CPC 143(1) adjustments quashed by courts clearly establish that intimation under section 143(1) is limited to prima facie adjustments and cannot decide debatable issues or make mechanical additions.
Mechanical adjustments under section 143(1) have therefore been struck down consistently.
Legal issue involved
Whether CPC can:
- Make additions involving interpretation of law
- Disallow claims requiring explanation or evidence
- Go beyond the limited scope of section 143(1)
The settled position is that 143(1) is not an assessment.
Judicial Precedent
CIT vs. Gujarat Poly-AVX Electronics Ltd. | Supreme Court | 1996
Facts:
Adjustment was made without giving opportunity of hearing.
Held:
The Supreme Court held that no addition can be made without giving the assessee an opportunity, even at the intimation stage.
Why it matters:
Opportunity of hearing is a basic requirement, even for CPC adjustments.
S.R.F. Charitable Trust vs. Union of India | Delhi High Court | 2018
Facts:
CPC made adjustment by denying exemption under section 11 without enquiry.
Held:
The Court held that CPC cannot decide complex or debatable issues under section 143(1).
Why it matters:
Issues requiring examination cannot be handled at CPC stage.
Khaitan Chemicals & Fertilizers Ltd. vs. DCIT | Rajasthan High Court | 2018
Facts:
CPC disallowed deduction without providing opportunity or examining explanation.
Held:
The Court quashed the adjustment holding that prima facie adjustment cannot be stretched to adjudication.
Why it matters:
143(1) is limited to arithmetical or apparent errors only.
Larsen & Toubro Ltd. vs. DCIT | Bombay High Court | 2019
Facts:
CPC made disallowance which required detailed examination of facts.
Held:
The Court held that such issues cannot be decided under section 143(1) and must go through regular assessment.
Why it matters:
Mechanical processing cannot replace assessment.
Hindustan Unilever Ltd. vs. DCIT | Bombay High Court | 2020
Facts:
CPC disallowed a claim based on mismatch without giving proper opportunity.
Held:
The Court held that mechanical disallowance without hearing violates principles of natural justice.
Why it matters:
Even system-driven actions must comply with law.
Common principles emerging
From the above judgments:
- Section 143(1) permits only prima facie adjustments
- Debatable or complex issues cannot be adjusted
- Opportunity of hearing is mandatory
- CPC cannot usurp AO’s role
- Mechanical adjustments are unsustainable
How to use these judgments
These cases are extremely useful:
- While filing rectification under section 154
- In appeals against CPC adjustments
- To challenge mechanical disallowances
- To argue lack of jurisdiction at CPC stage
If the issue needs explanation, 143(1) is the wrong forum.
Practical Implications for Assessees and Practitioners
These judgments are crucial while challenging intimation orders under section 143(1) where CPC makes disallowances without issuing notice or seeking explanation. Since section 143(1) is not an assessment, any adjustment requiring interpretation of law, verification of facts, or examination of evidence must fail.
Assessees should promptly file rectification applications or appeals highlighting that the adjustment is beyond the limited scope of section 143(1). Courts have consistently held that such mechanical processing cannot substitute scrutiny assessment.
Practical Strategy for Challenging CPC 143(1) Adjustments
Where CPC makes disallowances under section 143(1) without issuing notice or granting opportunity of hearing, the assessee has strong legal grounds to seek deletion. Since section 143(1) permits only prima facie adjustments, any issue involving interpretation of law, verification of facts, or examination of evidence must be excluded from CPC processing.
Assessees should immediately file rectification under section 154 or prefer an appeal before CIT(A), relying upon the above judgments. Courts have consistently held that mechanical adjustments under section 143(1) cannot replace scrutiny assessment under section 143(3).
Related reading
- CPC 143(1) Adjustment – What You Can Do When Income Is Increased
- Section 154 Rectification – When It Works and When It Fails
- Defective Return u/s 139(9) – Step-by-Step Fix
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