KUSUM LATA AGARWAL,BAREILLY vs. INCOME TAX OFFICER 1(1), BAREILLY

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.603/LKW/2025 Assessment Year: 2017-18 Kusum Lata Agarwal v. Income Tax Officer 1(1) Pilibhit Bypass Road Bareilly - New Bareilly (U.P) TAN/PAN:ACVPA0995K (Applicant) (Respondent) Applicant by: Shri Rakesh Garg, Advocate Respondent by: Shri Amit Kumar, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 24.06.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee filed her return of income for the year under consideration on 09.02.2018 declaring a total income of Rs.4,02,710/-. The case of the assessee was selected for complete scrutiny under Computed Assisted Scrutiny Selection (CASS) for the reason of ‘Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period’. The Assessing Officer (AO) issued notice under section 143(2) of the Act dated 22.09.2018, requiring the assessee to produce evidence in support of the return filed by the assessee. In response, the

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assessee’s Counsel attended before the AO and furnished Power of Attorney. Thereafter, the AO issued various notices under section 142(1) of the Act, requiring the assessee to furnish detailed Note on nature, volume and history of business, etc. of the assessee. The assessee furnished her reply from time to time. The main submission of the assessee was that the cash deposits of Rs.44,59,084/- were out of cash sales made by the assessee during the demonetization period. The AO worked out the average sales at Rs.3,70,603/- per month and considering the submission of the assessee in respect of enhanced sales in the months of September and October, 2016 preceding the festival of Diwali and also the wedding season, the total cash sales for the month of October was determined at Rs.10,00,000/- ignoring the cash sales claimed by the assessee at Rs.44,59,084/- for October, 2016. Accordingly, the AO treated Rs.34,59,084/- (Rs.44,59,084 – Rs.10,00,000) as unexplained cash deposit and added the same to the income of the assessee under section 68 of the Act. The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.38,61,794/-.

2.1 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.

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2.2 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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admission of Additional Ground. It was submitted that the Additional Ground being sought to be admitted was essentially a legal ground which went to the very root of the matter and was germane to the entire assessment proceedings. For a ready reference, this Ground is being reproduced hereunder:

5.0 Per contra, the Ld. Sr. D.R. opposed assessee’s prayer for admission of the Additional Ground and submitted that in this case, Notice under section 143(2) of the Act was issued on 22.09.2018 and served upon the assessee and during the course of assessment proceedings, the assessee had duly participated in the proceedings and had furnished various submissions along with necessary details and relevant documents from time to time and, therefore, in view of assessee’s participation and assessee’s failure to object to the assessment proceedings before the AO, the Additional Ground should not be admitted.

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6.0 After having heard both the parties, it is my considered view that this Additional Ground being sought to be admitted by the Ld. A.R. is purely a legal ground and irrespective of the assessee’s participation and lack of objection during the course of assessment proceedings, the valuable right of the assessee to raise this purely legal ground cannot be taken away and, therefore, I admit the same for the purpose of adjudication.

7.0 The Ld. A.R. submitted that the Notice issued under section 143(2) of the Act, vide dated 22.09.2018, was not issued in accordance with the Instructions issued by the CBDT vide F.No.225/157/2017/ΙΤΑ.II dated 23.06.2017 and, therefore, the assessment framed was lacking jurisdiction and the same deserved to be quashed. He drew my attention to the copy of Notice filed along with the application for admission of the Additional Ground and also Note on e-proceedings accompanying the Notice. He also drew my attention to paragraph 3 of the Instruction dated 23.06.2017 bearing F.No.225/157/2017/ΙΤΑ.II wherein vide paragraph 3 it has been ordained that all scrutiny Notices under section 143(2) of the Act were henceforth to be issued in the revised format only. It was submitted that since the impugned Notice was not in the revised format, as was apparent from the copy of Notice enclosed, the assessment was liable to be quashed. He also placed reliance on numerous

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orders of various Benches of ITAT wherein assessments had been quashed by the ITAT as the Notice under section 143(2) of the Act had not been issued in proper format.

8.0 Per contra, the Ld. Sr. D.R. submitted that the impugned Notice was a computer generated Notice and the AO had no authority to modify the contents of the said Notice and, therefore, in terms of the provisions contained in section 292B of the Act, the Notice was a valid Notice and any defect in such Notice would not make the assessment proceedings void ab initio. He submitted that the Additional Ground raised by the assessee should be dismissed and the appeal should be heard on merits.

9.0 I have heard the rival submissions and have also perused the material on record. It is seen that the issuance of Notice under section 143(2) of the Act in proper format is a jurisdictional requirement and any defect therein goes to the very root of the assessment proceedings. A Notice issued in violation of specific provision cannot confer jurisdiction on the AO to proceed with the scrutiny assessment. In the present case, it is apparent that the impugned Notice dated 22.09.2018 is not in the proper format and, therefore, in my considered view, it is invalid and unenforceable in law. Undisputedly, the impugned Notice has been issued in violation of the binding CBDT Instruction F.No.225/157/2017/ΙΤΑ.II dated 23.06.2017 which

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is binding on all the Income Tax Authorities. It is very much clear from paragraph 3 of the above said Instruction that all the scrutiny Notices under section 143(2) of the Act would have to be henceforth issued in the revised format only. In the present appeal before me, the AO did not issue the Notice in the prescribed revised format and this is a direct violation of CBDT’s binding Instruction. Accordingly, I have no option but to hold the impugned Notice to be bad in law and liable to be quashed. Accordingly, the Notice is quashed and the resultant proceedings are also quashed.

10.0 Since the assessee has already been granted relief on the issue of validity of Notice issued under section 143(2) of the Act, the grounds raised by the assessee in support of merits of the case have become of academic interest only and the same are dismissed as such.

11.0 In the final result, the appeal of the assessee stands partly allowed.

Order pronounced in the open Court on 08/05/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:08/05/2026 JJ:

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