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Facts
The assessee's appeal was filed with a delay of 9 days, which was condoned. The main issue was the validity of the notice issued under Section 143(2) of the Income-tax Act, 1961. The assessee contended that the notice was not in the prescribed format as per CBDT Circular No. F.NO.225/157/2017/ITA-11.
Held
The Tribunal held that the notice issued under Section 143(2) was invalid because it did not conform to the format prescribed by the CBDT. Consequently, the assessment framed based on this invalid notice was also held to be invalid and quashed.
Key Issues
Whether the notice issued under Section 143(2) of the Income-tax Act, 1961, was valid in light of the CBDT circular prescribing specific formats for such notices.
Sections Cited
143(2), 142(1), 143(3), 119
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Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA
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 10.09.2024 for the AY 2017-18.
At the outset, I note that the appeal of the assessee is barred by limitation by 09 days. At the time of hearing the counsel of the assessee explained the reasons for delay in filing the appeal. The Ld. D.R did not raise any objection in condoning the delay. After hearing the rival contentions and perusing the materials available on record, I find that the delay is for bonafide and genuine reasons and , hence, I condone the delay and adjudicate the appeal as under.
The facts in brief are that the assessee filed the return of income u/s on 07.11.2017, declaring total income of ₹4,38,840/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Thereafter the notice u/s 143(2) were issued on 24.09.2018 & Notice u/s 142(1) of the Act on 24.04.2019, 16.07.2019 and 17.08.2019, were issued along with the questionnaire which were duly served upon the assessee. The AO framed u/s 143(3) read with of the Act vide order dated 14.12.2019, by determining the total income at ₹38,36,690/-.
In the appellate proceedings also the ld. CIT (A) confirmed the order of the ld. AO by dismissing the appeal of the assessee.
After hearing the rival contentions and perusing the materials available on record, I find that particularly the notice was issued u/s 143(2) of the Act on 24.09.2018, a copy of which is available at Annexure-A 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:-
““आमकर अधिनियम 1961 की िारा 143(2) के अिीि िोटिस Notice under section 143(2) of the Income-tax Act, 1961 संवीक्षा (कंप्यूिर आिाररत संवीक्षा चयि Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससस, Sir/Madam/ M/s, “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.
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.”
“5. We note that the additional ground raised by the assessee is with regard to issuance of notice u/s.143(2) of the Act on 24.09.2018 in violation to CBDT Instruction f.No.225/157/2017/ITA-II dated 23.06.2017. The ld. AR also placed before us the above instruction issued by the Government of India, Ministry of Finance, Department of Revenue, wherein it has been provided that w.e.f. 23.06.2017, the notice u/s.143(2) of the Act to be issued in any of the three following forms :- ❖ Limited Scrutiny (Computer Aided Scrutiny Selection ❖ Complete Scrutiny (Computer Aided Scrutiny Selection) ❖ Compulsory Manual Scrutiny
6. The ld. AR submitted that the notice is not bearing to any of the above forms prescribed by the CBDT in the above instruction, therefore, notice issued u/s.143(2) of the Act is bad in law for which the assessment is not sustainable. Ld. AR in defense of his arguments, relied on following series of decisions, wherein similar issue has been decided in favour of the assessee :- ❖
1. Lavanya Estates Pvt. Ltd. vs. ITO ITA No.: 342/PAT/2023 PATNA ITAT ❖
2. Shri Rudraprasad Mondal vs. DCIT ITA No.: 702/K/2024 [08.10.2024] Kolkata ITAT ❖
3. Dev Milk Foods Pvt. Ltd. vs. Addl. CIT Spl. R-3,New Delhi Delhi ITAT [ITA No.: 6767/Del/2019] dt. 12.06.2023 ❖
4. Sukhdham Infrastructure LLP vs. ITO [ITA No.: 2611/Kol/2019] dt. 23.02.2023 Kolkata ITAT
7. Since the facts and issue involved in the present case are identical to the decisions as relied on by the ld. AR above, we are inclined to hold that notice issued u/s.143(2) of the Act is invalid and, therefore, the assessment framed u/s.143(3) of the Act is also invalid and accordingly quashed. Consequently, the additional ground raised by the assessee is allowed.”
10. Considering the facts of the instant case in the light of the decisions of the co-ordinate benches, I am inclined to hold that notice issued u/s
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.02.2026.