2024 (7) TMI 1696 - AT - Income Tax

Reassessment void where no notice under section 143(2); section 292BB cannot cure non-issuance, reassessment set aside

ITAT, Delhi (AT) held the reassessment void where no notice under s.143(2) was issued or record of issuance existed. Relying on HC and SC authorities, the ... Validity of reassessment proceedings - effect of non availability of notice u/s 143(2) in the assessment record or any non-existence of any evidence of the notice being issued - Whether a curable defect u/s 292BB - HELD THAT:- The issue of effect of non-issue of notice u/s 143(2) on the reassessment order is no longer res integra. In the case of PCIT v Jai Shiv Shankar Traders Pvt Ltd [2015 (10) TMI 1765 - DELHI HIGH COURT] and PCIT v Silver Line & anr. [2015 (11) TMI 809 - DELHI HIGH COURT], the Hon’ble Delhi High Court have held that non- issue of notice u/s 143(2) is fatal to the re-assessment order. The Hon'ble High Court of Delhi in the case of M/s Consortium Nussli Comfort Net [2022 (4) TMI 1324 - DELHI HIGH COURT] discussing the provisions of section 292BB and referring to the decision of the Hon’ble Supreme Court in the case of Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] dismissed the appeal of the Revenue as held Court is in agreement with the Tribunal that section 292BB does not give the power to condone the failure or delay in issuing the statutory notice required to be issued u/s 143(2). Section 292BB deals with failure of service of notice and not with regard to failure to issue notice. Scope of Section 292BB is to make service of notice having certain infirmities to be proper and valid. However, the section does not save complete absence of notice. Thus, the failure of the assessing officer to issue notice u/s 143(2) after the assessee filed reply to notice u/s 148, becomes fatal to the reassessment order. Consequently, the jurisdiction assumed by the AO u/s 143(3)/147 of the Act was erroneously assumed. Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether reassessment under sections 147/143(3) is vitiated for want of issuance of notice under section 143(2) after initiation under section 148 and receipt of the assessee's reply. 2. Whether section 292BB can cure non-issuance (as distinct from non-service) of a statutory notice under section 143(2) in reassessment proceedings. 3. Whether participation by the assessee in proceedings or reliance on other notices (e.g., section 142(1)) estops the assessee from raising objection about absence of section 143(2) notice or otherwise validates the reassessment. 4. Whether failure of the first appellate authority to examine assessment record/order-sheet entries as directed by the Tribunal in earlier remand affects the validity of the reassessment (relates to appropriate adjudicatory approach rather than the merits of addition). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework Sections 148 and 143(3)/(2) establish the procedure for reopening and completing reassessment: notice under section 148 to reopen, and a subsequent statutory notice under section 143(2) (within prescribed period) is prerequisite before assumption of jurisdiction under section 143(3) for final assessment. Issue 1 - Precedent Treatment The Court applied binding and persuasive authorities holding that failure to issue the section 143(2) notice prior to completion of reassessment renders the jurisdictional assumption under section 143(3)/147 invalid; Delhi High Court decisions in Jai Shiv Shankar Traders and Silver Line (and subsequent orders) and the Supreme Court position in Laxman Das Khandelwal (as interpreted by Delhi High Court) were followed. Issue 1 - Interpretation and reasoning Facts showed that after issuance of section 148 notice and receipt of the assessee's reply, only questionnaires and notices under section 142(1) were recorded; no notice under section 143(2) was found in assessment records and the Revenue conceded absence. The Tribunal found that the Assessing Officer assumed jurisdiction under section 143(3) without issuing the mandatory section 143(2) notice, a procedural defect going to jurisdiction. Issue 1 - Ratio vs. Obiter Ratio: Failure to issue section 143(2) notice after initiation of reassessment is fatal to jurisdiction and renders reassessment void ab initio. This is the operative holding (followed as binding on the facts). Issue 1 - Conclusion The reassessment order (and appellate confirmation) was quashed as void ab initio for lack of the mandatory section 143(2) notice; the issue disposed the appeal on jurisdictional/technical grounds and the merits were not adjudicated. Issue 2 - Legal framework Section 292BB deems notices to be duly served where the assessee has appeared or cooperated, subject to proviso that it does not apply where such objection is raised before completion of assessment/reassessment. The statutory distinction between issuance and service of notice is central. Issue 2 - Precedent Treatment The Tribunal followed the Supreme Court exposition and subsequent Delhi High Court rulings holding that section 292BB cures defects in service of a notice but does not validate the complete non-issuance of a statutory notice; decisions cited include Laxman Das Khandelwal and related Delhi High Court authorities interpreting 292BB narrowly. Issue 2 - Interpretation and reasoning Given the admitted absence of any record showing that a section 143(2) notice ever emanated from the Department, section 292BB could not be invoked to cure the defect because the provision applies only where a notice has been issued but suffered infirmity in service. The Tribunal accepted that section 292BB presupposes emanation of a notice from the Department; mere participation or cooperation cannot retroactively supply an unnoticed statutory step. Issue 2 - Ratio vs. Obiter Ratio: Section 292BB cannot be used to cure complete non-issuance of the section 143(2) notice in reassessment; it only addresses deficiencies in service where a notice has been issued. Issue 2 - Conclusion Section 292BB did not save the reassessment in the absence of any evidence that a section 143(2) notice had been issued; therefore the reassessment was invalid. Issue 3 - Legal framework Doctrine of jurisdictional defect and principles on belated objection: issues going to jurisdiction may be raised at any stage, including on appeal; participation in proceedings does not necessarily cure absence of a mandatory statutory notice that vitiates jurisdiction. Issue 3 - Precedent Treatment Authorities were applied holding that jurisdictional defects may be taken at any stage and that mere participation does not validate an assessment where a mandatory notice was never issued. The Tribunal relied on precedent emphasizing the root-nature of jurisdictional defects. Issue 3 - Interpretation and reasoning Although the assessee participated and furnished records in response to section 148, the absence of a follow-up section 143(2) notice before completing reassessment remained a distinct and incurable jurisdictional lapse. The Revenue's plea that participation or other notices (e.g., section 142(1)) estop the assessee or cure the defect was rejected because these do not substitute for the statutory requirement of issuing section 143(2). Issue 3 - Ratio vs. Obiter Ratio: Participation in proceedings or receipt of other departmental communications cannot substitute for a mandatory section 143(2) notice; jurisdictional defects can be raised belatedly. Issue 3 - Conclusion The assessee was entitled to challenge jurisdiction despite participation; the reassessment could not stand on account of non-issuance of section 143(2). Issue 4 - Legal framework Appellate authority's duty to examine remand directions and record: where a Tribunal remands for verification of factual/recordal aspects, the appellate authority is obliged to comply and examine records rather than dismiss on cursory grounds such as typographical error. Issue 4 - Precedent Treatment Tribunal relied on its earlier remand direction and treated the appellate authority's failure to verify assessment records (order-sheet entries) as an insufficient response; precedent supports thorough compliance with remand directions when jurisdictional questions are directed to be examined. Issue 4 - Interpretation and reasoning The Tribunal noted that the CIT(A) failed to inspect the assessment record to verify issuance of section 143(2) as earlier directed; instead, the appellate authority treated non-mention as a typographical error. Given the subsequent admission of non-existence of any section 143(2) notice, such approach was inadequate and reinforced the finding of jurisdictional invalidity. Issue 4 - Ratio vs. Obiter Ratio (procedural): Failure of appellate authority to follow remand direction and examine record undermined the appellate decision and contributed to upholding an assessment that lacked the mandatory statutory notice. Issue 4 - Conclusion The Tribunal remitted no further on merits because the procedural defect was dispositive; CIT(A)'s failure to examine records per remand was a material infirmity supporting quashing of the reassessment.