Section 143(1) Intimation Sans Adjustments Is Not An 'Order' For Section 263 Revision: Karnataka HC

The Karnataka High Court has restricted the Revenue's power to revise income tax proceedings, ruling that an automated intimation under Section 143(1) of the Income Tax Act, 1961 without adjustments does not constitute a revisable 'order' under Section 263. This decision effectively shields taxpayers from revisionary interference in cases where the Centralised Processing Centre (CPC) has processed returns without any formal adjudicatory scrutiny or adjustments.

A single-judge bench of Justice S Sunil Dutt Yadav heard the challenge against a revision notice issued to an individual assessee. The case centered on whether the Revenue could invoke revisionary jurisdiction against a refund determined through an automated processing of a revised return, particularly when the limitation period for formal scrutiny under Section 143(2) had already lapsed.

Key Takeaways

Revisionary Limits

The Revenue cannot use Section 263 to bypass the expired limitation period of Section 143(2) scrutiny by mischaracterizing a standard automated intimation as a revisable order.

Intimation vs Adjudication

An intimation under Section 143(1) is an automated process with limited scope for adjustments and lacks the adjudicatory conclusion required to be termed an 'order' for revision.

Jurisdictional Clarity

The Court reaffirmed that only intimations involving adjustments where the assessee has an opportunity to object might partake the character of an order under Sections 246 and 246A, whereas pure intimations remain non-revisable.

Distinction Between Automated Intimation and Assessment Order

The Court analyzed the legislative scheme, noting that the power under Section 263 of the Income Tax Act, 1961 can only be exercised against an 'order' passed by an Assessing Officer. Drawing a sharp distinction between Section 143(1) and Section 143(2), the Court observed that the former is a ministerial, often automated, process with narrow discretion.

The Court, in its reasoning, observed: "The term ‘order’ would refer to the reflection of a conclusion in an adjudicatory process. Such would be the meaning to be assigned for the purpose of construing whether the order could be tested by an adjudicatory hierarchy of grievance redressal. Where the scheme of Section 143(1) itself would indicate that an intimation is issued after a minimal inquiry, many a time based only on records before the Authority, there cannot be imputed the process of an adjudicatory exercise preceding such intimation."

Revenue Cannot Resort to Section 263 After Missing Scrutiny Deadlines

The Court emphasized that if the Revenue believed the treatment of ESOPs as 'Capital Gains' instead of 'Salary' was erroneous, it should have initiated scrutiny under Section 143(2).

The Court further noted: "Having lost out on time to initiate proceedings under Section 143(2), the Revenue cannot readily resort to the proceedings under Section 263 by construing without establishing that the intimation under Section 143(1) of the I.T. Act into an Assessment Order."

The Court has following directions:

"This Court finds that the impugned notice issued at Annexure-’A’ dated 13.01.2026 is clearly one without jurisdiction and requires to be set aside and accordingly, the notice at Annexure-‘A’ dated 13.01.2026 is set aside. The petition is accordingly allowed."

Ratio

An intimation issued under Section 143(1) of the Income Tax Act, 1961, in the absence of any adjustments made under the Proviso to Section 143(1)(a), does not constitute an 'order' for the purposes of invoking revisionary jurisdiction under Section 263. The legal fiction treating such intimation as a notice of demand under Section 156 is limited to recovery purposes and does not equate the intimation to a formal assessment order.

Background

The petitioner, an individual assessee, originally filed a return for the Assessment Year 2019-2020. Later, after obtaining condonation of delay from the CBDT under Section 119(2)(b) of the Income Tax Act, 1961, he filed a revised return. In this revised return, he treated the repurchase of Employee Stock Options (ESOPs) by his former employer as 'Capital Gains' rather than 'Salary', leading to a significant refund claim of over Rs. 27 crore.

The CPC processed this revised return under Section 143(1) and issued the refund. The Revenue subsequently issued a notice under Section 263, claiming the intimation was 'erroneous and prejudicial to the interest of revenue' because it failed to tax the ESOP proceeds as salary income at a higher rate and wrongly granted interest. The Revenue relied on Commissioner of Income-Tax v. Anderson Marine & Sons, (P.) Ltd. to argue that such determinations are revisable. However, the petitioner contended that per Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited ( "(2008) 14 SCC 208": 2007 CaseBase(SC) 1322), an intimation is not an order. The Court agreed with the petitioner, following the principles in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited ( "(2008) 14 SCC 208": 2007 CaseBase(SC) 1322) and distinguishing the Madhya Pradesh High Court's view in Amir Uddin S/o Kamruddin Bohra v. Income Tax Officer, Indore and Another regarding heads of income, ultimately quashing the revision notice for lack of jurisdiction.

Case Details:
Case No.: WRIT PETITION NO. 5330 OF 2026 (T-IT)
Neutral Citation: 2026:KHC:51326
Case Title: Shri Mukesh Bansal V. Principal Commissioner Of Income Tax, Bengaluru-2
Appearances:
For the Petitioner(s): Sri. Prashanth S Shivadass, Advocate; Smt. Gayathri G.S., Advocate; Sri Prahalad Sriram, Advocate; Sri Siddhant Kishanpuria, Advocate
For the Respondent(s): Sri. Aravind Kamath, ASG; Sri E.I. Sanmathi, Advocate

Source: 2026 CaseBase(KAR) 20813