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Facts
The Revenue appealed against the deletion of additions made by the AO, while the Assessee filed a cross-objection challenging the reassessment proceedings due to the non-issuance of a mandatory notice under Section 143(2) of the Income Tax Act.
Held
The Tribunal found merit in the Assessee's cross-objection, holding that the failure to issue a notice under Section 143(2) before framing the assessment order under Section 147 vitiated the proceedings. The assessment order and the order of the CIT(A) were set aside.
Key Issues
Whether the reassessment proceedings are vitiated due to the non-issuance of a mandatory notice under Section 143(2) of the Income Tax Act.
Sections Cited
147, 143(2), 144, 144B, 69C, 148, 142(1), 292BB, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI YOGESH KUMAR U.S.
Mahalakshmi Light House, Vs. Deputy Commissioner of 285, AvasVikasVihar, Hapur, Income Tax Ghaziabad,Uttar Pradesh, Room No. 201, First Floor, 201002 CGO Complex, Hapur PAN: AATFM3627N Chungi, Ghaziabad, Uttar Pradesh Appellant Respondent Assessee by Sh. Rajiv Saxena, Adv.Ms.Sumangla Saxena, Adv & Sh. Shyam Sunder, Adv. Revenue by Ms. Amisha S. Gupt, CIT (DR) Date of Hearing 09/10/2025 Date of Pronouncement 05/12/2025 ORDER
PER YOGESH KUMAR, U.S. JM:
The captioned appeal and Cross Objections are filed by the Revenue and the Assessee against the ordersof Ld. Commissioner of Income Tax (Appeals/National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 28/06/2024 for the Assessment Year 2015- 16.
Brief facts of the case are that, as mentioned in the order of the Ld. CIT(A) are as under:-
“The appellant is a partnership firm engaged in the business of providing services of erection of tents as well as illumination thereof by arranging for lighting by way of hiring of equipments. This service is provided various Government Departments. It is the allegation of the A.O. that as per information, during the course of assessment proceedings of M/s Vrindavan International Trade Private Limited, it was established that the company did not do any genuine business but had provided bogus accommodation entry in the form of sale and purchase of fabrics. During the year, the company (Vrindavan) has made sale to assessee i.e. M/s Mahalaxmi Light House which is held to be bogus purchase for the Appellant. Further, on perusal of the record of the assessee, it was seen that it has made purchase of Rs. 4,19,54,395/-during the year which includes bogus purchase from Vrindavan International Trade Private Limited for Rs. 41,82,341/-. In addition to this, as per 26AS, the gross total income is Rs. 14,60,45,404/- whereas as per ITR, the gross total income is 11,62,66,741/-. Hence, the assessee has declared short income of Rs. 2,97,78, 663/- for the year. On perusal of the Form-3CD it is found that the assessee is in the business of contractor and hence transactions for sale and purchase of fabrics are bogus transactions and not related to the business of the assessee. Hence, there is confirmed escapement of income to the tune of Rs.3,39,61,004/- (41,82,341/- + 2,97,78,663/-) for the Assessment Year 2015-16 which requires to be assessed by taking invoking jurisdiction under section 147 of the I.T.Act.”
3. Aggrieved by the assessment order dated 27/03/2022, Assessee preferred the Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 28/06/2024, deleted the additions made by the A.O. As against the order of the Ld. CIT(A) dated 28/06/2024, the department preferred the present Appeal. The Assessee has also filed Cross Objection challenging the order of the Ld. CIT(A).
The respective grounds of Appeal/C.O. of the parties as under:-
(A.Y. 2015-16) “1. That on the facts and circumstances of the case, the Ld. CIT(A), NFAC erred in law and on facts in deleting the addition of Rs.41,82,341/- made under section 69C of the Act, as unexplained expenditure on account of bogus purchases made by the assessee from Vrindavan International Trade Pvt. Ltd.
2. That on the facts and circumstances of the case, the Ld. CIT(A), NFAC erred in law and on facts in holding the transactions done by the assessee with shell company Vrindavan International Trade Pvt. Ltd. as genuine business transactions, merely on the basis that the transactions have been done through banking channel. During the course of assessment proceedings in the case of M/s Vrindavan International Trade Pvt. Ltd., it was found that the company was a shell company engaged in providing accommodation entries of bogus sales/purchases. During the A.Y. 2015-16, the assessee made bogus purchases of Rs.41,82,341/- from M/s Vrindavan International Trade Pvt. Ltd.
That on the facts and circumstances of the case, the Ld. CIT(A), NFAC erred in law and on facts in deleting the additions of Rs.2,97,78,663/- made to the business income of the assessee for the relevant assessment year on account of under reporting of business income as evident from the difference between total receipts shown in form 26AS and total income shown in ITR. As per 26AS, total receipts were shown as Rs.14.60.45.404/-, whereas total turnover as shown in ITR was Rs.11.62,66,741/, which showed that the assessee declared short income of Rs.2.97,78.663/-. The assessee failed to provide the reconciliation of the above figures.”
“1. That the Ld. AO, NFAC has grossly erred on facts and in law in completing the reassessment proceedings u/s 147/144/144B of the Act, 1961 without issuing mandatory notice u/s 143(2) of the Act, 1961, and hence order of the reassessment passed u/s 147/144/144B of the Act is unsustainable in law.”
Since, the Assessee has challenged the assessment order in the Cross Objection on the ground of non-issuance of mandatory notice u/s 143 (2) of the Income Tax Act, 1961 ('Act' for short), we have heard on the Cross Objection filed by the Assessee.
The Ld. Counsel for the Assessee addressing on Cross Objection, submitted that,without issuing the mandatory notice u/s 143(2) of the Act, A.O. framed the assessment u/s 147 r.w. Section 144 r.w. Section 144B of the Act, which is in violation of provisions of law,therefore, it renders the assessment order erroneous, thus, sought for allowing the Cross Objection and dismissal of the Appeal of the Department.
Per contra, the Ld. Departmental Representative submitted that the assessment order has been passed under Section 147 of the Act by following the provisions of law strictly and the additions have been made on the taxable income of the Assessee. Further submitted that the ground raised in the Cross Objection has neither raised before the A.O. nor before the Ld. CIT(A) and the said grounds have been raised for the first time before the Tribunal, therefore, submitted that the grounds raised by the Assessee in the Cross Objection cannot be entertained by the Tribunal. Thus, sought for dismissal of the Cross Objection.
We have heard both the parties and perused the material available on record. As could be seen from the assessment order, the A.O. issued notice u/s 142(1) of the Act on 13/02/2022 which has been replied by the Assessee and the said reply was treated as reply in response to notice u/s 148 of the Act issued on 30/03/2021. It is the specific caseof the Assessee that the said notice has not been served on the Assessee.
Further it is observed that in Para 3 of the Assessment Orderit is mentioned that another response dated 26/02/2022 was furnished by the Assessee and at Para 4 of the assessment order,it is mentioned regarding completion of draft assessment order and opportunity was given to the Assessee which was responded by the Assessee vide submission dated 25/03/2022. The Assessment order came to be passed under Section 147 r.w. Section 144 r.w. Section 144B of the Act on 27/03/2022. It is the specific case of the Assessee that no notice u/s 143(2) of the Act was issued during the course of assessment proceedings. To substantiate the same, the Assessee produced is e-filing portal which does not reflect any such notice u/s 143(2) of the Act was having been issued or communicated to the Assessee. The Department has also not produced any document to show that notice u/s 143(2) of the Act was indeed issued to the Assessee. It is the requirement of law that a notice u/s 143(2) of the Act shall be issued even in the re- assessment proceedings initiated u/s 147 of the Act and failure to issue such notice, vitiates the re-assessment proceedings and renders the re- assessment order invalid.
The Hon’ble Jurisdictional High Court in the case of Pr.
Commissioner of Income Tax Vs. Dart Infra Pvt. Ltd. 92024) 166 Taxmann.com 4 (Del) held as under:-
15.2 The absence of notice, under Section 143(2), impregnates the proceedings with a jurisdictional defect and, hence, renders it invalid in the eyes of the law. This position is no longer res integra, as demonstrated by the observations made in Principal Commissioner of Income-tax v. Shri Jai Shiv Shankar Traders (P.) Ltd. (2015) 64 taxmann.com 220 (Delhi):
12. The narration of facts as noted above by the court makes it clear that no notice under section 143(2) of the Act was issued to the assessee after December 16, 2010, the date on which the assessee informed the Assessing Officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Act.
In DIT v. Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 249 (Delhi), this court invalidated a reassessment proceeding after noting that the notice under section 143(2) of the Act was not issued to the assessee pursuant to the filing of the return. In other words, it was held mandatory to serve the notice under section 143(2) of the Act only after the return filed by the assessee is actually scrutinised by the Assessing Officer.
The interplay of sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court in Commissioner Of Income Tax-Ii Lucknow Petitioner v. Rajeev Sharma, Lucknow [2011] 336 ITR 678 (All) it was held that a plain reading of section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. It was observed (page 687): "The provisions contained in sub-section (2) of section 143 of the Act is mandatory and the Legislature in its wisdom by using the word „reason to believe' had cast a duly on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under section 148, it shall be mandatory for the Assessing Officer to serve a notice under sub-section (2) of Section 143 assigning reason therein . . . in absence of any notice issued under sub-section (2) of section 143 after receipt of fresh return submitted by the assessee in response to notice under section 148, the, entire procedure adopted for escaped assessment, shall not be valid."
In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. [2014] 50 taxmann.com 105 (All), it was held as under: "10. Section 292BB of the Act was inserted by the Finance Act, 2008 with effect from April 1, 2008. Section 282BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated In any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him ; or ii) not served upon him in time ; or (iii) served upon him in an improper manner. IN other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to section 292BB of the Act, however, carves out an exception to the effect that the section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292BB of the Act cannot obviate the requirement or complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under section 143(3) of the Act, it is necessary to issue a notice under section 143(2) of the Act and in the absence of a notice under section 143(2) of the Act, the assumption of jurisdiction itself would be invalid."
In the same decision in Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with."
17. The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO [2012] 25 taxmann.com 341/210 Taxman 78 (Mad.) (Mag.). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, theAssessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that: "Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act."
As already noticed, the decision of this Court in Vision Inc. (supra) proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of "service" of notice was concerned and not with regard to failure to "issue" notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act.
The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of theAct subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a notice under Section 148 of the Act, is fatal to the order of re- assessment."[Emphasis is ours]
IV. Conclusion: 16. On both aspects, the Tribunal is right. The Tribunal has returned findings of fact on the two issues adverted to hereinabove.
Thus, for the foregoing reasons, which are i) that notice under Section 148 of the Act was improperly served, and ii) that notice under Section 143(2) should have been issued before framing of assessment order under Section 147/144 of the Act, we are not inclined to interfere with the impugned order passed by the Tribunal.”
In view of the above, we find merit in the Ground No. 1 in the Cross Objection, consequently we set aside the assessment order and order of the Ld. CIT(A). Nevertheless we reserve liberty to the Revenue to file appropriate application for recalling this order in case if the Revenue is able to produce tangible material to show that mandatory notice u/s 143 (2) of the Act has been indeed issued and served on the Assessee.
In the result, Cross Objection filed by the Assessee is allowed.
Since, we have allowed the Cross Objection, the Appeal of the the Appeal of the Revenue is dismissed.
Order pronounced in the open court on 05th December, 2025