What is Section 143 of Income-Tax Act?

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  • Last Updated on 1 March, 2022

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Once the Income-tax return is filed by the taxpayers, the Income-tax department carries out an assessment on all the returns filed and tell the taxpayer, the result of that assessment as per the provisions mentioned in section 143(1) of Income-tax Act, 1961. This kind of assessment is complete done with help of computers and do not have any kind of human interventions and is delegated to Centralized Processing Center (CPC).
 
With millions of tax returns filed every year, there was a need to automate the process of assessment of these tax returns or else it would be a never ending tax to be carried out by the Income-tax department. Hence the Finance Act 2008, empowered the Central Board of Direct Taxes (CBDT) to introduce the scheme of centralized processing of these returns to determine both the tax payable and refund due towards the taxpayers.
 
Thus, based on recommendations of the Technical Advisory Group, the department adopted the strategy of CPC and instated it in Bangalore, where the paper based returns would be processes without any interface with taxpayers and in authority free manner with help of computers. This would enable the department to roll out the burden of preliminary assessment towards the computers while the human officers could concentrate on the hardcore based activities. 
 
Income Tax Act

Preliminary Assessment Done under section 143(1) of Income-tax Act 1961:

This preliminary assessment done under section 143(1) of Income-tax Act 1961 is completely computerized and automated and the intimation going to taxpayer is also generated by these computer programs. CPC validates the tax returns filed by the taxpayer based on the records available with the tax department and generates a notification in case any kind of mismatch is found in what taxpayer have reported and what the records of the Income-tax department states. The various steps carried out by the CPC processor are as below-

1. When the taxpayer files his returns, his total income or loss are recomputed by the CPC by comparing the ITR with records available with Income-tax department and any mismatch is recorded in the provide data by arithmetic calculation.
2. An intimation letter is generated which have two columns. One depicts the values as provided by the taxpayer in his return and second depicts the values as computed by CPC under section 143(1). There are four major categories under this comparison – 
   a. taxpayers income under various heads
   b. taxpayers Gross Total Income
   c. His tax deductions as per Chapter-ViA (80C, 80D, etc.)
   d. His tax deductions at the source and tax payments as done by the taxpayer in form of advance tax and self-assessment tax.
3. Then appropriate adjustments are made to income and taxpayer final tax liability or refund is calculated. 
4. Taxpayer received an email with PDF attachment containing intimation under section 143(1).  
Taxmann’s Income Tax Act covers the annotated text of the Income-tax Act, 1961, in the most authentic, amended & updated format. Amended by the Finance Act, 2021 & the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020
 
Kinds of Intimation under Section 143(1) of Income-tax Act 1961:

• Intimation with no demand or no refund – 

This generally takes place when returns filed by the taxpayer is accepted as it is without carrying out any kind of adjustment.

• Intimation determining demand – 

This kind of adjustments are made under Section143(1) when discrepancy is found in the return and tax liability is arrived.

• Intimation determining refund – 

This kind of intimation is issued when the interest or tax is to be refunded to taxpayer. This may happen with two scenarios, one, where the return filed is found without any discrepancy or the adjustments are made under section 143(1) which results in refund, the credits are given to the taxpayer for his refund claimed and interest must be paid on such refund. Refunds are automatically transferred to taxpayer’s account while demand notice wait for taxpayer to fulfil his tax liability.

Different Kinds of Adjustments that are done under Section 143(1) of Income-tax Act 1961:

Here are various kinds of adjustments that are done while evaluating the total income or loss by the CPC-
 
• Any kind of arithmetic error as found in returns.
 
• Any kind of incorrect claim that is found from the information as provided by the taxpayer in his return when compared to information records with the Income-tax department.
 
• Any kind of disallowance of set off loss which is found in that financial year is carried forward from the previous year while return is being filed beyond the due date.
 
• Any kind of disallowance of expenditures which are indicated in the audit report however is not indicated in the returns form.
 
The intimation under section 143(1) must be sent within one year of filing the tax returns that is by 31st March of that assessment year.

For Section wise details of Income Tax Act 1961, subscribe to Taxmann’s Income Tax Module.

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

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