EXCEL FINANCIAL CONSULTANTS (P) LIMITED,HOWRAH vs. ITO, WARD 13(1),, KOLKATA

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ITA 2608/KOL/2025Status: DisposedITAT Kolkata17 February 2026AY 2018-20196 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 143(2) of the Income Tax Act, 1961, was invalid as it was not issued in consonance with CBDT Instruction F No. 225/157/2017/ITA-II dated 23.06.2017. The Tribunal noted that the notice was not in the prescribed format. Citing decisions of co-ordinate benches in Shib Nath Ghosh Vs. ITO and Kamlesh Singh Vs. ITO, the Tribunal held that instructions issued by the CBDT are mandatory and binding on income tax authorities, and failure to adhere to them renders proceedings invalid. The Tribunal further referred to the Supreme Court's decision in UCO Bank (supra) and the Calcutta High Court's decision in Amal Kumar Ghosh (supra) which affirmed the binding nature of CBDT circulars under Section 119 of the Act. Consequently, the Tribunal held that the invalid notice under Section 143(2) rendered all subsequent proceedings, including the assessment order, invalid and void ab initio. The appeal of the assessee was allowed.

What were the facts?

The assessee, Excel Financial Consultants (P) Ltd., filed its return of income for Assessment Year 2018-19 on 28.10.2018, declaring a loss of ₹10,29,598. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Notices under Section 143(2) and 142(1) were issued on 23.09.2019 and 22.10.2020, respectively. The Assessing Officer (AO) passed an assessment order under Section 143(3) read with Section 144B on 31.05.2021, determining the total income at ₹3,72,974. The assessee appealed to the National Faceless Appeal Centre (NFAC), Delhi, which dismissed the appeal. The assessee is now before the Income Tax Appellate Tribunal (ITAT) challenging the order of the NFAC.

What were the issues?

1. Whether the notice issued under Section 143(2) of the Income Tax Act, 1961, is invalid for not being in consonance with CBDT Circular No. F.NO.225/157/2017/ITA-11 dated 23.06.2017, thereby rendering subsequent proceedings void ab initio? Assessee's Contention: The assessee argued that the notice issued under Section 143(2) was not in the prescribed format as per the CBDT Circular, making it invalid. The assessee relied on the decision in Shib Nath Ghosh Vs. ITO (ITA No. 1812/KOL/2024) and Amal Kumar Ghosh (supra). Revenue's Contention: The judgment does not record any specific arguments made by the Revenue.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 142(1),Section 143(3),Section 144B,Section 139(1),Section 119

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM

For Appellant: Shri Somnath Ghosh, AR
For Respondent: Shri Pampa Ray, DR
Hearing: 29.01.2026Pronounced: 17.02.2026

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 10.09.2025 for the AY 2018-19.

2.

The only issue raised by the assessee is against the issue of notice u/s 143(2) in violation of CBDT Circular No. F.NO.225/157/2017/ITA-11 on 23.06.2017.

3.

The facts in brief are that the assessee filed the return of income u/s 139(1) of the Act on 28.10.2018, declaring total loss of ₹10,29,598/-, which was selected for scrutiny under Computer Assisted Scrutiny

4.

In the appellate proceedings also the ld. CIT (A) confirmed the order of the ld. AO by dismissing the appeal of the assessee.

5.

After hearing the rival contentions and perusing the materials available on record, I find that the notice was issued u/s 143(2) of the Act on 23.09.2019, a copy of which is available at page no. 41 of the Paper Book of the assessee. I note that the said notice has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II Dated 23.06.2017. The said notice is extracted below for the sake of ready reference:-

“आयकर नियम 1962 के नियम 12 के साथ पठित आयकर अधिनियम 1961 की िारा 143 (2) के अिीि िोठिस Notice under section 143(2) of the income-tax Act, 1961 read with Rule 12E of the Income Tax Rules, 1962 संवीक्षा (जांच) (कंप्यूिर आिाररत संवीक्षा चिि) Scrutiny (Computer Aided Scrutiny Selection) प्रियं करदाता, Dear Taxpayer, आपके द्वारा नििाारण वर्ा 2018-19 के लिए ठदिांक, 28/10/2018 को पावती िं. 351466501281018 के तहत आयकर प्रववरणी दाधचत करिे के लिए आपको िन्यवाद। Thank you for filing your return of income for Assessment Year 2018-19 vide Ack, no. 351466501281018 on 28/10/2018. 2. प्रववरणणका की तैयार करिे में आपके ध्याि एवं पररिम को स्वीकार करते हुए, कुछ मुद्दों पर और स्पष्िीकरण की आवश्यकता है, जजिके कारण आपकी आय प्रववरणणका को संगीक्षा (जांच) के लिए चुिा गया है, ये मुद्दे िारंभ में निम्िािुसार है:

भवदीय/ Yours faithfully. सहायक आयकर आयुक्त (ई-सत्यापि) Assistant Commissioner of Income-tax (e-Verification) आयकर अधिनियम 1961 की िारा 143 (2) के अिीि प्रवठहत आयकर िाधिकारी Prescribed-Income-tax Authority u/s 143(2) of the Income Tax Act, 1961

“10. After hearing both the sides and the materials available on record, we find that the notice issued u/s 143(2) dated 9th August, 2017 was not in any of the formats as provided in the CBDT instruction F.No.225/157/2017/ITA-II dated 23.06.2017. We have examined the notice, copy of which is available at page no.1 of the Paper Book and find that the same is not as per the format of CBDT Instruction F.No. 225/157/2017/ITA-II dated 23.06.2017 as stated above. In our opinion, the instruction issued by the CBDT are mandatory and binding on the Income tax authorities failing which the proceedings would be rendered as invalid. Hon'ble Apex Court in case of UCO Bank (supra) held that the circular issued by CBDT in exercise of its statutory powers u/s 119 of the Act, are binding on the authorities. The Hon'ble Apex court held as under:-:- “The Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases Which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by Issuing circulars binding on the taxing authorities. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes issued a circular dated October 6, 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, It need not be included in the assessee's taxable income, provided the Income-tax Officer is satisfied that recovery is practically improbable. Twenty-six years later, on June 20, 1978, in view of the judgment of the Kerala High Court In STATE BANK OF TRAVANCORE v. CIT [1977] 110 ITR 336, the Board by another circular, withdrew with immediate effect the earlier circular. However, by circular dated October 9, 1984, the Board decided that Interest in respect of doubtful debts credited to suspense account by banking companies would be “6. I have considered the rival submissions. As it is noticed that the Assessing Officer who has passed the assessment has not issued notice u/s.143(2) of the Act. Such notice has been issued by an authority who has no jurisdiction over the assessee on this ground notice u/s.143(2) of the Act is quashed and I do so.

7.

It is also noticed that the notice issued u/s.143(2) of the Act is not in line with the Circular issued by the CBDT in respect of e-notice. This being so, respectfully following the decision of the coordinate bench of the Tribunal in the case of M/s Durga Automotives Pvt. Ltd., referred to supra, the notice is found to be invalid and consequently the same stands quashed. Since there is no valid notice issued u/s.143(2) of the Act to the assessee before completion of the assessment u/s.143(3) of the Act, the consequential assessment order passed by the Assessing Officer also stands quashed.”

8.

Considering the facts of the instant case in the light of the decisions of the co-ordinate bench, I am inclined to hold that notice issued u/s

9.

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

Order pronounced in the open court on 17.02.2026.

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