhs, however, the assesses has not disallowed such expenses while computing his total income in the return. Therefore, such payments shall be added back in the returned income in the intimation under section 143(1).

Although, the assess has the option to file the rectification under section 154 or appeal to the commissioner of income tax against the intimation under section 143(1).

Adjustment 5: Dis-allowance of deduction claimed under section 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or section 80IE, if the return is furnished beyond the due date specified under section 139(1)

For Example: For the assessment year 2019-20, the assesses has filed his return on 24.11.2019 declaring Nil Income. Actually he has claimed the deduction of whole income under section 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or section 80IE.

The software shall disallow the deduction under section 143(1) and compute the income of the assesses. However before making such dis-allowance, an intimation shall be sent to the assesses of the proposed dis-allowance.

One old Adjustment: Before finance Act, 2018, there is one more adjustment was specified in this list which is

Addition of Income appearing in form 26AS or Form 16A or Form 16, which has not been included in computing the total income in the return. However as per finance Act, 2018, this adjustment has been removed.

There are so many enterprises other than companies which follows cash system of accounting, hence it is not possible for them to book TDS on accrual basis and since there was the adjustment on this ground in the intimation under section 143(1). Every year they have to file the rectification under section 154 for this. However, from AY 19-20, no adjustment shall be made on this ground.

For Example: Now, if the TDS claimed as per your return is not matched with form 26AS or Form 16/16A, the adjustment cannot be made on this ground in the intimation under section 143(1).

Before making the above adjustments, the department issued an intimation under section 143(1) and inform the assesses about these adjustments and ask for the response within 30 days of issue of such intimation. If no response has been received within 30 days them the adjustments shall be made.

Now, we will discuss the cases on which the intimation under section 143(1) would be sent to the assesses:

• Where Tax or interest or Fee under section 234F is found payable on the basis of the return, after making the any or all of the above specified adjustments, and after giving the credit to the taxes and interest and fee under section 234F paid or

 

• Where any tax or interest is found refundable on the basis of the return, after making the any or all of the above specified adjustments, and after giving the credit to the taxes and interest paid and

 

• Where any or all of the above specified adjustments have been made which results the increase or decrease of loss declared by the assesses and no tax or interest or fee under section 234F is payable by the assesses and no tax or interest is refundable to the assesses.

 In other cases, acknowledgement of filing of return of income is deemed as an intimation under section 143(1).

Note: No revision under section 263/264 can be made against the intimation under section 143(1), because revision under section can be made only against the orders. However, intimation or deemed intimation under section 143(1) can be rectified under section 154.

Note: An appeal can be filed to commissioner of income tax appeals CIT(A) against the intimation under section 143(1).

Note: The intimation is deemed as notice of demand under section 156. Thus, the demand in the intimation should be paid within 30 days from the date of receipt of such intimation. In case of failure, assesses shall deemed to be an assesses in default and section 220 and 221 shall be levied.

Time limit for sending the intimation under section 143(1):

As per section 143(1), the intimation for the tax payable or refundable shall not be sent after the expiry of 1 year from the end of financial year in which the return has been filed. However, the limitation of 1 year shall not apply to issue cheque of refund.

Conclusion: I hope this article makes you to understand about the

• Adjustments that can be made in the intimation;
• What are the situations when such intimation may be issued;
• The time limit within which the intimation can be issued (1 year) and
• Options available to you to deal with such intimation (Rectification or Appeal)