Facts of the Case:
The assessee filed its return of income for AY 2022-23 declaring total income of Rs. 232.26 crores and claimed a refund of Rs. 6.53 crores. The assessee made a suo moto ICDS adjustment of Rs. 1.15 crores as quantified in clauses 13(d) and 13(e) of the Tax Audit Report. Subsequently, a notice dated 14.12.2022 was issued proposing adjustment u/s 143(1)(a) of the Act on three issues, namely section 36(1)(va), section 145A and section 35(1)(iv) of the Act. The assessee filed objections to these proposed adjustments. However, an intimation u/s 143(1) of the Act dated 29.07.2023 was issued determining total income of Rs.1515.81 crores and raised a demand of Rs.383.80 crores, primarily due to an ICDS adjustment of Rs. 1,284.67 crores, as against the voluntary adjustment of Rs.1.15 crores made by the assessee. This ICDS adjustment was never proposed in the earlier notice under Section 143(1)(a).
The assessee filed a rectification application u/s 154 of the Act but received an error message on the portal that since the case was selected for scrutiny, the rectification request is to be taken up by Respondent No. 2. Thereafter, the assessee filed appeal before CIT(A) against the intimation passed u/s 143(1) of the Act.
Subsequently, scrutiny assessment was completed under Sections 143(3) read with 144B of the Act, determining income at Rs.1,515.81 crores (same as the intimation) and raising a demand of Rs.408.50 crores. The assessee also appealed against this assessment order.
The assessee invoked writ jurisdiction challenging the intimation primarily on the ground of breach of statutory mandate and principles of natural justice.
Contention of Assessee:
The assessee contended that the ICDS adjustment was made without providing an opportunity of being heard as mandated by the first proviso to Section 143(1) of the Act.
The Assessee further contended that subjected adjustment was highly debatable and beyond the scope of permissible adjustments under Section 143(1)(a) of the Act, which is confined to prima facie issues.
Contention of Revenue:
The revenue contended that the assessee had already availed an alternate appellate remedy and should pursue it rather than file a writ petition.
The revenue further contended that, if the writ petition were entertained, the appeal against the assessment order under Section 143(3) could become infructuous.
Ruling of the High Court:
The Hon’ble High Court has ruled in favour of the assessee by giving following observations stated hereunder:-
- The Bombay High Court held that no adjustment under Section 143(1) of the Act can be made without prior intimation and consideration of the assessee’s response.
- Since no notice was issued regarding the ICDS adjustment, it violated statutory requirements and principles of natural justice.
- The Court rejected the alternate remedy objection, noting that breach of natural justice justifies writ intervention.
- Accordingly, the ICDS adjustment Rs. 1284.66 crores is quashed and set aside.
Citation: Rallis India Limited v Central Processing Centre and Ors. (Writ Petition (L) No. 37314 of 2025) of Hon’ble High Court of Bombay