1. Letter of Intimation u/s 143(1)

An income tax return can be either filed voluntarily under Section 139 or on demand by the income tax department under Section 142(1). It is necessary to understand what happens after the taxpayer has filed the return of income.

Income tax department carries out a preliminary assessment of all the returns filed and informs taxpayers of the result of such preliminary assessment. This assessment primarily includes arithmetical errors, internal inconsistencies, tax calculation and verification of tax payment. Such communication to the taxpayer post the preliminary assessment is called intimation under Section 143(1).

The preliminary assessment is wholly computerised and does not have any human intervention and is delegated to Centralised Processing Center (CPC).

2. Centralized Processing Center

With the rapid increase in the number of income tax returns and a jurisdiction-based processing model for all the returns filed, tax department faced problems leading to delayed processing of income tax returns. Therefore, the Finance Act, 2008 empowered the Central Board of Direct Taxes (CBDT) to make a scheme for centralized processing of returns with a view to expeditiously determining the tax payable by, or the refund due to the taxpayers.

Based on the recommendations of the Technical Advisory Group, the department adopted the strategy that CPC at Bangalore would process paper and e-returns without any interface with taxpayers and in a jurisdiction free manner. CPC project envisaged benefits for the citizens as well as the tax department. For citizens, it led to faster and hassle-free preliminary processing of their returns and also relieved the department from the burden of preliminary assessment that can be computerised and enabled them to concentrate on hardcore activities.

Any communication from the income tax department creates panic for taxpayers. However, Section 143 (1) intimation is not something one needs to worry about. In this article, we would be discussing intimation sent under Section 143 (1) in detail to make it help taxpayers deal with such intimation with ease.

3. Preliminary Assessment under 143(1)

Initial processing of returns by CPC is completely automated and Section 143 (1) Intimation is also computer generated record. CPC validates data provided in each tax return with details available with income tax department’s own record (such as form 26AS generated through details provided by collecting banks, form 16, TDS returns etc) and this notice usually only points out apparent mistakes found out by the mainframe system.

• Once the return is filed, total income or loss is recomputed by the computerised system as per the department’s record and provides a comparison with data filed by the taxpayer.

• The intimation has two columns: ‘As provided by the taxpayer in the Return of Income’ and ‘As computed under Section 143 (1). Comparison is made for major categories such as (a) income under various heads, (b) Gross Total Income, (c) Deductions under Chapter VIA (80C, 80D etc), and (d) tax deducted at source and tax payments by taxpayers in the form of advance tax and self assessment tax.

• Appropriate adjustments are made to income as computed under Section 143 (1) and final tax liability or refund is arrived at.

• The adjustments are carried out only after giving an intimation to the taxpayer of the proposed adjustments either in writing or electronic mode i.e., to the email id provided in the income tax return filed.

• Response received from the taxpayer within 30 days from the issuance date of intimation will be considered before making the final adjustment and in case no response received within such period, adjustments arrived at initially will be incorporated.

• After arriving at final tax liability, the same is adjusted against TDS and tax payments and other relief under Section 90/91 if any.

• An intimation shall be prepared and sent to the assessee. Kind of intimations possible are discussed below:

a. Intimation with no demand or no refund – This generally happens if the department has accepted the return as filed without carrying out any adjustments to it.

b. Intimation determining demand – issued in case of adjustments made under Section 143 (1) due to a discrepancy found and tax liability is arrived at.

c. Intimation determining refund – issued where any interest or tax is found to be refundable either where no discrepancy is found in the return already filed or after making adjustments as referred to in Section 143 (1) and after giving credit to the taxes and interest paid by the taxpayer.

• While demand notice is sent in case of final tax liability, refunds if any shall be granted to the taxpayer.

4. Sample of an intimation under 143(1)

5. Nature of adjustments under 143(1)

Total income or loss is computed under Section 143(1) after making the following adjustments:

• Arithmetical error in the return

• Any incorrect claim which is apparent from any information in the return where incorrect claim means the following:

The claim of an item in the return which is inconsistent with another entry of the same or some other item in such return – Example: income from other sources are deducted from business income but not declared under income from other sources.

• Disallowance of set off of loss in the financial year which is carried forward from previous years in which return was filed beyond specified due date

• Disallowance of expenditure indicated in the audit report but not indicated in the return of income.

6. Time Limit for issue of 143(1)

Section 143(1) intimation has to be sent within one year from the end of the financial year in which return is being filed. For eg: if the taxpayer has filed return pertaining to the financial year 2016-17 in July 2017, intimation can be sent any time till 31 March 2019.

If a taxpayer does not receive any intimation within such period, it simply means there are no adjustments carried out to the return filed by the taxpayer and no change in tax liability/refund and acknowledgement filed itself is deemed to be Section 143(1) intimation.

7. Action to be taken by the taxpayer after receiving a 143(1)

As a first step, review certain things in Section 143(1) intimation to ensure document pertains to your return itself and data provided pertain to the same financial year as mentioned in Section 143(1) intimation. Check the name, PAN, address, assessment year for which notice has been sent, e-filing acknowledgement number.

In case you are able to identify the mistakes you have made while filing your return from the 143(1) intimation, and they can be rectified by filing a revised return, please do so by logging into income tax efiling website. Please refer our article on how you can go about revising your return online.

However, if no mistakes have been made and you do not agree with the adjustments made by CPC/computerised system, you can file an online rectification application under Section 154(1) intimating the correction of mistake appearing in the Section 143(1) intimation. Refer our article on filing rectification application.

In case you are not satisfied with the processing of your rectification return by CPC, you can also file online grievances or contact your assessing officer. In case of no satisfactory action from CPC/assessing officer, you can file a complaint to income tax ombudsman.

However, if taxpayer agrees to the tax demand raised by income tax department after carrying out adjustments as above, taxpayer is required to pay such taxes. Refer our article on OLTAS challan payment on how to pay taxes. However, while paying tax on demand raised under this Section, please choose ‘Tax on regular assessment (400)’ under type of payment in the challan.