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Facts
The assessee's assessment was reopened under Section 147 based on search information regarding Yamini Investments Co. Ltd. The Assessing Officer (AO) completed the assessment under Section 144, treating the assessee's belatedly filed return as invalid and without issuing a mandatory notice under Section 143(2) of the Income Tax Act.
Held
The Tribunal held that the assessment completed under Section 144 without issuing a mandatory notice under Section 143(2) of the Income Tax Act is a jurisdictional error. Following the Delhi High Court's decision in PCIT vs. Dart Infrabuild P Ltd., the Tribunal stated that the issuance of a Section 143(2) notice is mandatory, even if the return is filed belatedly in response to a Section 148 notice, and this is not a curable defect under Section 292BB.
Key Issues
Whether the assessment completed under Section 144 is invalid due to the non-issuance of a mandatory notice under Section 143(2) of the Income Tax Act, especially when the return was filed belatedly.
Sections Cited
10(38), 69C, 147, 148, 143(2), 144, 144B, 132, 282A, 127, 292BB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “F ”: NEW DELHI
Before: MS. ANNAPURNA GUPTA
The instant appeal, preferred by the assessee, is directed against the order dated 18.05.2023 passed by the Learned Commissioner of Income-tax (Appeals)- 3o, New Delhi, arising out of the order dated 31.03.2022 passed by the Assessing Officer, NFAC, DCIT, Delhi under Section 147/144 read with Section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2016-17.
The assessee has raised following grounds of appeal: “Ground No.1 "The order under appeal is bad in law as the same has been passed disallowing claim of exemption of Rs.80.59.224/- u/s 10(38) of IT Act on long term capital gain on the premise that other investors in the Yamini Investment Co Ltd had indulged in claiming ingenuine LTCG arising out of price manipulation in the above scrip in question. Ground No.2 "The authorities below have erred in law in making/confirming the addition of Rs.4.13.374/- u/s 69C of IT Act on assumption of making payment of commission on alleged arrangement of above bogus long term capital gain." Additional Ground No. 1: "The impugned assessment is not valid in law as the same has been completed without considering the return of income filed in response to notice u/s 148 of IT Act and also without issuing/serving mandatory notice u/s 143(2) of IT Act." Additional Ground No.2 "The impugned assessment is not valid in law as the reassessment proceedings in the case has been initiated by the ITO. Ward 63(1). Delhi, the authority having no jurisdiction over the appellant assessee in view of the pecuniary jurisdiction had been with the Circle as per CBDT Instructions No. 1/2011." Additional Ground No.3 "On facts and in the circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that impugned assessment is invalid and without jurisdiction as the reassessment
proceedings has been initiated without application of mind and therefore, not in compliance of the mandate of sections 147/148/151 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed," Additional Ground No.4 "On facts and in the circumstances of the case, the Ld CIT(A) has erred in law in upholding the impugned reassessment proceedings ignoring the fact that the jurisdictional notice u/s 148 was never served upon the appellant in compliance of sec 282A rwr 127 of IT rules 1962 and therefore, such proceedings without service of notice u/s 148 is invalid in law and void-ab- initio and without prejudice the notice u/s 148 under the unamended act issued after 31.03.2021 is invalid in view of decision of Monmohan Kohli." Additional Ground No.5 "The impugned addition of Rs.80,59,224/- treating the sale realization from sale of shares as unexplained cash credit u/s 68 of IT Act is unsustainable in law as such unexplained credits are outside the ambit of sec 68 of IT Act. Such illegality in invoking wrong section for making addition to income is a jurisdictional error which is incurable u/s 292BB of IT Act."
The assessee filed her return of income on 21.03.2017 declaring total income at Rs. 43,62,210/- which was processed u/s 143(1) of the Act at returned income.
Subsequently, on the basis of Search conducted at Yamini Investments Co. Ltd. under Section 132 of the Act on scrip and found the assessee, among one of the beneficiaries to Datta & Tyagi Group. The assessee was the beneficiary amounting to Rs.82,67,491/- on the basis of which the assessment was reopened u/s. 147 of the Act upon recording reasons for reopening with the prior approval of the competent authority and notice u/s.148 of the Act was issued. As assessee has not filed valid return of income in response to the notice issued under Section 148 of the Act, proceedings were completed under Section 144 of the Act, 1961 and the data furnished in invalid return was taken for computation purpose.
The assessee filed additional grounds challenging the assessment proceeding being finalized without considering the return of income filed in response to the notice u/s 148 of the Act and particularly in the absence of issuance/ service of mandatory notice u/s 143(2) of the Act. It appears from the record and as also submitted by the learned counsel for the assessee that the assessee in response to the notice under Section 148 of the Act filed belated return and therefore found to be invalid by the Ld. AO whereupon he concluded the proceedings u/s 144 of the Act, which is evident from page 4 para 4.1.2 of the assessment order as also contended by him.
Further that the assessment has been completed without issuing mandatory statutory notice u/s 143(2) of the Act presumably on the reason that return filed by the assessee in response to the notice under Section 148 of the Act was not a valid return. In this regard he has drawn our attention to pages 111-113, para 16 of the Paper Book filed before us, being the notice under Section 142(1) dated 08.03.2022, issued by the Ld. AO to the assessee wherein it has been specifically mentioned that the return filed by the assessee against the notice u/s 148 of the Act was belated and invalid and therefore assessee was directed to show cause as to why the case of the assessee should not be concluded as per the provisions of Section 144 of the Act.
The case of the assessee before us is that assessee has duly filed her return of income in response to notice issued under Section 148 on 15.07.2021 appearing at pages 32-36 of the Paper book which was furnished to the Ld. AO by and under the submissions dated 30.11.2021; 16.12.2021; 18.01.2022; and 22.03.2022, copies whereof are duly annexed in the paper book filed before us. The screenshot of e- assessment proceedings, appearing at pages 179-180 of the Paper book, clearly depicts the fact of first notice being issued on 28.03.2021 under Section 148 of the Act followed by three notices issued under Section 142(1) of the Act dated 02.12.2021, 11.01.2022 and 08.03.2022 respectively, the assessment whereof was completed after issuance of notice under Section 144 of the Act dated 28.03.2022, which clearly speaks of no notice under Section 143(2) being issued and served by the Ld. AO before completion of assessment. The assessee joins issue here to this effect that as it is a settled principle of law that the completion of assessment without issuance of jurisdictional notice under Section 143(2) being not an incurable defect renders the assessment invalid and therefore under this premise the assessment so completed under Section 144 of the Act by the Ld AO impugned before us is liable to be quashed as was the crux of the arguments advanced by the Ld. AR. In this regard he has relied upon the following judgments:
- CIT vs. Laxman Das Khandelwal in SLP (C) No.7708 of 2019 dt:14.08.2019 (SC); - ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC); - PCIT v. Silver Line 383 ITR 455 (Delhi) (HC) - Pr CIT vs Staunch Marketing Pvt Ltd 404 ITR 299 (Del) - DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del) 7. The judgment rendered by the Hon’ble Delhi High Court in the case of PCIT vs. Dart Infrabuild P Ltd 118 CCH 0174 (Del) was further relied upon. Relying on the ratio laid down to this effect by that Court that the view of the AO that since return of income was invalid being filed beyond the time limit prescribed as per the notice under Section 148 of the Act is devoid of any merit because of issuance of notice under Section 143(2) is mandatory even if return of income is filed belatedly in response to the notice under Section 148 which is not a curable defect under Section 292 BB of the Act.
We have heard Ld. Counsels appearing for the respective parties and perused the materials available on record. Under these facts and circumstances of the matter we have further considered the judgment passed by the Hon’ble Delhi High Court in the case of PCIT vs Dart Infrabuild P Ltd. (supra). In that particular matter since return of income for A.Y. 2010-11 was filed beyond the thirty days as provided in the notice dated 30.03.2015 issued under Section 148 of the Act the Revenue took a stand before the Tribunal and before the Hon’ble High Court that it was not obliged to issue notice u/s 143(2) before passing the assessment order.
After considering the entire aspect of the matter as placed before the Hon’ble High Court the Hon’ble Court came to a conclusion that before framing of assessment order the AO ought to have issued notice u/s 143(2) of the Act and after considering the submissions made by the Revenue it was held that issuance of notice under Section 143(2) is mandatory even if the return of income is filed belatedly in response to notice under Section 148 of the Act and the same is not curable defect under Section 292BB of the Act.
Hence, the order passed by the Ld. Tribunal rejecting the submissions of the Revenue in justifying non-issuance of notice under Section 143(2) of the Act as the return was filed by the assessee in response to notice issued under Section 148 of the Act belated was upheld. In the absence of any contrary judgment placed by the Ld. DR to that ratio laid down by the Hon’ble High Court in the case of PCIT vs Dart Infrabuild P Ltd. (supra) we do not hesitate to be inspired and apply the said ratio laid down therein to the instant case before us on the identical facts and circumstances as is evident from the record and also placed by the respective parties. Thus, respectfully following the same we find that the order passed by the Ld. AO is suffered from jurisdictional error in not issuing mandatory statutory notice u/s 143(2) and the entire proceeding is, therefore, quashed.
As the appeal is allowed in favour of the assessee on this additional jurisdictional ground raised by the assessee, the other grounds become academic and needs no order to be passed.
Order pronounced in open court on 04.06.2025.