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Facts
The Revenue appealed against the order of the CIT(A) which applied the Supreme Court's decision in Hotel Blue Moon to the assessee's case. The assessee was a non-filer and their case was reopened under Section 148. A return was filed, processed under Section 143(1), and assessment framed under Section 143(3) r.w.s 147, without issuing a notice under Section 143(2).
Held
The Tribunal held that the failure of the Assessing Officer to issue a notice under Section 143(2) of the Act is fatal to the order of re-assessment. Relying on the Delhi High Court's decision in Dart Infrabuild, the Tribunal quashed the assessment order as void ab initio.
Key Issues
Whether the assessment framed under Section 143(3) r.w.s 147 is legally valid in the absence of a notice under Section 143(2) of the Act?
Sections Cited
148, 143(1), 143(3), 147, 143(2), 158BC, 142(1), 292BB, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI ANUBHAV SHARMA, & SHRI NAVEEN CHANDRA
This appeal by the Revenue is directed against the order of the ld.
CIT(A), Delhi dated 30.04.2025 pertaining to A.Y 2011-12.
The sole grievance of the Revenue is that the ld. CIT(A) wrongly applied the decision of the Hon'ble Supreme Court in the case of Hotel Blue Moon which was in the context of assessment u/s 158BC of the the same does not apply as the case is reopening u/s 148 of the Act.
Briefly stated, the facts of the case are that the assessee was a non-filer and it’s case was reopened u/s 148 of the Act vide notice dated 29.03.2018. The return in response to notice u/s 148 of the Act was filed on 11.09.2018 declaring an income of Rs 58,92,107/- which was processed u/s 143(1). The Assessing Officer framed assessment u/s 143(3) r.w.s 147 of the Act on 14.12.2018 at Rs 2,48,73,357/-.
The issue for adjudication before us is as to whether the assessment made u/s 143(3) r.w.s 147 of the Act is legally valid in the absence of any service of notice u/s 143(2) of the Act.
The ld. DR vehemently stated that the reliance of the ld. CIT(A) on the case of Hotel Blue Moon, Civil Appeal No.1198 Of 2010 dated 02.02.2010 is not applicable in the instant case as the case of the assessee was reopened u/s 148 of the Act and the assessee filed delayed return in response to the same. The return was filed beyond the stipulated time and hence the issue/service of notice u/s 143(2) is not applicable in such a case.
Per contra, the ld. counsel for the assessee forcefully argued that the issue of notice u/s 143(2) of the Act is a must while framing order u/s 143(3) r.w.s 147 of the Act. The ld. counsel for the assessee further
Page 2 of 11 issued at all. It is the say of the ld. counsel for the assessee that the Assessing Officer has further considered the return filed on 11.09.2018 in response to notice u/s 148 of the Act and has accepted the return as valid while determining the total income. In view of the same, the ld. counsel for the assessee argued that the decision in the case of PCIT Vs.
Dart Infrabuild Pvt Ltd 460 ITR 532 is squarely applicable.
We have heard the rival submissions and have perused the relevant material on record. The uncontroverted facts in the instant case are that the assessee’s case was reopened u/s 148 of the Act vide notice dated 29.03.2018 and the return in response to notice u/s 148 of the Act was filed on 11.09.2018. The RoI was processed u/s 143(1) at Rs 58,92,107/-. The Assessing Officer made an addition of Rs 1,89,81,250/- and ultimately framed the assessment u/s 143(3) r.w.s 147 of the Act on 14.12.2018 at Rs 2,48,73,357/-. It is also an admitted fact that the notice u/s 143(2) was not issued in the instant case.
The legal requirement of issuance of notice u/s 143(2) was established by the hon’ble Supreme Court in the case of Hotel Blue Moon (supra) where the return filed is necessary to be checked and for framing order u/s 143(3) r.w.s 147 of the Act. We find that the decision
Page 3 of 11 Infrabuild [supra] is squarely applicable which reads as under:
“15. This brings us to the second aspect of the matter, i.e., the consequences of the failure of the appellant/revenue to issue notice under Section 143(2) of the Act before framing the assessment order. Concededly, the appellant/revenue did not issue a notice under Section 143(2) of the Act, although it had on record the ROI filed by the respondent/assessee for the AY in issue, i.e., 2010- 11. The return was, concededly, filed on 04.12.2015. This return was considered while framing the assessment under Section 147/144 of the Act. The only reason furnished for not issuing a notice under Section 143(2) of the Act is that the ROI was not filed within the thirty (30) days provided via the notice dated 30.03.2015 issued under Section 148. This argument does not impress us because if we were to hold [as we have], that the said notice was directed towards the wrong address, the respondent/assessee could have not adhered to the timeline provided in the said notice. 15.1 The respondent/assessee became aware of the Section 148 notice being issued after it received the notice dated 12.06.2015 under Section 142(1) of the Act. The fact that the respondent/assessee had filed an ROI on 04.12.2015 is not disputed. The fact that this ROI, as noticed above, was taken into account is also not in dispute. Therefore, in our opinion, before framing an assessment order, the AO ought to have issued a notice under Section 143(2) of the Act. The submission advanced on behalf of the appellant/revenue that, while it could consider the invalid
Page 4 of 11 return while framing the assessment order, it was not obliged to issue a notice under Section 143(2) of the Act because it was not filed within the timeframe given in the Section 148 notice is untenable in law, since the ROI, which was belated, was considered by the AO while carrying out the assessment. 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
Page 5 of 11 High Court in CIT v. Rajeev Sharma [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 Page 6 of 11 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,
Page 7 of 11 the requirement of notice under Section 143(2) cannot be dispensed with."
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, the Assessee 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 Page 8 of 11 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 the Act 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.”
Page 9 of 11 identical to the case decided by the hon’ble Delhi High Court above. The assessee has filed a return in response to notice u/s 148 which was processed u/s 143(1). The AO has framed the assessment u/s 147 r.w. section 143(3), taking the income as assessed u/s 143(1) as the starting point which shows that the AO has considered the return filed u/s 148 as valid return. In the factual matrix of the instant case, we respectfully follow the above decision in Dart Infrabuild [supra] of the Hon'ble Delhi Court and hold that failure of the Assessing Officer to issue notice u/s 143(2) of the Act is fatal to the order of the re-assessment. The assessment order so framed is quashed as void ab initio. Grounds 1 and 2 of appeal of the Revenue are dismissed. dismissed.
Order pronounced in open court on 21.11.2025.