The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed reassessment proceedings involving an addition of ₹53.50 lakh after finding that the Assessing Officer failed to issue the mandatory notice under Section 143(2) of the Income Tax Act, 1961.
The bench of Anubhav Sharma (Judicial Member) and Sanjay Awasthi (Accountant Member) observed that issuance of a notice under Section 143(2) is essential for a valid assumption of jurisdiction where the taxpayer has filed a return in response to a reassessment notice. The taxpayer’s participation in the proceedings cannot cure the complete absence of the statutory notice, the Tribunal observed.
The dispute arose from reassessment proceedings concerning Assessment Year 2015-16. The Assessing Officer passed an order on March 24, 2024, under Section 147 read with Section 144B of the Income Tax Act.
Buy Now: Income tax E-Compilation – August 2026
Through the reassessment order, the officer added ₹53.50 lakh to the taxpayer’s income under Section 69A. The amount represented cash deposits in a bank account that the Income Tax Department treated as unexplained.
The taxpayer challenged the reassessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, on jurisdictional grounds as well as on the merits of the addition.
The taxpayer argued that the notice issued under Section 148 on April 2, 2022, was barred by limitation. It was contended that, under the provisions applicable to the assessment year in question and the first proviso to Section 149, the reassessment notice could have been issued only up to March 31, 2022.
A second jurisdictional objection was raised on the ground that the Assessing Officer had not issued a notice under Section 143(2), even though the taxpayer had filed a return of income on April 30, 2022, in response to the notice issued under Section 148.
The Commissioner (Appeals), however, rejected the objections and dismissed the appeal. The taxpayer subsequently approached the ITAT.
Before the Tribunal, the taxpayer submitted that the omission to issue a notice under Section 143(2) constituted a fatal jurisdictional defect.
The Income Tax Department sought to treat the return filed in response to the reassessment notice as invalid because it had allegedly not been electronically verified. The taxpayer argued that he had discharged his obligation by filing the return as directed by the Assessing Officer and could not be denied the statutory protection available under Section 143(2).
The taxpayer also disputed the addition on its merits. It was claimed that the actual cash deposited in the bank account was ₹28.30 lakh and not ₹53.50 lakh. The taxpayer maintained that the deposits were fully explained and alleged that the lower authorities had failed to properly consider the supporting explanation and documents.
The Revenue opposed the appeal and contended that the Section 148 notice had been issued within the permissible period because the alleged escaped income exceeded ₹50 lakh. According to the Department, such a notice could be issued within the extended limitation period applicable to high-value cases.
On the question of the notice under Section 143(2), the Department argued that the return filed by the taxpayer had been treated as invalid. Consequently, the Assessing Officer was entitled to proceed under Section 144, for which a notice under Section 143(2) was allegedly unnecessary.
The Revenue also disputed the taxpayer’s explanation regarding the cash deposits, submitting that it was based primarily on affidavits rather than substantive factual evidence.
After examining the record and the rival submissions, the Tribunal identified the complete absence of a notice under Section 143(2) as the decisive issue.
The ITAT noted that the taxpayer had filed a return of income on April 30, 2022, in response to the notice issued under Section 148. Despite the filing of the return, the Assessing Officer did not issue any notice under Section 143(2).
The Tribunal disagreed with the finding of the Commissioner (Appeals) that the taxpayer’s participation in the reassessment proceedings was sufficient to satisfy the procedural requirements.
It observed that the legal position was well settled that a notice under Section 143(2) must be issued for a valid assumption of jurisdiction. The requirement was not merely procedural but was fundamental to the validity of the assessment proceedings.
The Bench relied on the Delhi High Court’s decision in Shaily Juneja, reported in 476 ITR 665, which held that issuing a notice under Section 143(2) is an essential jurisdictional requirement.
The Tribunal also examined whether Section 292BB could protect the reassessment despite the absence of the statutory notice.
Section 292BB creates a legal fiction regarding the service of a notice where a taxpayer has participated in the proceedings. It restricts a participating taxpayer from subsequently objecting that the notice was not served, was not served within time or was served improperly.
However, the ITAT clarified that the provision applies only where a notice has actually been issued but there is some defect in its service. It cannot cure a situation in which the Department never issued the required notice.
The Bench referred to the Supreme Court’s ruling in Commissioner of Income Tax v. Laxman Das Khandelwal, in which it was held that Section 292BB remedies defects in the manner of service but does not save the complete absence of a notice.
For Section 292BB to apply, the notice must first have emanated from the Department. The taxpayer’s participation cannot be treated as a substitute for the issuance of a jurisdictional notice, the Tribunal noted.
The ITAT also rejected the Department’s contention that the return filed by the taxpayer should be treated as invalid because it was not electronically verified.
The Bench found that the taxpayer had complied with the Assessing Officer’s direction by filing a return in response to the notice issued under Section 148. It held that the taxpayer could not be made responsible merely because the return was allegedly not e-verified.
Accordingly, the Assessing Officer was required to follow the statutory procedure applicable after the filing of the return, including the issuance of a notice under Section 143(2).
Since no such notice was issued, the Tribunal held that the Assessing Officer’s assumption of jurisdiction was legally invalid. All proceedings conducted after the jurisdictional defect were consequently declared invalid in the eyes of law.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
