No Processing of Return If Scrutiny Notice Served

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Finance Bill 2012-13 has proposed an amendment effective  from the 1st day of July, 2012.which was long been settled by Supreme Court .The issue whether processing of return can be done when Assessing Officer has already served scrutiny notice u/s 413(2) has been held bad in law by  Supreme Court in Commissioner of Income-tax v. Gujarat Electricity Board [2003] (260 ITR 84 (SC).assessment

Under the existing provisions, every return of income is to be processed under sub-section (1) of section 143 and refund, if any, due is to be issued to the taxpayer. Some returns of income are also selected for scrutiny which may lead to raising a demand for taxes although refunds may have been issued earlier at the time of processing.

Finance Bill 2012-13 has proposed to amend the provisions of the Income-tax Act to provide that processing of return will not be necessary in a case where notice under sub–section (2) of section 143 has already been issued for scrutiny of the return.

What will be the impact of this amendment?

No refund will be raised during the scrutiny proceeding. Thus , if any tax is paid , it may be adjusted with the demand which may arise after the scrutiny assessment is over. Previously, refunds were being issued u/s 143(1  )  even when scrutiny was in progress.

On the other side , there won’t be any demand by virtue of processing when the scrutiny proceeding is going on.