TEXCITY CONSTRUCTIONS KOVAI PRIVATE LIMITED,. vs. ITO CORP. WARD-1, COIMBATORE, .
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the reassessment proceedings were void ab initio because the AO failed to issue a mandatory notice under Section 143(2) before completing the reassessment, even though a belated return was filed.
What were the facts?
The assessee, a real estate company, filed a belated return in response to a notice under Section 148. The Assessing Officer (AO) made additions on account of unexplained cash credits under Section 68. The CIT(A) confirmed the additions.
What were the issues?
Whether reassessment proceedings are valid without issuing a mandatory notice under Section 143(2) after a belated return is filed in response to a notice under Section 148.
Which sections of the Income-tax Act were involved?
Section 147,Section 148,Section 143(2),Section 68,Section 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: HON’BLE SHRI SS VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
PER SS VISWANETHRA RAVI, J.M :
This appeal by the assessee is against the order dated 12.09.2025
passed by the Learned Commissioner of Income Tax [herein after
“CIT(A)”], National Faceless Appeal Centre(NFAC), Delhi, for the
assessment year 2014-15.
The brief facts as emanating from the record are that the
assessee is a company engaged in real estate business. The
assessee filed return of income u/s. 139(1) of the Income-tax Act,
1961 [herein after ‘the Act’] on 18.09.2014 declaring total income of
Rs.22,940/-. The said return was processed vide an intimation u/s.
143(1)(a) of the Act dated 04.03.2016. On an information related to
High Risk CRIU/VRU, the AO formed his reasons for re-opening the
assessment that income charegable to tax has escaped and issued
notice dated 31.03.2021 u/s. 148 of the Act. According to the AO that
the assessee filed return of income on 31.01.2022 belatedly in
response to notice u/s. 148 of the Act. Further, notices u/s. 142(1) of
the Act issued asking the assessee to submit details and in response
to which the assessee filed submissions dated 16.03.2022 which is
reproduced in page no. 8 to 16 of the assessment order. The AO
found the said explanation as not acceptable and proceeded to add an
amount of Rs.2,80,00,000/- on account of Manikaran Marketing Pvt
Ltd and Rs.50,00,000/- on account of M/s. Pramodanah Goods Pvt Ltd
u/s. 68 of the Act on account of unexplained cash credit vide his order
dated 29.03.2022 passed u/s. 147 r.w.s. 144 and 144B of the Act. The
assessee having being aggrieved by the order of the AO challenged
the same before the ld.CIT(A). The ld.CIT(A) reproduced reply dated
11.09.2023 in para no. 5.1 from page nos. 4 to 11 and reply dated Page - 2 - of 20 23.03.2022 in para no. 5.2 from page nos. 12 to 22 and another reply
dated 19.08.2024 in para no. 5.3 from page nos. 23 to 30. The
ld.CIT(A) found the said explanation as not acceptable and confirmed
the view of the AO in making addition u/s. 68 of the Act. Not satisfied
with the order of the ld.CIT(A), the assessee is before us.
The ld.AR, Shri. Rajiv Saxena, Advocate, submits that the
assessee raised ground no.4 challenging the action of the ld.CIT(A) in
failing to appreciate that the re-assessment proceedings initiated u/s.
147 of the Act is void ab initio, since no notice u/s.143(2) of the Act
was ever issued prior to the completion of re-assessment. He submits
that the issue raised in ground no.4 goes to the root of the matter and
no new facts are required to be examined as such it was raised before
the ld.CIT(A). He prayed to take up ground no.4 as a preliminary issue
and adjudicate the same.
The ld.DR, Ms. R. Anitha, Addl.CIT, reported no objection.
In view of the submissions of the ld.AR and ld.DR and with their
consent, we proceed to adjudicate ground no.4 as a preliminary issue.
Page - 3 - of 20
The ld.AR submits that no notice u/s. 143(2) of the Act was
issued during the course of re-assessment proceedings and drew our
attention to the para 7.1.1 of the impugned order. He argued that the
assessee has filed return of income belatedly in response to notice u/s.
148 of the Act and the AO was not justified in treating the said return
as non-est and framing the re-assessment without issuing the
mandatory notice u/s. 143(2) of the Act. He argued vehemently that it
is a settled and trite proposition of law that even where the assessee
files the return of income belatedly in response to notice u/s. 148 of the
Act and the AO is mandatorily required to issue notice u/s. 143(2) of
the Act prior to completion of re-assessment proceedings u/s. 147 of
the Act. Further, he submits that much prior to the completion of re-
assessment proceedings, the assessee had filed its return of income
in response to the notice u/s. 148 of the Act and the AO was statutorily
obliged to issue notice u/s. 143(2) of the Act. He argued vehemently
that failure to do so renders the impugned re-assessment order invalid
and void ab initio and drew our attention to the relevant
judgments/orders from page no. 1 to 59 in paper book-I. He referred
to order dated 14.01.2026 in the case of Ashutosh Foods of Delhi ITAT
Benches, in ITA No. 234/Del/2025 for AY 2015-16 and submits that
the Delhi ITAT Benches by following the judgment of Hon’ble High
Court of Delhi in the case of Staunch Marketing Ltd reported in (2017) Page - 4 - of 20 81 taxmann.com 482 (Delhi), held that once the return is filed, notice
u/s. 143(2) of the Act is mandatory prior to the framing an assessment .
He further submitted that the AO, at page no. 12 of the
assessment order has referred to the order of the ITAT Delhi Benches
in the case of Rakesh Agarwal vs ITO in ITA No. 2461/Del/2019 which
held that where the return of income in response to notice issued u/s.
148 of the Act is not filed within the prescribed time, the same is to be
treated as non-est and argued that the facts of the aforesaid case are
clearly distinguishable from the facts of the present case. In the said
case, no return of income was originally filed u/s. 139 of the Act and
only a belated return of income was filed in response to notice issued
u/s. 148 of the Act. He argued that in the present case, the original
return of income was already filed and was very much available on
record. The delay in filing the return in response to notice issued u/s.
148 of the Act occurred only due to the Covid period. He argued that
the said return was filed much prior to the completion of the re-
assessment proceedings and the AO had sufficient time available to
issue the mandatory notice u/s. 143(2) of the Act. He argued the facts
of the said case are clearly distinguishable and the reliance placed by
the AO is misplaced and the issue involved in the present matter is
already covered by various judgments of the Hon’ble High Courts and Page - 5 - of 20 the Hon’ble Supreme Court. He argued that in the present case AO erred in not issuing the mandatory notice u/s. 143(2) of the Act before completing the assessment proceedings and the assessment proceedings are bad in law and required to be quashed. The ld.AR
placed on record order dated 18.04.2025 in case of MetalCity Constructions Kovai Pvt Ltd in DIN ITBA/NFAC/S/250/2025- 26/1075684616(1) and argued by referring the para no. 7 that the
ld.CIT(A)/NFAC, Delhi held the re-assessment is bad under law for an omission on the part of the AO in issuing notice u/s. 143(2) of the Act by following decision of Hon’ble Supreme Court in the case of Hotel
Blue Moon [2010] 188 Taxmann 113 (SC), whereas in the present case the very ld.CIT(A)/NFAC, Delhi without considering the same decision of Hon’ble Supreme Court held no notice u/s. 143(2) of the
Act is required prior to completion of assessment. Therefore, argued that the ld.CIT(A)/NFAC, Delhi failed to follow consistently the decisions of superior courts which is binding on such authorities. He
prayed to allow ground no.4 raised by the assessee.
The ld.DR, submits that the case laws relied on by the assessee are distinguishable and referred to page no. 2 of paper book -III in the
case of Staunch Marketing Pvt Ltd (Supra). She submits that the originally return of income is not available on record and the date of Page - 6 - of 20 letter filed to adopt the original return of income in response to notice
u/s. 148 of the Act is also not available on record. She referred to para
no. 10 of the Delhi ITAT and argued that the facts therein are
distinguishable. Further, she referred to page no. 28 of the paper
book-I with reference to decision of Hon’ble High Court of Madras in
the case of Saptagiri Finance & Investments vs ITO [2012] 25
taxman.com 341 (Mad) and argued that the assessee failed to furnish
the return of income in response to notice u/s. 148 of the Act and the
AO rightly treated the same as non-est. Further, she argued that the
ld.CIT(A) considering the same held that no notice is required to be
issued in the absence of any return of income filed in response to
notice u/s. 148 of the Act. She prayed to dismiss ground no.4 raised
by the assessee and confirmed the order of the ld.CIT(A).
Heard both the parties and perused the material available on
record. We note that the assessee filed its return of income u/s. 139(1)
of the Act on 18.09.2014 which was processed u/s. 143(1)(a) of the
Act on 04.03.2016. The AO re-opened said assessment on
31.03.2021 vide notice u/s. 148 of the Act. According to the AO the
assessee failed to file return of income in response to the notice u/s.
148 of the Act. But, however on going through the page no. 7 of the
assessment order it is noted that the assessee filed return of income Page - 7 - of 20 on 31.01.2022 vide acknowledgment no. 999751530310122 in
response to the notice u/s. 148 of the Act. The AO held the same non-
est in view of filing the same belatedly. A specific contention raised by
the ld.AR the delay in filing return of income was entirely due to covid
pandemic and we note the Hon’ble Supreme Court in the case of suo
motu writ petition (c) no.3 of 2020 in re: cognizance for extension of
limitation, even saved limitation from 15.03.2020 to 28.02.2022,
therefore, we find force in the arguments of ld.AR that there was
sufficient cause in filing the return of income in response to the notice
u/s. 148 of the Act belatedly. We find the assessee raised ground no.2
before the ld.CIT(A) challenging the re-assessment is bad without
issuing any notice u/s. 143(2) of the Act. The ld.CIT(A) answered the
said ground no.2 in para no. 7.1.1 of the impugned order, wherein
upheld the view of AO in treating the belated return as non-est by
holding no statutory requirement to issue notice u/s. 143(2) of the Act
to frame the assessment u/s. 144 of the Act. Therefore, it is clear
admittedly no notice u/s. 143(2) of the Act was issued by the AO prior
to completion of re-assessment on 29.03.2022. In view of the same,
let us examine the decision of Hon’ble Supreme Court in the case of
Hotel Blue Moon (Supra), the relevant part is reproduced herein below
for ready reference:
Page - 8 - of 20
15) We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of sub- sections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158 BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158 BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. We may also notice here itself that the clarification given by CBDT in its circular No.717 dated 14th August, 1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of Section 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act, for the determination of undisclosed income for a block period under the provisions of Section 158 BC, the provisions of Section 142 and sub-sections (2) and (3) of Section 143 are applicable and no assessment could be made without issuing notice under Section 143(2) of the Act. However, it is contended by Sri Shekhar, learned counsel Page - 9 - of 20 for the department that in view of the expression "So far as may be" in Section 153 BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned counsel has relied on the observation made by this Court in Dr. Pratap Singh's case [1985] 155 ITR 166(SC). In this case, the Court has observed that Section 37(2) provides that "the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under Section 37(2). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The learned counsel for the respondent has brought to our notice the observations made by this Court in the case of Maganlal Vs. Jaiswal Industries, Neemach and Ors., [(1989) 4 SCC 344], wherein this Court while dealing with the scope and import of the expression "as far as practicable" has stated "without anything more the expression `as far as possible' will mean that the manner provided in the code for attachment or sale of property in execution of a decree shall be applicable in its entirety except such provision therein which may not be practicable to be applied." 16) The case of the revenue is that the expression `so far as may be apply' indicates that it is not expected to follow the provisions of Section 142, sub- sections 2 and 3 of Section 143 strictly for the purpose of Block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression `so far as may be apply'. In our view, where the assessing officer in repudiation of the return filed under Section 158 BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143.
On careful reading of the above decision of Hon’ble Supreme
Court, we note that the Hon’ble Supreme Court was not pleased to
agree with the submission of Revenue that it is not expected to follow
provisions of section 142, sub section (2) & (3) of section 143 strictly
for the purpose of block assessments. Further, the Hon’ble Supreme
Court rejected the contention of the Revenue that the issue of notice
u/s. 143(2) of the Act is not mandatory, but, optional and are to be
applied to the extent practicable, in view of the expression “so far as
Page - 10 - of 20 may be” in section 153BC(b) of the Act. The Hon’ble Supreme Court
clearly observed where the AO in repudiation of return of income filed
u/s. 158BC(a) of the Act proceeds to make an enquiry, he has
necessarily to follow the provisions of section 142, sub-sections (2) &
(3) of section 143 of the Act. Further, the Hon’ble Supreme Court
referred to circular no. 717 dated 14.08.1995 issued by the CBDT and
concluded even for the purpose of Chapter XIV-B of the Act, the
determination of undisclosed income for a block period under the
provisions of section 158BC, the provisions of section 142 and sub-
sections (2) & (3) of section 143 of the Act are applicable and no
assessment can be made without issuing notice u/s. 143(2) of the Act.
Therefore, the AO has necessarily to issue notice u/s. 143(2) of the
Act in order to complete the assessment under Chapter XIV and
Chapter XIV-B of the Act.
We note that Hon’ble High Court of Delhi in the case of Staunch
Marketing Pvt Ltd (Supra), considering decisions of Hon’ble Supreme
Court in the case of Hotel Blue Moon (Supra), Shri Jai Shiva Shankar
Traders Pvt Ltd reported in 383 ITR 448 (Delhi) answered question of
law against the revenue, the said question of law and finding therein
are reproduced herein below for better understanding:
Page - 11 - of 20
While admitting this appeal by order dated 4th September 2016, the following question of law was framed. “Whether the tribunal fell into error in holding that the assessment for the concerned year was not effective because of lack of notice u/s. 143(2) of the Income Tax Act in the given facts of the case?” 14. In any event, factually the Assessee filed a return pursuant to notice issued under Section 148 of the Act, notwithstanding that it may not have filed a return in the first place under Section 139 of the Act for the AY in question. Once a return is filed notice under Section 143 (2) of the Act to the Assessee is mandatory prior to framing an assessment. The question of framing an assessment ex parte without even issuing a notice under Section 143(2) of the Act did not arise. The mandatory nature of that requirement is settled not only by the decision of the Supreme Court in the case of Hotel Blue Moon (supra) but also by a decision of this court in PR.Commissioner of Income-tax v. Shri Jai Shiv Shankar Traders (P.) Ltd. [2015] 64 taxmann.com 220/383 ITR 448 (Delhi).
On careful reading of the above, we note the Hon’ble High Court
of Delhi was pleased to answer question in Para no. 2 against the
revenue by holding once a return is filed, notice u/s. 143(2) of the Act
to the assessee is mandatory prior to framing the assessment vide
para 14 of said judgment by referring to the decisions of Hon’ble
Supreme Court in the case of Hotel Blue Moon (Supra) and Jai Shiv
Shankar Traders P Ltd (Supra).
Further, we note that the Hon’ble High Court of Madras in the
case of Saptagiri Finance & Investments (Supra) by referring to
decision of Hon’ble Supreme Court in the case of Hotel Blue Moon
(Supra) held substantial question of law no. iv, in favour of the
Page - 12 - of 20 assessee, the relevant part of substantial question of law and finding
thereon is reproduced herein below for ready reference:
(iv) Whether on the facts and in the circumstances of the case the Tribunal was right in not appreciating that there cannot be any Estoppels against law and as such notice under Section 143(2) has to be issued within the prescribed time limit even assuming that there was waiver of such notice?"
As already pointed out, the assessee reiterated its contention in the letter dated 18.12.2002, pursuant to notice issued under Section 142(1) stating that original return filed shall be treated as return filed in response to the notice issued under Section 148 of the Act. Thus, on the reply to the notice under Section 142(1), reiterating the original return which was found incorrect, the Assessing Officer should have follow up by a notice under Section 143(2) of the Act issued therein. It is evident that the Officer had not proceeded with issuance of any such notice in this case. Merely because the matter was discussed with the assessee and the signature is affixed, it does not mean the rest of the procedure of notice under Section 143(3) of the Act stood complied with or that on placing the objection the assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued under Section 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued under Section 148 of the Act and the Officer had also noted that the same would be considered for completion of assessment, would show that the Assessing Officer has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued under Section 143(3) and there being no waiver, we do not find any justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued under Section 143(2) of the Act.
As rightly pointed out by the learned counsel for the assessee placing reliance on the decision reported in 118 ITR 326 �MOTILAL PADAMPAT SUGAR MILLS CO., v. STATE OF U.P., it is difficult to find any material which would justifiably enable this Court to affirm the view of the Tribunal that there was an conscious act with knowledge to waive such right of notice being served on the assessee. The Apex Court pointed out that there can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. There is nothing on record to show or one could read from the letter written by the assessee dated 18.12.2002 that the assessee abandoned such right of a notice under Section 143(2) of the Act. In the light of the above, we reject the Tribunal's reasoning.
As far as the contention of the Revenue that failure to issue notice under Section 143(2) of the Act is only curable defect is concerned, the decision relied on by the assessee reported in 321 ITR 362 �ASST. CIT v. HOTEL BLUE MOON, also covers the said issue. It is no doubt true that the said decision dealt with the assessment done under Chapter XIV relating to block assessment. The assessee therein raised a contention that the failure to issue notice under Section 143(2) within the prescribed Page - 13 - of 20 time for the purpose of block assessment could be fatal to the validity of the assessment made under Chapter XIVB of the Income Tax Act, 1961. In other words, the assessee contended that the issuance of notice under Section 143(2) within the prescribed period of time for the purpose of block assessment is mandatory for assessing the assessee's undisclosed income found during the search. The Revenue took the stand that issue of notice under Section 143(2) of the Act was only procedural irregularity which was curable. The Apex Court pointed out to Section 158BC(b) provided for determination of the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of section 142, sub sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. The Apex Court pointed out after return is filed, the Assessing Officer has to follow the procedure like the issue of notice under Section 143(2)/142 and complete the assessment under Section 143(3). In the event, the assessee is not filing the return or not complying with the notice under Section 143(2)/142, the Officer is authorised to complete the assessment ex parte under section 144. The Apex Court further pointed out that notice under Section 143(2) would become necessary only where the block return does not conform undisclosed income inferred by the authorities. Thus, if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under Section 143(2) should be issued within one year from the date of filing of the block return. The Apex Court further held that omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable, and therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The legislation referring to the compliance of the provisions under Section 143, 144 and 145 of the Act is a legislation by incorporation. Thus, where the Assessing Officer repudiates the return filed by the assessee in response to notice under Section 158BC(a), the Assessing Officer must necessarily issue notice under Section 143(2) of the Act. Dealing with the contention that the issue of notice is not mandatory but optional and is to be applied to the extent practicable, in view of expression "so far as may be" in Section 153BC(b), the Apex Court pointed out that the expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. Rejecting the contention of the Revenue that it is not expedient to follow the provisions under Sections 142 and 143 (2) and (3) strictly for the purpose of block assessment, the Apex Court held that in completing the assessment, when the officer repudiates the return filed under Section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142 and 143 (2) and (3) of the Act.
As far as the present case is concerned, the provisions of Section 148 also uses the expression "so far as may be apply accordingly as if such return were a return required to be furnished under Section 139". Thus, understanding this provisions in the background of the decision of the Apex Court, on the facts available, we are of the view that in completing the assessment under Section 148 of the Act, compliance of the procedure laid down under Sections 142 and 143(2) is mandatory. On the admitted fact that beyond notice under Section 142(1), there was no notice issued under Section 143(2), and in the light of the fact that the very basis of the Page - 14 - of 20 reassessment was the failure on the part of the assessee in not disclosing the capital gains arising on the transfer of property for assessment and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to Section 148 of the Act, we hold that there was total failure on the part of the Revenue from complying with the procedure laid down under Section 143(2) of the Act, which is mandatory one as held by the Apex Court.
On careful reading of the above, we find the Hon’ble High Court
of Madras was pleased to answer the substantial question of law (iv) in
favour of the assessee by holding that the procedure laid down u/s.
143(3) of the Act is mandatory and in the absence of which re-
assessment could not be held to be validly made. Further, it was
observed that the provisions of section 148 of the Act also uses the
expression “so far as may be” applied accordingly as if such returns
were a return required to be furnished u/s. 139 of the Act and held
understanding this provisions in the background of the decision in the
case of ACIT vs Hotel Blue Moon (Supra), that in completing the
assessment u/s. 148 of the Act, compliance of the procedure laid down
under sections 142, 143(2) of the Act is mandatory.
On similar circumstances, the ITAT Delhi Benches in the case of
Ashutosh Foods in ITA NO. 234/Del/2025 for AY 2015-16, vide its
order dated 14.01.2026, by following the decision of Hon’ble High
Court of Delhi in the case of Staunch Marketing Pvt Ltd (Supra)
Page - 15 - of 20 quashed the assessment framed u/s. 144B r.w.s. 147 of the Act, the
relevant of which is reproduced herein below:
Heard and perused the records. It comes up that the assessee has filed Return of income on 01.10.2015 declaring income at Rs.56,95,570/- for the Assessment Year 2015-16. The assessment order in this case was passed on 29.12.2017 at an income of Rs.56,95,570/-, in this case notice u/s 148 was issued on 31.03.2021. However, the assessee has not filed any return in response to notice u/s 148 of the Act. The assessee has uploaded his reply on 26/1/2022 and submitted that the ROI filed on 1.10.2015 may be treated as Return filed in response to the notice issued u/s 148 of the I.T.Act. Addition was made to the tune of Rs. 9,73,46,250/- on account of doubtful sales and purchases which have been deleted by the ld. CIT(A) for which revenue is in appeal and cross objection have been filed by the assesse, where one of the grounds is that no jurisdictional notice u/s 143(2) of the Act was issued for which it comes from the assessment order that ld. AO has observed as follows; “3. However, it is to be noted that the provision of section 148 prescribes filing of Return of income within a period specified in the notice. Such specified period has been prescribed to be 30 days in ITNS 34 for the relevant assessment year. In this case as the assessee had neither filed his ROI nor a reply requesting that the return filed on 1/10/2015 be treated as ROI in response to notice u/s 148 within the 30 days period of issue of notice u/s 148, hence it is held that the assessee has not filed a ROI in response to notice u/s 148 and the assessment will be completed u/s 144 of the Act.” 3. Thus the case of department as per the AO and the ld. DR is that as assesse has not filed ROI in response to the notice u/s 148 of the Act so non compliance of notice 143(2) of the Act is not detrimental. But the law seems to be otherwise settled and extensively discussed in a co-ordinate bench decision in Anil Aggarwal HUF versus ITO, Ward 28(1), New Delhi ITA No. 4594/Del/2024 order dated 30.07.2025, as relied by ld. Counsel and for completeness and to avoid cost of repetition in laying principles afresh we reproduce the relevant part here below; “5. The Ld. Counsel for the assessee submitted that assessee has filed return on 28.10.2021 in response to notice issued u/s 148 dated 30.03.2021. However, the Assessing Officer did not issue notice u/s 143(2) of the Act. Ld. Counsel invited our attention to 21 to 22 of the PB which contains the notice issued u/s 148 dated 30.03.2021 and a copy of return filed on 28.10.2021 in response to the notice issued u/s 148 of the Act. Therefore, the Ld. Counsel submitted that non issuance of notice u/s 143(2) makes the impugned assessment order as bad in law. Reliance is placed on the following decisions in support of his contentions: 1. CIT vs. Laxman Das Khandewal 417 ITR 325 (SC); 2. Rajender Kumar Sehgal vs. ITO 414 ITR 286 (Del.); 3. PCIT vs. Paramount Biotech Industries Ltd. 398 ITR 701 (Del);
Page - 16 - of 20
PCIT vs. Jai Shiv Shankar Trading P. Ltd. 388 ITR 448 (Del.); 5. CIT vs. Rajiv Sharma 336 ITR 678 (All.); 6. PCIT vs. Staunch Marketing Pvt. Ltd. 404 ITR 299 (Del). 6. On the other hand, the Ld. DR submitted that the assessee did not file return within the time specified in the notice issued u/s 148 of the Act and therefore the Assessing Officer treated the return as invalid return and since the return was treated as invalid the Assessing Officer need not issue notice u/s 143(2) before completion of assessment. 7. In rebuttal the Ld. Counsel for the assessee submitted that the Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) held that even in ex parte assessment when once return is filed by the assessee in response to notice issued u/s 148 of the Act issuance of notice u/s 143(2) is mandatory even though the assessee failed to furnish return u/s 139 of the Act. Ld. Counsel submits that the Hon’ble High Court held that once return is filed in response to notice u/s 148 of the Act even ex parte assessment cannot be made without issue of notice u/s 143(2) of the Act. 8. Heard rival contentions, perused the orders of the authorities below and the case laws relied on by the assessee. In this case, the assessee filed return on 28.10.2021 in response to notice issued u/s 148 of the Act dated 30.03.2021. The Assessing Officer completed the assessment on 30.03.2022 u/s 144 r.w.s. 147 of the Act determining the income of the assessee at Rs.84,32,240/-. While computing the income the Assessing Officer started with the income declared by the assessee in the return of income of Rs.69,040/- declared by the assessee in the return in response to notice issued u/s 148 of the Act, whereby the Assessing Officer acted upon the return filed by the assessee. The Assessing Officer before completion of assessment u/s 144B r.w.s. 147 of the Act appears to have not issued any mandatory notice u/s 143(2) of the Act. The Revenue also could not show that the Assessing Officer had issued any notice u/s 143(2) of the Act for the assessment year under consideration. Therefore, the question now to be adjudicated this appeal is whether the assessment framed u/s 14B r.w.s. 147 of the Act is a valid assessment in the absence of issue of notice u/s 143(2) of the Act. 9. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) considered almost an identical situation examined “whether the Tribunal fell into error in holding that the assessment for the concerned year was not effective because of lack of notice u/s 143(2) of the Income Tax Act in the given facts of the case” the Hon’ble Jurisdictional High Court decline to answer the question on an appeal filed by the Revenue. The Hon’ble High Court further affirming the order of the Tribunal held as under: “14. In any event, factually the Assessee filed a return pursuant to notice issued u/s 148 of the Act, notwithstanding that it may not have filed a return in the first place u/s 139 of the Act for the assessment year in question. Once a return is filed notice u/s 143(2) of the Act Page - 17 - of 20 to the assessee is mandatory prior to framing an assessment. The question of framing an assessment ex parte without even issuing a notice u/s 143(2) of the Act did not arise. The mandatory nature of that requirement is settled not only by the decision of the Supreme Court in the case of ACIT Vs. Hotel Blue Moon (supra) but also by a decision of this court in Commissioner of Income Tax-08 vs. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 388 ITR 448 Del. 15. For all the aforementioned reasons, the question framed does not arise in the present appeal and is declined to be answered. In any event, the court does not find any substantial question of law arise from the impugned order. The appeal is, accordingly, dismissed.” 10. In all the case laws relied on by the Ld. Counsel for the assessee which are referred to above, it was held that assessment/reassessment finalized without issue of notice u/s 143(2) of the Act is not a valid assessment/reassessment. Thus, respectfully following the above decisions, we hold that the assessment framed by the AO u/s 144B r.w.s. 147 of the Act for the AY 2016-17 without issue of notice u/s 143(2) is bad in law and void ab initio and consequently the same is hereby quashed.”
On an examination of the above, we note that the assessee filed
return of income belatedly on 28.10.2021 in response to the notice
issued u/s. 148 of the Act dated 30.03.2021 and the Delhi Tribunal
considering the same by following decision of Hon’ble High Court of
Delhi in the case of Staunch Marketing Pvt Ltd (Supra), which held that
even in exparte assessment when once return is filed by the assessee
in response to the notice issued u/s. 148 of the Act, issuance of notice
u/s. 143(2) of the Act is mandatory even though the assessee failed to
furnish return u/s. 139 of the Act. The Delhi Tribunal agreed with the
contention that once return is filed in response to the notice u/s. 148 of
the Act, even exparte assessment cannot be made without issue of
notice u/s. 143(2) of the Act, by holding so, the Delhi Tribunal Benches Page - 18 - of 20 held assessment framed by the AO u/s. 144B r.w.s. 147 of the Act for
AY 2016-17 without issue of notice u/s. 143(2) of the Act is bad in law
and void ab initio. We find the facts of present case are similar to the
facts before ITAT Delhi Benches. Therefore, the re-assessment order
in the present case is liable to be quashed.
Coming to the facts of the present case, we find the notice dated
31.03.2021 u/s. 148 of the Act was issued to the assessee, whereas,
assessee filed return of income on 31.01.2022 in response to the said
notice u/s. 148 of the Act. Therefore, it is clear though the said return
of income filed belatedly taking into account Covid Pandemic, it is on
record before the AO and the AO has to issue mandatorily notice u/s.
143(2) of the Act before completion of re-assessment. On
examination of the para no. 7.1.1 of the impugned order which clearly
demonstrates an omission on the part of AO in issuing notice u/s.
143(2) of the Act, and the finding of the ld.CIT(A) in observing that
there was no statutory requirement to issue notice u/s. 143(2) of the
Act in view of treating the belated return of income filed in response to
148 of the Act as non-est, in our opinion, is not justified. Therefore,
respectfully following the ratio laid down by the Hon’ble Supreme Court
in the case of Hotel Blue Moon (Supra) which was followed by the
Hon’ble High Court of Delhi in the case of Staunch Marketing Ltd
Page - 19 - of 20 (Supra) and Hon’ble High Court of Madras in the case of Saptagiri
Finance & Investments (Supra), we hold the re-assessment order
dated 29.03.2022 passed u/s. 147 r.w.s. 144 & 144B of the Act is bad
under law and is quashed. Thus, the order of the ld.CIT(A) is set aside
and ground no. 4 raised by the assessee is allowed.
In view of our decision in ground no.4, in favour of the assessee
quashing the re-assessment therein as invalid, the other grounds
raised by the assessee becomes academic requiring no adjudication.
In the result, appeal of the assessee is allowed. Order pronounced on 04th June, 2026 at Chennai.
Sd/- Sd/- (एस एस एस. आर एस आर आर. रघुनाथा आर रघुनाथा रघुनाथा) रघुनाथा (यस यस यसयस यस यस यसिव�ने� यस िव�ने� िव�ने�रिव िव�ने� रिव रिव) रिव (S. R. RAGHUNATHA) (SS VISWANETHRA RAVI) लेखासद�य लेखा सद�य/Accountant Member �याियकसद�य �याियक सद�य/ Judicial Member लेखा लेखा सद�य सद�य �याियक �याियक सद�य सद�य Chennai, Dated: 04th June, 2026. JPV/-
Copy to: 1. Appellant 2. Respondent 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF
PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.06.08 09:47:53 +05'30' Page - 20 - of 20
More judgments on Section 147
- ACIT Central Bilaspur, Bilaspur vs Arun Kumar Agrawal, SaktiITSSA 26/RPR/2025[2018-19]Status: Disposed21 Oct 2026AY 2018-19
- Vinod Agrawal, Kawardha vs Assisstant Commissioner of Income Tax…ITA 666/RPR/2026[2019-20]Status: Heard21 Oct 2026AY 2019-20
- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Tarunaben Maganlal Bhut, Navagam vs ITO Ward 2(2)(1), RajkotITA 673/RJT/2026[2024-25]Status: Disposed21 Oct 2026AY 2024-25
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
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