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Facts
The assessee's appeal was filed 61 days late, but the delay was condoned by the tribunal. The primary issue was the validity of the notice issued under section 143(2) of the Income Tax Act, 1961, which the assessee contended was not in the prescribed format as per CBDT Circular No. F.NO.225/157/2017/ITA-11 dated 23.06.2017.
Held
The Tribunal held that the notice issued under section 143(2) was not in the prescribed format as per the CBDT circular. Citing precedents, the Tribunal ruled that such a notice is invalid, and all subsequent proceedings, including the assessment order, are therefore invalid and void ab initio.
Key Issues
Whether the notice issued under section 143(2) of the Income-tax Act, 1961, was in consonance with the CBDT circular and therefore valid.
Sections Cited
143(2), 139(1), 142(1), 143(3), 119
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM
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 26.08.2025 for the AY 2017-18.
At the outset, we note that the appeal of the assessee is barred by limitation by 61 days. At the time of hearing the counsel of the assessee explained the reason 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, we find that the delay is for bonafide and genuine reason, hence, we condone the delay and adjudicate the appeal.
The facts in brief are that the assessee engaged in the business of Import of Damarbatu (which is used in making the agarbatti) from Thailand and sale in India. The assessee filed its the return of income u/s 139(1) of the Act on 02.11.2017, declaring total income of ₹10,44,240/-, which was selected for complete scrutiny. Thereafter the notice u/s 143(2) & 142(1) of the Act were issued on 27.09.2018 & 16.05.2019 respectively, along with the questionnaire which were duly served upon the assessee. The AO was framed u/s 143(3) of the Act vide order dated 03.12.2019, by determining the total income at ₹37,23,410/-.
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 27.09.2018, a copy of which is available at page no. 94 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:-
“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 subjected to tax but Interest charged in an account where there has been no
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.02.2026.
Sd/- (RAJESH KUMAR) (ACCOUNTANT MEMBER) Kolkata, Dated: 17.02.2026 Sudip Sarkar, Sr.PS