Central Processing Center of Income Tax Dept. cannot go beyond prima facie adjustments while processing returns

 In a recent ruling, the Hon’ble Delhi ITAT in Coforge Limited v. DCIT (ITA Nos. 4333 & 4659/Del/2024) quashed an intimation issued u/s 143(1) of the Income-tax Act, 1961 (‘the Act’), holding that the adjustments made by the Centralized Processing Centre (CPC) were beyond the permissible scope as prescribed under the law [i.e. section 143(1)(a)]. The Tribunal reiterated that only prima facie and non-debatable adjustments can be made at the return processing stage, and any issue requiring verification or interpretation must be dealt with in regular scrutiny assessment under the Act [i.e. section 143(3)].

In the present case, the assessee, filed its return of income for AY 2021–22. While processing the return u/s 143(1) of the Act, the CPC made two adjustments - (i) disallowance of deduction claimed u/s 80M with respect to inter-corporate dividends; and (ii) addition on account of mismatch between GST refund as per the tax return and tax audit report. The assessee contended that both the issues involved were debatable in nature and did not constitute apparent mistakes, and therefore, were beyond the limited scope of permissible adjustments that could be made by the CPC under the relevant provision [section 143(1)] . The assessee further argued that its reply to the proposed adjustments was also not considered, thereby violating the principles of natural justice.

The Hon’ble ITAT observed that the adjustments made by CPC neither constituted arithmetical errors nor incorrect claims apparent from the return. Both disallowances involved matters requiring examination of facts and legal interpretation, which could only be addressed through scrutiny assessment. The Hon’ble ITAT also took note of the procedural lapse in not considering the assessee’s response before finalizing the intimation. Accordingly, the Hon’ble ITAT held that the CPC had exceeded its jurisdiction u/s 143(1) and quashed the intimation.

This ruling reinforces that the scope of adjustments that can be affected by CPC is strictly limited to clear and self-evident errors. Any adjustment based on debatable interpretation or factual verification is beyond the jurisdiction of CPC and renders the intimation invalid. The decision serves as an important reminder that procedural safeguards and statutory limitations must be respected even in automated return processing, ensuring that taxpayers are not prejudiced by system-driven actions.