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Facts
The assessee's appeal for Assessment Year 2012-13 arises from an order upholding a reassessment framed under Section 147 read with Section 144 of the Income Tax Act. The primary contention is that the Assessing Officer failed to issue a mandatory notice under Section 143(2) before completing the reassessment.
Held
The Tribunal held that the Assessing Officer erred in law and fact by framing the impugned assessment in the absence of a Section 143(2) notice. The Tribunal concluded that failure to issue such a notice renders the reassessment invalid. Consequently, the assessee's appeal was allowed.
Key Issues
Whether the reassessment order is valid when the mandatory notice under Section 143(2) of the Income Tax Act was not issued by the Assessing Officer before framing the assessment.
Sections Cited
147, 144, 143(2), 148, 142(1), 292BB
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: Sh. Satbeer Singh Godara & Sh. Avdhesh Kumar Mishra
Asstt. Year: 2012-13 Pelican Tobacco India Pvt. Ltd. Vs Income Tax Officer, 902-903, Padma Tower-I, Rajendra Ward-19(4), Place, New Delhi-110008 New Delhi (APPELLANT) (RESPONDENT) PAN No. AADCP9492K Assessee by : Sh. Udit Dad, Adv. Revenue by : Sh. Om Prakash, Sr. DR Date of Hearing: 01.10.2025 Date of Pronouncement: 01.10.2025 ORDER
Per Satbeer Singh Godara, Judicial Member:
This assessee’s appeal for Assessment Year 2012-13, arises against the CIT(A)-24, New Delhi’s DIN & order No. ITBA/APL/M/250/2023-24/1058023390(1) dated 17.11.2023, in proceedings u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
It transpires during the course of hearing that the assessee presses for it’s first and foremost legal ground seeking to annual the impugned assessment framed on 11.12.2019 as non-est in the eyes of law for want of issuance of section Pelican Tobacco India Pvt. Ltd. 143(2) notice by the Assessing Officer. We are further taken to the learned CIT(A) detailed discussion deciding the same against the assessee and in the Revenue’s favour as follows: “4.1 I have considered the material on record including written submission of the AR of the appellant filed in course of appellate proceedings. I have perused the assessment order u/s 147 r.w.s. 144 of the Income Tax Act passed by the Assessing Officer. In the present appeal the appellant has raised five grounds of appeal
and one additional ground of appeal. 4.1.1 In Additional Ground of appeal, the appellant has contended that Assessing Officer has erred in law and on facts in framing the impugned reassessment order without serving the mandatory notice u/s 143(2) of the Act as per law. 4.1.2 Since the additional ground of appeal addresses the issue which is the very basis of carrying out the assessment u/s 147 of the Income Tax Act; the additional ground is adjudicated at the beginning before examining the other grounds. As per the assessment order, the appellant has filed a return of income on 30.09.2012 declaring a total income as Nil. Subsequently in view of the information received from the Investigation wing and after recording the reasons and taking necessary approval from the competent authority, notice u/s 148 was issued and served upon the appellant on 31.03.2019. In response to the notice u/s 148, no communication was received from the appellant. Subsequently notice u/s 143(2)/143(1) dated 23.10.2019 were issued and served upon the appellant. The above facts mentioned in the assessment order results in the following conclusions:
1. No return was filed in response to notice u/s 148 of Income Tax Act by the appellant.
2. Notice u/s 143(2) dated 23.10.2019 was issued and served upon the assessee. 4.1.3 The appellant in a submission mentioned that a notice u/s 143(2) was not issued during the course of reassessment proceedings. However, as per the Assessing Officer in the assessment order, a notice u/s 143(2) of Income Tax Act dated 23.10.2019 was issued Pelican Tobacco India Pvt. Ltd. during the course of reassessment proceedings. Similarly, in the paper book filed before the undersigned the appellant did not file a copy of return filed in response to the notice u/s 148 of Income Tax Act. The appellant in its submission mentioned that the Assessee company has filed the Income Tax Return on 28.09.2019 but did not provide either the return of income or ITBA screenshot as a proof of filing a valid return of income. The appellant was granted several opportunities vide notice dated 28.08.2023, 05.09.2023, 27.09.2023, 02.11.2023 and 08.11.2023 but the appellant did neither attended the proceedings nor the copy of the return filed u/s 148 of Income Tax Act, if any, was made available during the course of appellate proceedings. 4.1.4 As per the case laws, it is undisputed fact that the notice u/s 143(2) of Income Tax Act was required to be served upon the assessee on or before the prescribed timelines and not serving such a notice would be a fatal error and the reassessment carried out subsequent to issue of an invalid notice u/s 143(2) of Income Tax Act cannot be considered as valid and as per law. However, these case laws are only applicable for the cases where a valid return is filed during the course of reassessment proceedings and a notice u/s 143(2) of Income Tax Act is not issued upon the appellant within the prescribed timelines. In this case, during the course of appellate proceedings, the appellant failed to prove that a valid return of income was filed subsequent to issue of notice u/s 148 of Income Tax Act. Further, issuance of notice u/s 143(2) is specifically mentioned in the assessment order. The assessment order specifically mentions that notice u/s 143(2) and 142(1) were issued on 23.10.2019, the appellant had not disputed that the notice u/s 142(1) was issued on the said date. In view of the above, it could not be conclusively proved that whether a valid return of income was filed in response to notice u/s 148 of Income Tax Act and whether a notice u/s 143(2) of Income Tax Act was issued/served in the stipulated time frame. The appellant despite of several opportunities provided to it could not conclusively establish the facts pertaining to filing of a valid return and service of notice. Therefore, the additional ground of the appeal raised during the course of appellate proceedings cannot be allowed and the jurisdiction of the Assessing Officer to frame the reassessment in this case is valid. Additional Ground of appeal is dismissed.”
4. We observe in this factual backdrop that the instant legal issue is very much clear in light of the learned CIT(A) above detailed discussion that the Assessing Officer had not issued any section 143(2) notice to the assessee before framing the impugned assessment. The Revenue derives strong support from the CIT(A)’s discussion that given the fact that the assessee had not filed any valid return in response to section 148 proceedings; no such notice could have been issued by the Assessing Officer.
There would be hardly any quarrel in this backdrop that the issuance of section 143(2) notice in framing the assessment is very much a mandatory condition as settled in ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC). The further issue between the parties that the assessee had not filed a valid return, we note from a perusal of the case records that the same was submitted before the Assessing Officer on 28.08.2019 in furtherance to his section 148 notice issued on 31.03.2019. We conclude in this backdrop of facts that the learned Assessing Officer could not have framed his assessment in absence of such a notice as per PCIT Vs. Dart Infrabuild Pvt. Ltd. (2024) 166 taxmann.com 4 (Del.) deciding the very issue in the assessee’s favour and against the department reading as under:
Pelican Tobacco India Pvt. Ltd. “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 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 220/383 ITR 448 (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 Pelican Tobacco India Pvt. Ltd. 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 CIT v. Rajeev Sharma [2010] 192 Taxman 197/336 ITR 678 (Allahabad) 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 105/228 Taxman 48 (Allahabad), 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.
Pelican Tobacco India Pvt. Ltd. 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 (Madras) (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 Pelican Tobacco India Pvt. Ltd. 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 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."
[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.”
We adopt their lordships detailed discussion mutatis mutandis to conclude that the learned Assessing Officer herein has erred in law and on fact in framing his impugned assessment in absence of section 143(2) notice issued to the assessee to quash the same in very terms. Ordered accordingly.
All other pleadings on merits between the parties has been rendered academic.