Section 143(1) of Income Tax Act 1961- All About Intimation U/S 143(1)

Section 143(1)

Section 143(1) of Income Tax Act 1961- All About 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 posts 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 Centre (CPC).

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.

We need to understand the process done by department after return filing completed.

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 (1) income under various heads, (2) Gross Total Income, (3) Deductions under Chapter VIA and (4) 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.

An intimation shall be prepared and sent to the assessee. Intimation of such kind can be received by assessee

  1. 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.
  2. Intimation determining demand – issued in case of adjustments made under Section 143 (1) due to a discrepancy found and tax liability is arrived at.
  3. 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.

Time Limit: Section 143(1) intimation has to be sent within one year from the end of the financial year in which return is being filed. However, 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

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

  • Arithmetical error or Correction in the return
  • Any incorrect claim which is apparent from any information in the return.
  • 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.

Any communication from the income tax department creates panic for taxpayers. However, Section 143 (1) intimation is not something one needs to worry about.

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