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Facts
The assessee filed its return for AY 2017-18, and its case was selected for scrutiny, leading to a notice under Section 143(2) on 27.08.2018 and an assessment order under Section 143(3) on 24.12.2019. The assessee challenged the assessment's validity, arguing that the 143(2) notice was invalid as it failed to comply with CBDT Instruction No. F. No. 225/157/2017/ITA-II, which mandates specifying the type of scrutiny (limited, complete, or compulsory manual). The DR contended that a computer-generated notice's omission of scrutiny type should not invalidate it.
Held
The Tribunal held that the notice issued under Section 143(2) was invalid because it only specified 'computer aided scrutiny selection' and did not adhere to the CBDT instructions requiring the type of scrutiny to be mentioned. It emphasized that revenue authorities are bound by CBDT instructions, and any violation renders the notice and subsequent proceedings invalid. Citing previous co-ordinate bench decisions, the Tribunal quashed the assessment framed under Section 143(3).
Key Issues
Whether an assessment framed based on a Section 143(2) notice that does not specify the type of scrutiny (limited, complete, or compulsory manual) as per CBDT instructions is valid in law.
Sections Cited
Section 143(2), Section 143(3), Section 119, CBDT Instruction No. F. No. 225/157/2017/ITA-II Dated 23-06-2017
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “GUWAHATI BENCH, GUWAHATI
Before: Shri Rajesh Kumar & Shri Manmohan Das
Assessment Year: 2017-18 Assam Industrial Development Corporation Ltd……................……….……Appellant A-4, R G Baruah Road, Ambikagiri Nagar, Guwahati, Assam-781024. [PAN: AACCA4720A] vs. ACIT, Circle-3, Guwahati.………..…………………………...……...…..…..Respondent Appearances by: Shri Somnath Ghosh, Advocate & Amalan Bhadra, FCA, appeared on behalf of the appellant. Shri Sanjay Jha, CIT, appeared on behalf of the Respondent. Date of concluding the hearing : November 18, 2025 Date of pronouncing the order : November 20, 2025 ORDER
Per Rajesh Kumar, Accountant Member:
This is an appeal preferred by the assessee against the order of the CIT(Appeals)-2, Guwahati (hereinafter referred to as the “Ld. CIT(A)”] dated 27.02.2020 for the AY 2017-18.
At the outset, during the course of assessment proceedings, the assessee has raised legal issue challenged the assessment framed based on notice issued u/s 143(2) of the Act which is not in accordance with instruction no. F. No. 225/157/2017/ITA-II Dated 23- 06-2017, issued by the CBDT.
The facts in brief are that the assessee filed the return of income on 22.03.2018, declaring total income at ₹38,482690/- and the case of the assessee was selected for scrutiny through CASS and accordingly notice u/s 143(2) of the Act was issued on 27.08.2018.
At the outset, the ld. Counsel for the assessee submitted that the assessment framed u/s 143(3) of the Act dated 24.12.2019, is invalid and ex-facie, null and void as the same is passed in consequence to invalid notice u/s 143(2) of the Act dated 27.08.2018, which is not as per the CBDT Instruction no. F. No. 225/157/2017/ITA-II Dated 23- 06-2017 and accordingly, the assessment order passed consequently is void ab initio, ultra virus and nullity in the eyes of law.
The ld. AR vehemently submitted that the notice u/s 143(2) of the Act does not specify whether it is a limited scrutiny or a complete scrutiny or a compulsory manual scrutiny. The ld. AR submitted that the CBDT has issued specific instruction vide instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017, that the notice u/s 143(2) shall be issued in one of the three formats which are specifically mentioned and prescribed but the present notice issued is not in accordance with such said instruction and therefore, the assessment framed consequently is invalid and void ab initio. The ld. AR in defense of his arguments relied on the decisions of Tapas Kumar Das Vs. ITO in vide order dated 11.03.2025 for A.Y. 2017- 18 and Ashok Kumar Agarwal and others HUF Vs ACIT Cir 34 A.Y. 2017-18, wherein similar issue has been decided in favour of the assessee. The ld. AR therefore prayed that the additional ground raised by the assessee may kindly be allowed.
The ld. DR on the other hand submitted that this is a computer- generated notice and the non-mentioning of the fact of either limited or complete scrutiny or compulsory manual scrutiny would not render
After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the notice issued u/s 143(2) of the Act dated 27.08.2018, specifies only computer aided scrutiny selection which neither mentioned it either to be a limited or a complete scrutiny nor compulsory manual scrutiny. Thus, the said notice has been issued in violation of the instruction issued by CBDT as noted above. In our opinion, the revenue authorities have to follow the instruction issued by CBDT and violation thereto would certainly render the notice as invalid with the result all the consequential proceedings would also be invalid. The case of the assessee find support from the decision of the co-ordinate Bench in the case of Tapas Kumar Das Vs. ITO (supra), wherein a similar issue has been decided in favour of the assessee. The operative part of the same is extracted below: -
“After hearing the rival contentions and perusing the materials available on record, we find that particularly the notice was issued u/s 143(2) of the Act, a copy of which is available at page no. 25 of the Paper Book. We 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:- ““आमकरअधिनियम 1961 कीिारा 143(2) केअिीििोटिस Notice under section 143(2) of the Income-tax Act, 1961 संवीक्षा (कंप्यूिरआिाररतसंवीक्षाचयि Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससस, Sir/Madam/ M/s, आपकोसूधचतककयाजाताहैककनििासरणवर्स 2017-18 केपावतीसंख्या 269322761301017 केअिुसारआपकेद्वाराटदिांक 30/10/2017 कोदाखिलकीगईआयकरवववरणीकोसंवीक्षाकेललएचुिागयाहै। 3 Assam Industrial Development Corporation Ltd This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack, no. 269322761301017 on 30/10/2017 has been selected for Scrutiny. इससंबंिमें, आपकोटदिीक को 2. 16/11/2018 01:00 PM तकसाक्ष्यप्रस्तुतकरिेअथवासाक्ष्यप्रस्तुतकरािेकाअवसरप्रदािककयाजारहाहैजजसपरआपउक्तआयक रवववरणीकेसमथसिमेंनिभसरहैं/ रहेंगे। 2. In this regard, an opportunity is being given to you to produce or cause to produce any evidence on which you may like to rely in support of the said return of income by 16/11/2018 at 01:00 PM. उपयुसक्तनिटदसष्िप्रमाण सूचिाकोआपकोऑिलाइिमाध्यमसेइलेक्रॉनिकरूपमें 3. / परअपिेई- Incometaxindiaefiling.gov.in फाईललंगिाताद्वाराप्रस्तुतककयाजािाहै।बादकीनििासरणकायसवाहीभीआयकरववभागकी 'ई-कायसवाही' सुवविाद्वाराकीजायेगी। 'ई-कायसबाही' परएकसंक्षक्षप्तिोिआपकेसंदभसकेललएसंलग्िहै। 3. The evidence/information specified above has to be furnished online electronically through your E-filing account in incometaxindiaefiling.gov.in. Subsequent assessment proceedings shall also be conducted electronically through the 'E-Proceeding' facility of Income-tax Department. A brief note on 'E-Proceeding' is enclosed for your kind reference. 4. नििासरणकायसवाहीकेदौराि, यटदआवश्यकहोगातोसूचिा / दस्तावेजहेतुववशेर्प्रश्िावली (यों) याअधियाचिा (यााँ) कोबादमेंजारीककयाजाएगा। 4. In course of assessment proceedings, if required, specific questionnaire(s) or requisition(s) for information/document shall be issued subsequently. कृपयाध्यािदेंककयटदआपकेपासई-फाइललंगिाताहैतोआपकेललएपैरा 5. 3 लागूहै।आपकेद्वारास्वयंअपिािातािबिालेिेतकनििासरणकायसवाहीआपकेद्वारावखणसतकीगईई-मे is created by you, assessment proceedings shall be carried out either through your specified e-mail account or manually (if e-mail is not available). संलग्िक : यचौिरर Enclosure as above ”7. In our opinion, the notice issued u/s 143(2) of the Act which is not in the prescribed format as provided under the Act is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. The case of the assessee find support from the 4 Assam Industrial Development Corporation Ltd decision of Shib Nath Ghosh Vs. ITO in for A.Y. 2018-19 vide order dated 29.11.2024, wherein the co-ordinate Bench has held as under:- “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 recovery for three consecutive accounting years would not be subjected to tax in the fourth year and onwards. The circular also stated that if 5 Assam Industrial Development Corporation Ltd there is any recovery in the fourth year or later, the actual amount recovered only would be subjected to tax in the respective years. This procedure would apply to assessment year 1979-80 and onwards.”
8. Considering the facts of the instant case in the light of the decision of the co-ordinate bench, we are inclined to hold that notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially to that is also invalid and is hereby quashed.”
Since the facts of the assessee’s case are similar to one as decided by the co-ordinate Bench, we therefore, respectfully following the same hold that the notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially is also invalid and is hereby quashed.
In the result, the appeal of the assessee is allowed.
Kolkata, the 20th November, 2025.