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Facts
The assessee failed to file a return of income for AY 2017-18 despite notices. The AO issued a notice u/s 142(1) on March 12, 2018, and later proceeded with a best judgment assessment u/s 144 on December 30, 2019, after the assessee filed a belated return which was rejected.
Held
The tribunal held that since no return was filed voluntarily and the assessment was framed as a best judgment assessment under section 144 due to non-compliance, the mandatory notice under section 143(2) was not required for the validity of the assessment.
Key Issues
Whether the assessment framed under section 144 is invalid due to the non-issuance of a notice under section 143(2) when the assessee failed to file a return of income and the assessment was completed as a best judgment assessment.
Sections Cited
139, 142(1), 143(2), 143(3), 144, 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Sanjay Garg & Smt. Annapurna Gupta
PER: ANNAPURNA GUTA, A.M. This appeal is filed by the Assessee against appellate order dated 12-03- 2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. 2. The Grounds of Appeal raised by the Assessee are as follows:
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 2
The ld. CIT(Appeals) erred in law and on facts of the case, in upholding the validity of the assessment despite non-issuance of any notice u/s.143(2).
The ld. CIT(Appeals) erred in law in remanding the matter back to the Assessing Officer for denovo adjudication and thereby erred in not to delete addition of Rs.2,79,36,163/- despite all materials were produced before CIT(A), without appreciating the facts and law of the case properly.
The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise.
The appeal is noted to be delayed for filing by 95 days. The assessee has filed application seeking condonation of the delay . Noting the shortness of the delay , in the interest of justice therefore the delay is condoned.
Taking up the appeal of the hearing, the solitary issue raised and on which arguments were made before us were with respect to the validity of the assessment framed in the present case. The contention being that the assessment was framed without valid juri iction by the A.O, since he had not issued the mandatory juri ictional notice u/s. 143(2) of the Act to frame assessment once return of income was filed by the assessee. Reference was made to several case laws holding that the requirement of issuing notice u/s. 143(2) of the Act to be mandatory for a valid assumption of juri iction to frame assessment under the Act basis the return filed.
In the facts of the present case, pertaining to A.Y 2017-18, no return of income u/s 139(1) of the Act was filed by the assessee. Noticing substantial cash deposited in his bank account the AO issued notice u/s 142(1) of the Act on 12-03-2018 asking the assessee to file return of income, which despite repeated reminders by the AO was filed belatedly only on 08/11-12-2019.The AO noting no response of the assessee to his notice asking return to be filed, proceeded to frame best judgement assessment u/s 144 of the Act , the return
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 3 filed subsequently by the assessee was rejected by him and order passed on 30- 12-2019. 6. As per the Ld. Counsel for the assessee since return of income was filed by the assessee, the AO was mandatorily required to issue notice u/s 143(2) of the Act for assuming valid juri iction to frame assessment.
For adjudicating the issue it is imperative to understand the objective / purpose of issuing notice u/s 143(2) of the Act and juxtapose the same with the facts of the present case.
The procedure for scrutiny assessment u/s 143(3) of the Act, as has been done in the present case, begins with return filed by assesses either u/s 139(1) of the Act or in response to notice u/s 142(1) of the Act, being considered for scrutiny. As per section 142(1) of the Act, assesses who have not filed return of incomes u/s 139(1) of the Act or before the end of the relevant assessment year, can be served with notice to file their returns of income within stipulated time. Relevant provision of section 142(1) is reproduced hereunder:
(1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified,— (i) where such person has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or : Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section: Provided further that a notice under this sub-section for the purposes of this clause may I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 4 also be served by the prescribed income-tax authority, (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require :
After the return of income is filed either u/s 139(1) of the Act or 142(1) of the Act the process of scrutinizing the same begins by issuing notice u/s 143(2) of the Act, which virtually puts the assessee to notice that his/her return will be scrutinized for its correctness. Section 143(2) of the Act reads as under: “(2)Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:”
The AO accordingly by putting the assessee to notice that his/her return will be scrutinized by issuing notice u/s 143(2) of the Act assumes juri iction to assess income of assesses. The assessee is required to participate and submit all evidences which the AO may require. Thereafter after taking into account all relevant material gathered during the proceedings the AO makes an assessment of income, accepting or rejecting the claims of the assessee as provided for in Section 143(3) of the Act. Section 143(3) reads as under:
“(3) On the day specified in the notice,- (i) issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment:
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 5 (ii) issued under clause (it) of sub-section (2), or as soon afterwards may be after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on spec points, and after taking into account all relevant material which has gathered, the Assessing Officer shall, by an order in writing, mais an assessment of the total income or loss of the assessee, and 76 determine the sum payable by him or refund of any amount due to him on the basis of such assessment:]
The first proviso to section 143(2) of the Act prescribes an outer limit for issuing such notice, which for the impugned year before us, i.e A.Y. 2017- 18 was six months from the end of the Financial Year in which return is filed. The first proviso to section 143(2) of the Act reads as under:
“Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.”
Section 153 of the Act specifies the time period within which assessment order is to be passed. For our purposes since assessment in the present case has been framed u/s 143(3) r.w.s 144 of the Act section 153(1) of the Act specifies the time period for passing order as under:
“(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable.”
A conjoint reading of the above provisions reveals that the legislature in its wi om has framed laws relating to assessment of income providing timelines for various acts to be done for the purpose in such a manner so as to provide sufficient time to the AO to facilitate a proper scrutiny of return of incomes filed. Assesses are required to file return s as per the time line provided u/s 139 (1) of the Act and if not filed even before the end of the relevant assessment year then notice u/s 142(1) of the Act can be issued directing the assesses to file return within stipulated time. Before scrutinizing
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 6 the returns for their correctness the assesses are to be put to notice by issuing notice u/s 143(2) of the Act .This notice is to be issued within six months from the end of the relevant financial year in which return of income is filed by the assessee and thereafter after making all inquiries assessment is to be framed within two years from the end of the relevant assessment year thus providing sufficient reasonable time for making all necessary inquiries for framing a proper assessment of income.
The objective of issuing notice u/s 143(2) of the Act therefore is to put the assessee to notice that his return will be scrutinized for its correctness for which purposes due inquiry will be conducted by the AO.
In the facts of the present case no return was filed by the assessee u/s 139(1) of the Act and the AO accordingly issued notice u/s. 142(1) of the Act to the assessee requesting the assessee to prepare and file a return of income for the impugned assessment year i.e. A.Y. 2017-18 on 12-03-2018, however the assessee did not file the return of income. Thereafter another notice u/s. 142(1) dated 03-06-2019 was issued to the assessee asking to furnish explanation regarding cash deposits during demonetization period, again the assessee failed to respond. Thereafter another notice dated 13-09-2019 was issued as a reminder of the preceding notice which also went unresponded. Due to repeated non-compliance and non-cooperation of the assessee the AO proceeded to frame best judgement assessment issuing show cause notice u/s 144 of the Act dated 24-09-2019. In response to which the assessee filed necessary details and documents called for vide the show cause notice.The AO did not take cognizance of the same noting that no return had been filed by the assessee.Subsequently return of income was filed on 07-12-
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 7 2019 declaring total income of Rs.4,56,440/-. The return of income was transferred to the A.O. as per the Income Tax portal on 10-12-2019 and the assesse intimated the A.O. about the filing of return of income on 11-12- 2019. The impugned assessment year before us being A.Y 2017-18, as per section 153 of the Act the AO was required to pass order u/s 143(3) of the Act within twenty-one months from the end of the relevant assessment year, i.e by 31-12-2019. The A.O. rejected the return filed by the assessee and passed order u/s. 144 of the Act on 30-12-2019, when the order was getting time barred as per section 153 of the Act.
It is evident from the facts above that the AO proceeded to frame best judgement assessment u/s 144 of the Act when despite repeated opportunities given, the assessee failed to file return of income in response to notice u/s 142(1) of the Act.As the facts above demonstrate the assessee was first asked to file return of income by the AO issuing notice u/s 142(1) of the Act on 12- 03-2018.And it was only on 24-09-2019, after waiting for more than 18 months, that the AO proceeded with best judgement assessment in the absence of any return filed by the assessee. Having so rightfully proceeded with framing best judgement assessment,any return filed by the assessee subsequently at the fag end when the assessment was getting time barred, did not have any legal validity/sanctity and the AO was not required to take any cognizance of the same, which ,we hold, he rightfully did not take in the present case.
Taking cognizance of the same would even otherwise have required him to follow all procedures including issuing notice u/s 143(2) of the Act for which hardly any time was left with the AO . It was virtually expecting the AO
I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 8 to do the impossible for which the assessee himself was responsible. The act of the assessee of delayed filing of return has literally prevented the AO to exercise his power, granted by law, to conduct a proper inquiry regarding the claims made by the assessee in his return of income. In fact the assessee has deliberately delayed filing of its return so as to prevent the AO from conducting any inquiry on the issue involved.In such circumstances the AO rightfully rejected the return filed by the assessee and proceeded with framing a best judgement assessment as per section 144 of the Act. Since the AO rejected the assesses return and did not scrutinize the same, there was no requirement to issue notice u/s 143(2) of the Act. The non-issuance of notice u/s. 143(2) of the Act, we hold therefore does not invalidate the assessment framed in the present case.
The case laws relied upon by the ld. Counsel for the assessee have not been demonstrated to have been rendered in the peculiar facts of the case as before us.
1 The Ground raised by the assessee is found to be devoid of merits and is accordingly dismissed.
In effect, the appeal of the assessee is dismissed. Order pronounced in the open court on 17-04-2026 (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 17/04/2026I.T.A No. 1695/Ahd/2025 A.Y. 2017-18 9 आदेश की "ितिलिप अ"ेिषत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 20/02/2026 2) Date on which the typed draft is placed before the Dictating /02/2026 Member & Other Member 3) Date on which the approved draft comes to the Sr. P.S./P.S. /02/2026 4) Date on which the fair order is placed before the Dictating 20/02/2026 Member for pronouncement 5) Date on which the fair order comes back to the Sr. P.S./P.S. 17/04/2026 6) Date on which the file goes to the Bench Clerk 17/04/2026 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the