Validity of reassessment notice and applicability of section 292BB: non-issuance of notice under 143(2) renders assessment invalid

A deeming provision cannot validate proceedings where no notice was issued: the provision applies only where a notice was in fact issued but its service, timing, or manner is contested. Because no post-return scrutiny notice was issued, the deeming rule cannot cure the defect, and the assessment framed without a valid pre-filing scrutiny notice is invalid. The tribunal and appellate authority correctly held that a notice issued before the return was filed was ineffective, producing invalidation of the assessment and resulting in relief to the assessee.

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Issues Involved:
1. Validity of reassessment proceedings under section 292BB of the Income Tax Act, 1961.
2. Requirement and timing of notice under section 143(2) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 292BB of the Income Tax Act, 1961:

The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) which quashed the reassessment proceedings. The appellant contended that under section 292BB, the assessee is deemed to have been duly served with the notice under section 143(2) if they participated in the proceedings. The appellant cited the Punjab and Haryana High Court decision in *Commissioner of Income-tax, Hisar v. Ram Narain Bansal* and the Madras High Court decision in *Venkatesan Raghuram Prasad v. Income-tax Officer*, where it was held that participation in proceedings precludes the assessee from objecting to the non-issuance or improper service of notice under section 143(2).

2. Requirement and Timing of Notice under Section 143(2) of the Income Tax Act, 1961:

The respondent-assessee argued that section 292BB does not apply when no notice under section 143(2) has been issued. The respondent cited the Gujarat High Court decision in *Shirishbhai Hargovandas Sanjanwala v. Commissioner of Income Tax* and the Calcutta High Court decision in *Principal Commissioner of Income-tax v. Oberoi Hotels (P.) Ltd.*, which clarified that section 292BB cures defects in the service of a notice but does not dispense with the issuance of a notice itself. The Supreme Court in *CIT v. Hotel Blue Moon* held that the omission to issue a notice under section 143(2) is not a procedural irregularity and cannot be cured, making it mandatory to issue such notice.

Court's Findings:

1. Non-Issuance of Notice under Section 143(2):

The court noted that the Assessing Officer issued multiple notices under section 148 but recorded reasons for reopening only on 20.07.2010. The notice under section 143(2) was issued on 12.03.2010, before the assessee filed a letter on 19.07.2010 to treat the earlier return as the return in response to the notice under section 148. Therefore, no notice under section 143(2) was issued after the filing of the return, rendering the assessment invalid.

2. Interpretation of Section 292BB:

The court held that section 292BB applies only when a notice has been issued but not served properly or in time. It does not apply when no notice has been issued at all. The court disagreed with the Punjab and Haryana High Court's interpretation in *Ram Narain Bansal* and clarified that section 292BB cannot cure the complete non-issuance of a notice under section 143(2).

Conclusion:

The court affirmed that the issuance of a notice under section 143(2) is mandatory and its omission is not a procedural irregularity that can be cured under section 292BB. Hence, the Tribunal and the Commissioner (Appeals) were correct in holding the reassessment invalid due to the absence of a valid notice under section 143(2). The appeal was dismissed, and the question of law was answered in favor of the assessee and against the revenue.

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