Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live, central. The engine of regular assessment. Sub-section (1) provides for summary processing and intimation (with permitted prima-facie adjustments, fee and interest); sub-section (2) for the scrutiny notice; sub-section (3) for the scrutiny assessment after hearing; sub-section (3A)-(3C) for the faceless-assessment scheme (now operated through section 144B).
FA 2026: No substantive amendment by the Finance Act, 2026 to section 143; faceless assessment continues under section 144B with FA 2026 enabling e-authentication of records without digital signature.
Recent amendments: The time-limit for issuing the scrutiny notice under section 143(2) and the scope of prima-facie adjustments under section 143(1)(a) have been periodically amended; the Finance Act, 2025 made consequential changes to the processing timeline.
A. SECTION COMMENTARY
Section 143 contains the two principal modes of assessment. Section 143(1) is a summary, largely automated processing of the return at the Centralised Processing Centre: the total income is computed after the permitted prima-facie adjustments (arithmetical errors, incorrect claims apparent from the return, disallowance of loss/expenditure/deduction on stated grounds, additions of income appearing in Forms 26AS/16/16A not included, etc.), and an intimation is generated determining the sum payable or refundable. Crucially, an intimation under section 143(1) is not an assessment — it is the acceptance/processing of the return, and the absence of an 'assessment' has important consequences for reopening.
Section 143(2) is the gateway to scrutiny: if the AO considers it necessary to ensure that the assessee has not understated income or overstated loss/refund, he must serve a notice under 143(2) within the prescribed period (presently three months from the end of the financial year in which the return is furnished). Service of a valid 143(2) notice within time is a condition precedent to a scrutiny assessment under section 143(3); its absence is not a mere irregularity curable under section 292BB where no notice was issued at all.
Section 143(3) is the scrutiny assessment made after hearing the assessee and considering the evidence. Faceless assessment (originally section 143(3A)-(3C), now section 144B) restructures the conduct of the 143(3)/144 assessment through the National Faceless Assessment Centre. The recurring litigation concerns (i) the legal character of a 143(1) intimation; (ii) the mandatory nature and timing of the 143(2) notice; and (iii) the limits of prima-facie adjustments.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). Includes sub-section (1) (processing and intimation), sub-section (2) (scrutiny notice) and sub-section (3) (scrutiny assessment), with the faceless-scheme enabling provisions.
143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:—
(a) the total income or loss shall be computed after making the following adjustments, namely:—
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:
Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;
(b) the tax , interest and fee, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:
Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him:
Provided further that no intimation under this sub-section shall be sent after the expiry of nine months from the end of the financial year in which the return is made.
Explanation.—For the purposes of this sub-section,—
(a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,—
(i) of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or
(iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
(b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a).
(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section.
(1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012.
(1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2):
Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017.
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished.
(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:
Provided that in the case of a—
(a) research association referred to in clause (21) of section 10;
(b) news agency referred to in clause (22B) of section 10;
(c) association or institution referred to in clause (23A) of section 10;
(d) institution referred to in clause (23B) of section 10, which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless—
(i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B), as the case may be, by such research association, news agency, association or institution, where in his view such contravention has taken place; and
(ii) the approval granted to such research association or other association or institution has been withdrawn or notification issued in respect of such news agency or association or institution has been rescinded:
Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause
(via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the
Explanation to sub-section (4) of section 12AB, as the case may be, he shall—
(a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and
(b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:
Provided also that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer.
(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) or section 144 so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based assessment with dynamic jurisdiction.
(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section
(3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2021.
(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(3D) Nothing contained in sub-section (3A) and sub-section (3B) shall apply to the assessment made under sub-section (3) or under section 144, as the case may be, on or after the 1st day of April, 2021.
(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,—
(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment ;
(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(5) Omitted by the Finance Act, 1999, w.e.f. 1-6-1999.
C. AUTHORITIES
The authorities settle the character of a 143(1) intimation, the mandatory 143(2) notice, the reach of section 292BB, and the scope of prima-facie adjustments.
Court: Supreme Court of India; judgment dated 23 May 2007.
Held: An intimation under section 143(1)(a) is not an 'assessment' and does not involve any 'opinion' of the Assessing Officer; consequently, where only an intimation has been issued, the question of 'change of opinion' does not arise, and the AO is free to initiate reassessment under section 147 provided its ingredients (reason to believe that income has escaped assessment) are satisfied. Issue of a notice under section 143(2) is not a pre-condition to reopening under section 147/148.
Significance: The leading authority on the distinction between processing (143(1)) and assessment (143(3)); it underpins the law that reopening of a return processed under 143(1) does not require a prior 'opinion' and is not barred by change-of-opinion (subject to the post-2021 reassessment regime and the threshold of 'information').
Asst. CIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC)
Court: Supreme Court of India.
Held: Where the Assessing Officer repudiates the return and proceeds to make an assessment, the issue of notice under section 143(2) within the prescribed time is mandatory and is the very foundation of jurisdiction; it cannot be dispensed with. (Decided in the context of block assessment under section 158BC, which adopts section 143(2).)
Significance: Establishes that a valid and timely 143(2) notice is a jurisdictional condition for a scrutiny assessment; its omission is fatal, not a curable irregularity.
CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC)
Court: Supreme Court of India.
Held: Section 292BB cures defects in the service of notice (where the assessee has participated), but it cannot cure a complete failure to issue the notice under section 143(2); the section deals with service, not issue. Where no 143(2) notice was issued at all, the assessment is invalid notwithstanding section 292BB.
Significance: Authoritatively limits section 292BB to service defects; non-issuance of the 143(2) notice remains a jurisdictional infirmity that section 292BB does not save.
Held: An adjustment under section 143(1)(a) (and the consequential additional tax) cannot be made in respect of a claim that was correct and bona fide when the return was filed but became inadmissible only by reason of a later retrospective amendment; the 'prima facie' adjustment power is confined to what is apparent and incontrovertible on the return as filed.
Significance: Defines the narrow compass of summary adjustments: only patent, indisputable corrections are permissible under 143(1)(a); debatable matters require scrutiny under 143(2)/(3). A guard against high-pitched summary additions.
Relevance: In a 143(3) scrutiny, a fresh claim before the AO must be made by a revised return (see section 139); but the appellate authorities retain power to entertain it. Relevant to the conduct of the 143(3) assessment and the treatment of claims.
4. Reopening of a section 143(1) intimation; reasons and objections
Indu Lata Rangwala v. Dy. CIT (2016) 384 ITR 337 (Delhi)
Court: Delhi High Court.
Held: Where a return is processed under section 143(1) and no scrutiny assessment is made, there is no 'opinion' formed, so reopening under section 147 is not barred by 'change of opinion'; but the Assessing Officer must still have valid reasons (tangible material) that income has escaped assessment — the absence of a prior opinion does not dispense with the jurisdictional requirement of reason to believe (now, 'information').
Significance: Clarifies the reopening of 143(1) cases: no change-of-opinion bar, but the jurisdictional threshold must independently be met. Aligns with Rajesh Jhaveri.
Pr. CIT v. Jai Shiv Shankar Traders (P) Ltd. (2016) 383 ITR 448 (Delhi)
Held: Failure to issue a notice under section 143(2) before completing a reassessment renders the order void; section 292BB does not cure the non-issuance (as distinct from a defect in service), and participation by the assessee does not waive the requirement where no notice was issued at all.
Significance: Applies the Hotel Blue Moon / Laxman Das Khandelwal principle to reassessment; the 143(2) notice is jurisdictional and its omission is fatal.
5. The narrow compass of prima-facie adjustments under section 143(1)(a)
Held: The power to make a prima-facie adjustment under section 143(1)(a) is somewhat co-terminous with the power to rectify a mistake apparent from the record under section 154; a deduction/claim can be disallowed only if, on the face of the return and the accompanying documents and accounts, it is inadmissible. If any further enquiry or proof is needed, the matter must go to scrutiny under section 143(2) and cannot be dealt with by a summary adjustment.
Significance: The leading authority confining 143(1)(a) adjustments to the patent and incontrovertible; debatable or enquiry-requiring matters are outside the summary power.
Bajaj Auto Finance Ltd. v. CIT (2018) 404 ITR 564 (Bombay)
Held: In making a prima-facie adjustment under section 143(1)(a), the Assessing Officer cannot ignore the decisions of courts and tribunals interpreting a provision; an adjustment that disregards a legal position settled by judicial decisions is impermissible — to hold otherwise would 'ring the death knell' of the rule that only incontrovertible matters may be summarily adjusted.
Significance: Reinforces Khatau Junkar; a 143(1)(a) adjustment cannot be made on a point governed by (or debatable in the light of) judicial precedent. (Confirm the precise reported citation before independent reliance.)
6. Assessment on a non-existent entity is void
PCIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC)
Court: Supreme Court of India.
Held: An assessment framed in the name of an entity that has ceased to exist (there, a company that had amalgamated and been dissolved) is void; it is a substantive jurisdictional defect, not a procedural irregularity curable under section 292B, even if the assessee participated in the proceedings. Once the amalgamation is intimated to the AO, the assessment must be made on the successor.
Significance: A leading authority on the jurisdictional validity of the assessment itself: a section 143(3)/144 order against a dead/non-existent person is a nullity. Read with Spice Entertainment (Del) and distinguished from cases of mere mis-description.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act (base text amended up to the Finance Act, 2025), with the publisher footnote apparatus and amendment-marker brackets removed; Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported; Tribunal / AAR / High Court orders are flagged. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XIV — PROCEDURE FOR ASSESSMENT
Section 143 — Assessment
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live, central. The engine of regular assessment. Sub-section (1) provides for summary processing and intimation (with permitted prima-facie adjustments, fee and interest); sub-section (2) for the scrutiny notice; sub-section (3) for the scrutiny assessment after hearing; sub-section (3A)-(3C) for the faceless-assessment scheme (now operated through section 144B).
FA 2026: No substantive amendment by the Finance Act, 2026 to section 143; faceless assessment continues under section 144B with FA 2026 enabling e-authentication of records without digital signature.
Recent amendments: The time-limit for issuing the scrutiny notice under section 143(2) and the scope of prima-facie adjustments under section 143(1)(a) have been periodically amended; the Finance Act, 2025 made consequential changes to the processing timeline.
A. SECTION COMMENTARY
Section 143 contains the two principal modes of assessment. Section 143(1) is a summary, largely automated processing of the return at the Centralised Processing Centre: the total income is computed after the permitted prima-facie adjustments (arithmetical errors, incorrect claims apparent from the return, disallowance of loss/expenditure/deduction on stated grounds, additions of income appearing in Forms 26AS/16/16A not included, etc.), and an intimation is generated determining the sum payable or refundable. Crucially, an intimation under section 143(1) is not an assessment — it is the acceptance/processing of the return, and the absence of an 'assessment' has important consequences for reopening.
Section 143(2) is the gateway to scrutiny: if the AO considers it necessary to ensure that the assessee has not understated income or overstated loss/refund, he must serve a notice under 143(2) within the prescribed period (presently three months from the end of the financial year in which the return is furnished). Service of a valid 143(2) notice within time is a condition precedent to a scrutiny assessment under section 143(3); its absence is not a mere irregularity curable under section 292BB where no notice was issued at all.
Section 143(3) is the scrutiny assessment made after hearing the assessee and considering the evidence. Faceless assessment (originally section 143(3A)-(3C), now section 144B) restructures the conduct of the 143(3)/144 assessment through the National Faceless Assessment Centre. The recurring litigation concerns (i) the legal character of a 143(1) intimation; (ii) the mandatory nature and timing of the 143(2) notice; and (iii) the limits of prima-facie adjustments.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). Includes sub-section (1) (processing and intimation), sub-section (2) (scrutiny notice) and sub-section (3) (scrutiny assessment), with the faceless-scheme enabling provisions.
143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:—
(a) the total income or loss shall be computed after making the following adjustments, namely:—
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;
(iia) any such inconsistency in the return, with respect to the information in the return of any preceding previous year, as may be prescribed;
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under section 10AA or under any of the provisions of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:
Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018;
(b) the tax , interest and fee, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:
Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him:
Provided further that no intimation under this sub-section shall be sent after the expiry of nine months from the end of the financial year in which the return is made.
Explanation.—For the purposes of this sub-section,—
(a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,—
(i) of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or
(iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
(b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a).
(1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section.
(1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012.
(1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(1D) Notwithstanding anything contained in sub-section (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2):
Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017.
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished.
(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:
Provided that in the case of a—
(a) research association referred to in clause (21) of section 10;
(b) news agency referred to in clause (22B) of section 10;
(c) association or institution referred to in clause (23A) of section 10;
(d) institution referred to in clause (23B) of section 10, which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution, shall be made by the Assessing Officer, without giving effect to the provisions of section 10, unless—
(i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B), as the case may be, by such research association, news agency, association or institution, where in his view such contravention has taken place; and
(ii) the approval granted to such research association or other association or institution has been withdrawn or notification issued in respect of such news agency or association or institution has been rescinded:
Provided further that where the Assessing Officer is satisfied that any fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause
(via), of clause (23C) of section 10, or any trust or institution referred to in section 11, has committed any specified violation as defined in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or the
Explanation to sub-section (4) of section 12AB, as the case may be, he shall—
(a) send a reference to the Principal Commissioner or Commissioner to withdraw the approval or registration, as the case may be; and
(b) no order making an assessment of the total income or loss of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution shall be made by him without giving effect to the order passed by the Principal Commissioner or Commissioner under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB:
Provided also that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer.
(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) or section 144 so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based assessment with dynamic jurisdiction.
(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section
(3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2021.
(3C) Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(3D) Nothing contained in sub-section (3A) and sub-section (3B) shall apply to the assessment made under sub-section (3) or under section 144, as the case may be, on or after the 1st day of April, 2021.
(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,—
(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment ;
(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(5) Omitted by the Finance Act, 1999, w.e.f. 1-6-1999.
C. AUTHORITIES
The authorities settle the character of a 143(1) intimation, the mandatory 143(2) notice, the reach of section 292BB, and the scope of prima-facie adjustments.
1. Intimation under section 143(1) is not an assessment
Asst. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC)
Court: Supreme Court of India; judgment dated 23 May 2007.
Held: An intimation under section 143(1)(a) is not an 'assessment' and does not involve any 'opinion' of the Assessing Officer; consequently, where only an intimation has been issued, the question of 'change of opinion' does not arise, and the AO is free to initiate reassessment under section 147 provided its ingredients (reason to believe that income has escaped assessment) are satisfied. Issue of a notice under section 143(2) is not a pre-condition to reopening under section 147/148.
Significance: The leading authority on the distinction between processing (143(1)) and assessment (143(3)); it underpins the law that reopening of a return processed under 143(1) does not require a prior 'opinion' and is not barred by change-of-opinion (subject to the post-2021 reassessment regime and the threshold of 'information').
2. The mandatory scrutiny notice under section 143(2)
Asst. CIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC)
Court: Supreme Court of India.
Held: Where the Assessing Officer repudiates the return and proceeds to make an assessment, the issue of notice under section 143(2) within the prescribed time is mandatory and is the very foundation of jurisdiction; it cannot be dispensed with. (Decided in the context of block assessment under section 158BC, which adopts section 143(2).)
Significance: Establishes that a valid and timely 143(2) notice is a jurisdictional condition for a scrutiny assessment; its omission is fatal, not a curable irregularity.
CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC)
Court: Supreme Court of India.
Held: Section 292BB cures defects in the service of notice (where the assessee has participated), but it cannot cure a complete failure to issue the notice under section 143(2); the section deals with service, not issue. Where no 143(2) notice was issued at all, the assessment is invalid notwithstanding section 292BB.
Significance: Authoritatively limits section 292BB to service defects; non-issuance of the 143(2) notice remains a jurisdictional infirmity that section 292BB does not save.
3. Prima-facie adjustments under section 143(1)
CIT v. Hindustan Electro Graphites Ltd. (2000) 243 ITR 48 (SC)
Court: Supreme Court of India.
Held: An adjustment under section 143(1)(a) (and the consequential additional tax) cannot be made in respect of a claim that was correct and bona fide when the return was filed but became inadmissible only by reason of a later retrospective amendment; the 'prima facie' adjustment power is confined to what is apparent and incontrovertible on the return as filed.
Significance: Defines the narrow compass of summary adjustments: only patent, indisputable corrections are permissible under 143(1)(a); debatable matters require scrutiny under 143(2)/(3). A guard against high-pitched summary additions.
Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) — cross-reference
Relevance: In a 143(3) scrutiny, a fresh claim before the AO must be made by a revised return (see section 139); but the appellate authorities retain power to entertain it. Relevant to the conduct of the 143(3) assessment and the treatment of claims.
4. Reopening of a section 143(1) intimation; reasons and objections
Indu Lata Rangwala v. Dy. CIT (2016) 384 ITR 337 (Delhi)
Court: Delhi High Court.
Held: Where a return is processed under section 143(1) and no scrutiny assessment is made, there is no 'opinion' formed, so reopening under section 147 is not barred by 'change of opinion'; but the Assessing Officer must still have valid reasons (tangible material) that income has escaped assessment — the absence of a prior opinion does not dispense with the jurisdictional requirement of reason to believe (now, 'information').
Significance: Clarifies the reopening of 143(1) cases: no change-of-opinion bar, but the jurisdictional threshold must independently be met. Aligns with Rajesh Jhaveri.
Pr. CIT v. Jai Shiv Shankar Traders (P) Ltd. (2016) 383 ITR 448 (Delhi)
Held: Failure to issue a notice under section 143(2) before completing a reassessment renders the order void; section 292BB does not cure the non-issuance (as distinct from a defect in service), and participation by the assessee does not waive the requirement where no notice was issued at all.
Significance: Applies the Hotel Blue Moon / Laxman Das Khandelwal principle to reassessment; the 143(2) notice is jurisdictional and its omission is fatal.
5. The narrow compass of prima-facie adjustments under section 143(1)(a)
Khatau Junkar Ltd. v. K.S. Pathania, Dy. CIT (1992) 196 ITR 55 (Bombay)
Court: Bombay High Court.
Held: The power to make a prima-facie adjustment under section 143(1)(a) is somewhat co-terminous with the power to rectify a mistake apparent from the record under section 154; a deduction/claim can be disallowed only if, on the face of the return and the accompanying documents and accounts, it is inadmissible. If any further enquiry or proof is needed, the matter must go to scrutiny under section 143(2) and cannot be dealt with by a summary adjustment.
Significance: The leading authority confining 143(1)(a) adjustments to the patent and incontrovertible; debatable or enquiry-requiring matters are outside the summary power.
Bajaj Auto Finance Ltd. v. CIT (2018) 404 ITR 564 (Bombay)
Held: In making a prima-facie adjustment under section 143(1)(a), the Assessing Officer cannot ignore the decisions of courts and tribunals interpreting a provision; an adjustment that disregards a legal position settled by judicial decisions is impermissible — to hold otherwise would 'ring the death knell' of the rule that only incontrovertible matters may be summarily adjusted.
Significance: Reinforces Khatau Junkar; a 143(1)(a) adjustment cannot be made on a point governed by (or debatable in the light of) judicial precedent. (Confirm the precise reported citation before independent reliance.)
6. Assessment on a non-existent entity is void
PCIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613 (SC)
Court: Supreme Court of India.
Held: An assessment framed in the name of an entity that has ceased to exist (there, a company that had amalgamated and been dissolved) is void; it is a substantive jurisdictional defect, not a procedural irregularity curable under section 292B, even if the assessee participated in the proceedings. Once the amalgamation is intimated to the AO, the assessment must be made on the successor.
Significance: A leading authority on the jurisdictional validity of the assessment itself: a section 143(3)/144 order against a dead/non-existent person is a nullity. Read with Spice Entertainment (Del) and distinguished from cases of mere mis-description.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act (base text amended up to the Finance Act, 2025), with the publisher footnote apparatus and amendment-marker brackets removed; Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported; Tribunal / AAR / High Court orders are flagged. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.