Understanding Intimation Under Section 143(1) of the Income Tax Act

Understanding Intimation Under Section 143(1) of the Income Tax Act, 1961

This FAQ guide addresses inquiries related to the concept of intimation under Section 143(1) of the Income Tax Act, 1961. Intimation pertains to the processing of income tax returns by the Centralised Processing Centre (CPC) to identify and rectify arithmetical errors, apparent errors, and to validate tax calculations. Importantly, this phase does not involve income verification. adjustments by CPC may involve correcting errors, disallowing incorrect claims, and modifying income or loss computations based on audit findings. Intimation must be communicated within nine months from the conclusion of the financial year in which the return is submitted, allowing the assessee 30 days to rectify any identified errors. Responses to CPC adjustments can be submitted conveniently through the assessee’s e-filing account.

What is Intimation Under Section 143(1)?

Answer:
Intimation refers to the processing of income tax returns by the CPC. During this process, all returns filed under Section 139 or in response to a notice under Section 142(1) are examined to verify arithmetical errors, apparent discrepancies, tax calculations, and payments. It is important to note that income verification does not occur at this point.

Adjustments Made by CPC in Income Computation

Answer:
While processing income tax returns, the CPC makes the following adjustments to calculate total income or loss:

1. Correction of any arithmetical errors in the return.
2. Disallowing claims that are evidently incorrect based on the return information.
3. Disallowance of losses claimed if the return for the previous year, eligible for set-off, was filed beyond the due date.
4. Disallowance of expenditures or adjustments in income as indicated in the audit report, which were not accounted for in the total income reported.
5. Disallowance of deductions claimed under Section 10AA or Chapter VIA pertaining to "C-Deductions in respect of certain incomes," if the return was filed past the designated due date.

Definition of an Incorrect Claim

Answer:
An "incorrect claim apparent from any information in the return" signifies a claim rooted in an entry that:

1. Contradicts another entry within the same return.
2. Lacks the necessary supporting information for substantiation.
3. Involves deductions that exceed the specified statutory limits, expressed either as a monetary amount, a percentage, ratio, or fraction.

Timeframe for Issuing Intimation Under Section 143(1)

Answer:
Intimation must be issued within a nine-month period following the end of the financial year in which the return is submitted by the assessee.

Time Horizon for Assessee's Rectification

Answer:
The assessee is granted a 30-day period from the issue date of intimation to rectify any arithmetical errors or incorrect claims identified by the CPC before any adjustments are made.