STAR TRADECOM PRIVATE LIMITED.,KOLKATA vs. I.T.O., WARD - 9(1), KOLKATA, KOLKATA

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ITA 52/KOL/2023Status: DisposedITAT Kolkata16 June 2026AY 2009-201013 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the original assessment order was bad in law and a nullity because a mandatory notice under Section 143(2) was not issued. Consequently, revision proceedings under Section 263 based on such an invalid assessment order are also invalid.

What were the facts?

The assessee's case was reopened under Section 147, and an assessment order was passed. Subsequently, the CIT initiated revision proceedings under Section 263, holding the original assessment to be erroneous. The assessee raised an additional ground challenging the validity of the original assessment due to the non-issuance of a notice under Section 143(2).

What were the issues?

Whether an assessment order passed without issuing a mandatory notice under Section 143(2) is invalid, and if so, can revisionary proceedings be initiated based on such an invalid order?

Which sections of the Income-tax Act were involved?

Section 147,Section 143(2),Section 263,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

For Appellant: Shri Sunil Surana, AR
For Respondent: Shri Md. Gayasuddin Ansari, DR
Hearing: 09.06.2026Pronounced: 16.06.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 23.12.2022 for the AY 2009-10.

2.

The assessee has raised additional ground, which is extracted as under:-

“3. For that the reopening proceedings carried out vide issuance of notice under section 148 of the I.T Act on 16.12.2010 and thereafter proceedings completed on17.03.2011, are bad-in-law and non-est based on decision in ACIT vs. Hotel Blue Moon, (2010) 321 ITR 362 (SC) since statutory notice under section 143(2) of the I.T Act was not issued and served to the Appellant company and, therefore, since the subject matter of the revisionary

4.

The facts in brief are that the assessee filed the return of income on 11.07.2009, declaring total income at ₹714/-, which was duly processed u/s 143(1) of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”). Subsequently, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 16.12.2010, on the basis of information that income under the head miscellaneous expenses to the tune of ₹26,870/- had escaped assessment

5.

Thereafter, on examination of the assessment record, the Commissioner of Income Tax KOL-III, Kolkata held that assessment order was erroneous in so far as prejudicial to the interest of the Revenue on the ground that requisite enquiries were not done regarding the identity and creditworthiness of the shareholders and genuineness of the transactions through which the introduction of share capital to the tune of ₹5,07,00,000/- was made during the financial year. Accordingly, the show cause notice u/s 263 of the Act was issued to the assessee to explain as to why the assessment should not be set aside. Ultimately the order u/s 263 of the act was passed on 05.03.2013, setting aside the assessment with a direction to re-frame the assessment after conducting through enquires. Thereafter, notice u/s 142(1) of the Act was issued on 10.02.2014, by the ld. AO fixing the case on 20.02.2014, calling for various details of the shareholders but the same was unserved. Further summons were issued u/s 131 of the Act by Speed Post to the directors of the assessee company fixing the hearing on 12.03.2014, and the same were also unserved. Finally, share application money raised by the assessee was added as unexplained money u/s 68 of the Act to the income of the assessee. Now the assessee has taken up the additional ground which has been admitted by us hereinabove.

Intentionally left blank

“1. The Court - The substantial questions of law that have arisen are in the context of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961 pursuant to a notice under Section 148 thereof. 2. The Appellate Tribunal has quashed the entire reassessment proceedings on the assessee's assertion that no notice under Section 143(2) of the Act was issued by the Assessing Officer before undertaking the reassessment. The judgment of the Appellate Tribunal is founded primarily on the ratio decidendi in the Supreme Court judgment Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113/321 ITR 362. The Revenue is in appeal and says that in view of Section 292BB of the Act, the ground could not have been urged by the assessee before the Appellate Tribunal, particularly, as the assessee participated in course of the reassessment, the objections of the assessee as to the reassessment were considered by the Assessing Officer and it was not pointed out by the assessee prior to the reassessment being completed that no notice under Section 143(2) of the Act had been issued to him in respect of the reassessment. In the alternative, the Revenue says that if a notice under Section 143(2) is deemed to be mandatory so that in the absence thereof the subsequent order of assessment (or reassessment) has to be annulled, the matter must be restored to the stage where a notice under Section 143(2) of the Act may be issued for completing the assessment or reassessment, as the case may be. In such circumstances, the following substantial questions of law arise:

"1. Whether the failure to issue a notice under Section 143(2) of the Act in course of reassessment proceedings would vitiate the reassessment proceedings altogether? 2. What is the effect in view of Section 292BB of the Act when a notice under Section 143(2) of the Act is not issued at all?"

3.

The Supreme Court judgment in Hotel Blue Moon has first to be referred to since such judgment still holds the field. In course of a block assessment when the Assessing Officer repudiated the return filed by the assessee but failed to issue any notice under Section 143(2) of the Act within the prescribed period of time, the Supreme Court held, at paragraph 15 of the judgment, inter alia, as follows:—

(a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner:

Provided that nothing contained in this section shall apply where the assessee had raised such objection before the completion of such assessment or reassessment." 12. Even if the provision does not carry a non-obstante clause, since Section 292BB is a provision of general application, it would be applicable in all situations; but only in so far as it proclaims to operate. Section 292BB of the Act, read in the context of several provisions of the Act which mandatorily require notices to be issued in divers situations, cannot be said to have dispensed with the issuance of such notices altogether. Section 292BB must be understood to cure any defect in the service of the notice and not authorise the dispensation of a notice when the appropriate interpretation of a provision makes the notice provided for thereunder to be mandatory or indispensable. 13. This is not a case where the assessing officer says that a notice had been issued and there is a contradiction thereof by the assessee. It is evident that the assessee carried the objection before the Commissioner (Appeals) and the Commissioner brushed aside the objection on the ground that it was a technicality without addressing the issue or applying his mind to such aspect of the matter. Further, it is evident from the order impugned passed by the

(1) If the time for issuance of the notice under Section 143(2) of the Act has expired or the time for completing the reassessment proceedings under Section 153(2) of the Act has run out, the failure to issue such notice under Section 143(2) of the Act would result in the entire proceedings, including any order of assessment, to be quashed. (2) Section 292BB of the Act does not dispense with the issuance of any notice that is mandated to be issued under the Act, but merely cures the defect of service of such notice if an objection in such regard is not taken before the completion of the assessment or reassessment. In addition, it is held that in the light of the Supreme Court dictum in Hotel Blue Moon (supra), the view expressed in Humboldt Wedag India (P.) Ltd. (supra) is per incuriam and, as such, not good law. ITAT 152 of 2015 and GA 3671 of 2015 are disposed of. There will be no order as to costs.” 8. Therefore, we find merit in the contention of the assessee that the revisionary jurisdiction cannot be invoked u/s 263 of the Act by the PCIT on an invalid assessment order as stated above. Consequently, the additional raised by the assessee is allowed.

9.

So far as raising the issue in collateral proceedings is concerned, we are of the view that the issue of invalidity can be raised in the collateral proceedings by the assessee even though the order concerned passed by the authorities have not been challenged before the appellate authority. The case of the assessee find support from the following decisions. In defense of his arguments, the ld. AR stated that the consequential proceedings would be invalid and the assessee can challenge the validity of the assessment framed in the co-

10.

In the result, the appeal of the assessee is allowed.

Order pronounced on 16.06.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 16.06.2026 Sudip Sarkar, Sr.PS

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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