ITO 23 3 6 MUMBAI, MUMBAI vs. RAMESH C SALECHA HUF, MUMBAI

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ITA 1370/MUM/2026Status: DisposedITAT Mumbai23 September 2026AY 2009-1014 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessment order was void ab initio due to the non-issuance and non-service of notice under Section 143(2) of the Income-tax Act, 1961. The Tribunal relied on the Supreme Court's decision in CIT v. Lakshman Das Khandelwal, which clarified that Section 292BB of the Act does not cure the complete absence of a notice, but only infirmities in its service. The judgment stated that for Section 292BB to apply, the notice must have emanated from the Department, and it is only the manner of service that the section seeks to cure, not the complete absence of notice. The Tribunal found that the Assessing Officer failed to substantiate the issue and service of the notice under Section 143(2) by placing any evidence on record. The assessment order sheet also did not reflect any recording about the issue of such a notice. Therefore, the Tribunal concluded that the issuance and service of a statutory notice under Section 143(2) is a prerequisite for the valid assumption of jurisdiction for continuing assessment proceedings and cannot be dispensed with. Consequently, the impugned assessment order was quashed. As the assessment order was quashed on this legal ground, the remaining grounds of appeal for both the assessee and the revenue were not adjudicated.

What were the facts?

The assessee, Ramesh C. Salecha HUF, is engaged in the business of trading ferrous and non-ferrous metals. The assessment year in question is 2009-10. The case was reopened under Section 147 of the Income-tax Act, 1961, based on information from the investigation wing regarding bogus billers identified by sales tax authorities. The Assessing Officer (AO) issued a notice under Section 148 on March 28, 2013. During the assessment proceedings, the assessee was asked to explain purchases from three parties: M/s Ruchi Impacts, M/s Parswan Company, and M/s Big Trade Agency. The AO later treated purchases totaling Rs. 4,52,53,153/- as bogus and added it as unexplained expenditure under Section 69C. The assessee appealed to the National Faceless Appeal Centre (NFAC), Delhi, which upheld an addition of Rs. 45,91,889/-. Cross-appeals were filed by the assessee and the revenue before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the assessment order is void ab initio due to the non-issuance and non-service of a notice under Section 143(2) of the Income-tax Act, 1961, prior to the completion of the assessment. Assessee's Contention: The assessee argued that the assessment order is void ab initio as no notice under Section 143(2) was issued and served. They relied on the Supreme Court judgment in CIT v. Lakshmandas Khandelwal and the Allahabad High Court judgment in ACIT v. Greater Noida Industrial Development Authority, emphasizing that notice must be served. Revenue's Contention: The revenue contended that the assessee's challenge to the non-service of notice under Section 143(2) is not sustainable in terms of Section 292BB of the Act, as the assessee failed to furnish objections within 30 days. They also argued that notices issued under Section 133(6) to alleged suppliers were returned unserved, indicating non-existent parties and non-genuine purchases, and that the NFAC erred in restricting the addition under Section 69C. 2. Whether the addition of Rs. 45,91,889/- made under Section 69C is applicable, considering the assessee's claim of having filed complete details and the alleged non-application of the section due to lack of finding that payments were made otherwise than out of unrecorded bank accounts. Assessee's Contention: The assessee argued that Section 69C has no application as there was no finding that payments were made otherwise than out of unrecorded bank accounts, and that complete details in support of purchases were filed. They also requested an opportunity to cross-examine hawala operators. Revenue's Contention: The revenue argued that the NFAC erred in restricting the addition and deleting the balance, failing to appreciate that unserved notices indicated non-existent parties and non-genuine purchases. They further argued that the assessee failed to produce suppliers or furnish independent evidence, and that book entries alone do not establish genuineness of purchases, making the entire amount liable under Section 69C.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 147,Section 148,Section 69C,Section 133(6),Section 292BB,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI CHALL NAGENDRA PRASAD & SHRI RAKESH KUMAR LODHA

For Appellant: Shri G.P Mehta C.A
For Respondent: Shri S. Giridharan SR DR
Hearing: 07.09.2026Pronounced: 23.09.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI CHALL NAGENDRA PRASAD, JUDICIAL MEMBER And SHRI RAKESH KUMAR LODHA, ACCOUNTANT MEMBER ITA No.1253/MUM/2026 (Assessment Year: 2009-2010) RAMESH C. SALECHA HUF, INCOME TAX OFFICER, WARD 14(2)(3), C/o G.P. Mehta and Co., CAS, Vs. 807, Tulsiani Chambers, 306- Earnest House, Nariman Point, Mumbai – Nariman Point 400021, Maharashtra. Mumbai – 400021, Maharashtra.

AND ITA No.1370/MUM/2026 (Assessment Year: 2009-2010) ITO 23(3)(6), MUMBAI, RAMESH C. SALECHA HUF, 610, Piramal Chambers, Parel, Mumbai – 400012, R.N. 23, C/o.Reliance Maharashtra. Enterprises, Malharraowadi, Mahen, MANSN, Dadisethagyari Lane, Mumbai – 400002, Maharashtra. PAN- AAIHR4937D (Appellant) (Respondent) Assessee Represented by : Shri G.P Mehta C.A Revenue Represented by : Shri S. Giridharan SR DR

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 Date of Hearing : 07.09.2026 Date of Pronouncement : 23.09.2026 O R D E R PER : Shri Rakesh Kumar Lodha, Accountant Member:

These cross-appeals, filed by the Assessee as well as the Revenue, are directed against the common order passed under Section 250 of the Income-tax Act, 1961 (“the Act”) by the National Faceless Appeal Centre (“NFAC”), Delhi, for the assessment year 2009-10, arising out of the assessment order passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act. 2. The Assessee raised the following grounds of appeal filed in ITA No. 1253/M/2026:

1.

Orders passed by the learned lower authorities are bad in law and bad in facts. 2. Assessment order passed and upheld by the learned lower authorities is ab-initio void, inasmuch as, no notice u/s 143(2) of the I.T. Act, 1961, was issued and served upon the appellant prior to completion of the impugned assessment. 3. Notice issued under section 148 of the I.T. Act, 1961, is ab-initio void, inasmuch as, said notice was issued on the basis of wrong information and non existent material. 4. Notice issued under section 148 of the I.T. Act, 1961, is ab-initio void, inasmuch as, the Assessing Officer did not annex the informations received from Sales Tax Department to the notice issued. Thus the impugned notice was a non-est notice.

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 5. The learned Assessing Officer has grossly erred in issuing the notice u/s 148 of the I.T. Act, 1961, on the basis of informations received from Sales Tax Authorities without application of his own mind and without recording his own satisfaction. Thus the impugned notice has been issued on the basis of borrowed satisfaction which is not permissible in law. 6. The learned lower authorities have grossly erred in making/upholding an addition of Rs.45,91,889/- merely on the basis of informations received from Sales Tax Authorities even though complete details in support of claim of purchase was filed. 7. The learned Assessing Officer has grossly erred in not granting an opportunity to cross examine alleged hawala dealers, even though a specific request in this regard was made to grant such an opportunity. 8. The learned lower authorities have grossly erred in making impugned addition of Rs. 45,91,889/- by recourse to sec. 69C of the I.T. Act, 1961, as said section has no application, inasmuch as there is no finding in the assessment order that payments of goods purchased was made otherwise than out of unrecorded bank account. 9. Having regard to the facts of the case, provisions of law and judicial propositions, impugned addition of Rs.45,91,889/- is wholly uncalled for and untenable in law. 10.The appellant may please be permitted to raise any additional or alternative ground on or before hearing of the appeal. 3. The revenue also raised the following grounds of appeal in ITA No. 1370/MUM/2026: 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in restricting the addition made u/s 69C of the Income-tax Act, 1961 to ₹45,91,889/- and deleting the balance addition of ₹4,06,58,264/-.” 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has failed to appreciate that all the notices issued u/s

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 133(6) of the Act to the alleged suppliers were returned unserved with the remark “Not Known”, clearly indicating that the parties were non- existent and the purchases were not genuine.” 3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC erred in granting relief without appreciating that the assessee failed to produce the alleged suppliers or furnish any independent evidence such as transportation details, delivery challans, or proof of actual receipt of goods.” 4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC erred in law and on facts in accepting the assessee’s explanation merely on the basis of entries in books of accounts and banking transactions, ignoring the settled legal position that book entries alone do not establish genuineness of purchases.” 5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC failed to appreciate that once the suppliers were found to be untraceable and non-existent, the entire amount of such purchases was liable to be treated as unexplained expenditure u/s 69C of the Act.” 6. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal 4. The brief relevant facts of the case are that Assessee HUF has been engaged in the proprietary business of trading of ferrous and non-ferrous metals, and filed its return of income on 29th September 2009, declaring income of Rs.5,45,892/-. Subsequently, the assessing officer has received information from the investigation wing based on the investigation carried out by the sales tax authorities, wherein, they identified bogus billers/ accommodation entry providers, and recorded their statements.

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 The list of such bogus billers was shared, with details of beneficiaries, wherein, name of the Assessee was appearing. Accordingly, the assessing officer has reopened the case under section 147 of the Act, by issue of notice under section 148 on 28th March 2013, in compliance to that, assessee vide letter dt 27- 09-2013, requested to treat the return of income u/s 139(1) dated 29-09-2009 as compliance to that notice.

5.

During the course of assessment proceedings, with reference to statement of hawala operators, the assessee was asked to explain purchases made from three parties: - M/s Ruchi Impacts - M/s Parswan Company - M/s Big Trade Agency with direction to furnish following documents : - ledger account in the books of Account - copy of relevant purchase bills and delivery challans - copy of this tax register for verification - evidence to show the goods purchased have been sold or utilized by the Assessee - bank statement showing payment made for the purchases. 6. In response to that, the Assessee has furnished: - a copy of the ledger account of M/s Big Trade Agency; - purchase bill of the said concern; - bank statement for payment made against those purchases

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 - stock register 7. The Assessee stated before AO, that it did not purchase any goods from M/s. Ruchi Impacts and Parshva and Company during the year under consideration.

8.

Looking to the partial compliance, the assessing officer issued notice under Section 133(6) to Ruchi Impex, M/s. Parshva & Co, and M/s.Big Trade Agency, requiring personal attendance with details and documents relating to the purchase transactions carried by the Assessee. 9. These notices under Section 133(6) sent by speed post were returned by the Postal Authority with the remark "not known", so, the assessee was asked to produce these parties along with the relevant details for examination and verification of facts, and show cause why the entire purchases should not be taken as cash purchases made from the above three parties. The assessee did not produce any one of them. Moreover, assessee requested to grant an opportunity to cross-examine the hawala operator, whose statements were recorded by Sales Tax dept and proposed to relied upon by assessing officer. 10. Finally, based on details and documents, the assessing officer observed that since, assessee failed to produce evidence of receipt

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 of goods from the inward / outward from all suppliers, and genuineness of the movement of the goods through the transport evidences. In view of that, the purchases to the tune of Rs.4,52,53,153/- treated as bogus and added as unexplained expenditure under Section 69C of the Income Tax Act. 11. The Assessee, aggrieved by the assessment order, preferred an appeal before the Ld. Commissioner of Income Tax (Appeals), raising certain legal grounds, one amongst them, was relating to the non-issuance of notice under Section 143(2) of the Income Tax Act, and further on merits additions of ₹4,52,53,153/- under Section 69C of the Act. 12. The Learned Commissioner of Income Tax (Appeals), called remand report from the assessing officer on the issue of service of notice under Section 143(2) of the Act upon assessee. The AO responded that notice under Section 143(2) was issued on 9th October 2013, served through speed post as evident from records. It is also submitted by AO that assessee did not raise objections during the assessment proceedings for non issue / service of such notice, and participated in assessment proceedings. 13. Ld. CIT Appeal observed that during the course of assessment proceeding, the assessee did not raise objections for non-issue and

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 service of the notice under Section 143(2) of the Act. Therefore, in terms of the provisions of Section 292BB of the Act, the objection for non-service of notice under Section 143(2) is dismissed with regard to the issue on merits. 14. With regards to merits of the case, issue relating to addition under Section 69C of ₹4,52,50,053/- on account of unexplained expenditure for the purchases, before CIT(A), the assessee submitted with supporting documents, that out of total reported purchases of Rs 10,17,55,523/- of the whole year, there were imports of Rs 9,55,13,377/- ( i.e. 99.87%), such imports were cleared through the customs department after payment of custom duty. Therefore, local purchases were remained only Rs.62,42,146/- and out of that Rs 45,91,889/- were made from the one of the listed party M/s Big Trade Agency. 15. Considering the submissions, the Ld.CIT(A) observed that there was no evidence to show that, assessee had made bogus purchases of Rs. 4,52,50,153/- from three alleged entry operators, and considering non reply from M/s Big Trade Agency for purchases of Rs. 45,91,889/-, held that assessee failed to substantiate genuineness of purchase of goods worth Rs. 45,91,889/- from M/s. Big Trade Agency. So, Ld. CIT(Appeals)

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 restricted the additions Rs. 45,91,889/-, and the balance of Rs. 4,06,58,264/- is deleted. 16. Now, the revenue is in appeal against the deletion of addition of Rs. 4,06,58,264/- and also assessee against the sustaining additions under Section 69C of Rs. 45,91,889/- towards unexplained purchases. 17. Before us, the Assessee empathetically raised legal issue of non-service of notice under Section 143(2) by the assessing officer for qassumption of valid jurisdiction for the assessment. The learned authorized representative, referred the remand report ( PB 48) issued by the assessing officer, and findings therein, “… no service of the said notice is on record”. With that he strongly asserts that when the assessing officer himself admitted that there was no evidence available to substantiate the service of statutory notice under Section 143(2) of the Act, the subsequent whole reassessment proceeding became void. 18. Per contra, learned DR strongly objected and submitted that since, assessee did not raise any objection for non-service of notice under Section 143(2) during the course of assessment proceedings, and participated therein till passing of an assessment order. So, the legal challenge for non-service of notice under

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 Section 143(2) is not sustainable in terms of the provision of Section 292BB of the Act for failure to furnish objection within a period of 30 days. The details of remand report are as under : “In continuation of this office letter no. No.ITO-14(2)(3)/Remand Report/2014-15 dtd. 16.10.2014 it has been brought to your kind notice that the notice u/s 143(2) was issued on 09.10.2013 wherein the date of assessee’s compliance was 18.10.2013 at 04.00 pm. However, no service of the said notice is on record. During the course of assessment proceedings the assessee did not mention about the non-service of notice u/s 143(2) nor did the assessee file any objection about the same. In the context of assessee’s objection for non service of notice u/s 143(2) the provision of section 292BB may kindly be applied.”

19.

The learned AR of the assessee in the rejoinder submitted that the issue of non-service of notice under Section 143(2) cannot save the subsequent assessment proceeding. He relied upon the judgment of the Honorable Apex Court in the case of CIT v. Lakshmandas Khandelwal,(2019) 310 CTR 8, also relied upon the judgment of the Honorable Allahabad High Court in the case of ACIT v. Greater Noida Industrial Development Authority [379 ITR 14], wherein it was held that notice must be served to the Assessee. 20. We have considered the rival submissions, perused the material available on record, particularly the remand report dated 22nd September 2015, issued by the Income Tax Officer-18(3)(1),

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 Mumbai, containing the admission that no-service of the notice under Section 143(2) is on record. 21. We may herein observe that the mandate of the provision of Section 143(2) of the Act contemplates the service of statutory notice is sine qua non for assumption of valid jurisdiction to continue the assessment proceedings. The onus to prove the service of notice under Section 143(2) of the Act lies upon the assessing officer. The matter of non-issue of notice under Section 143(2) of the Act, reached the Honorable Apex Court, and has been Settled in the case of CIT v. Lakshman Das Khandelwal holding at para 8 to 10 (PB page 66) : “8. The law on the point as regards applicability of the requirement of notice under s. 143(2) of the Act is quite clear from the decision in Blue Moon’s case (supra). The issue that however needs to be considered is the impact of s. 292BB of the Act.

9.

According to s. 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the section does not save complete absence of notice. For s. 292BB to apply, the notice must have emanated from the Department. It is only the infirmities in the manner of service of notice that the section seeks to cure. The section is not intended to cure complete absence of notice itself.

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 10. Since the facts on record are clear that no notice under s. 143(2) of the Act was ever issued by the Department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.

22.

Here in the case, it is undisputed fact that assessing officer failed to substantiate by placing on record an evidence of issue and service of notice under Section 143(2) of the Act upon the assessee, either before the Ld. Commissioner of Income Tax (Appeals) or Tribunal as well. 23. We also noticed that assessment order sheet (PB 49) entry dated 09-10-2023, not reflecting any recording of assessing officer about issue of notice u/s 143(2) of the Act. On that date an entry contains the issuance of notice u/s 142(1) of the Act, by this recorded fact, we, found that there was no notice u/s 143(2) issued by assessee. Further, the assessing officer failed to place on record the evidence of speed post to support issuance of said notice. Mere statement alone cannot be treated as an evidence for issue of notice. The issuance and service of statutory notice u/s 143(2) of the Act for valid assumption of jurisdiction for continuation of assessment proceedings cannot be dispensed with. 24. Therefore, we respectfully following the judgment of the Honorable Supreme Court in the case of CIT v. Lakshman Das 12

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 Khandelwal (supra), wherein it is held that the failure of service of notice under Section 143(2) upon the Assessee is not a curable defect under Section 292BB of the Act. Consequently, the impugned assessment order passed without assumption of valid jurisdiction, therefore, is hereby quashed, and the legal ground raised by the Assessee is hereby allowed. 25. Since, the assessment order is quashed for non-issuance of notice under Section 143(2) of the Act herein above; the remaining grounds of appeal of the Assessee are not required to be adjudicated. Further, the appeal of the revenue is also not required to adjudicate. 26. In the result, appeal of the Assessee is allowed and appeal of the revenue is dismissed. Order pronounced in the open court on 23.09.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (RAKESH KUMAR LODHA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 23.09.2026. Sharath, Private Secretary.

ITA NO. 266 & 1971-MUM-2026 WELLNESS FOREVER HEALTHTECH PRIVATE LIMITED AY 2022-2023 Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai.

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