Reassessment under s.147 read with s.143(3) void ab initio for failure to issue mandatory s.143(2) notice

ITAT held that reassessment completed under s.147 read with s.143(3) was void ab initio because the mandatory notice under s.143(2) was never issued; the reassessment order was arbitrary and bad in law. The reassessment was quashed and the taxpayer's appeal was allowed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether reassessment completed under section 147 read with section 143(3) of the Income Tax Act is invalid where no notice under section 143(2) was issued and served to the assessee after filing of return in response to notice under section 148.

2. Whether issuance of multiple notices under section 148 by different assessing officers without a transfer order under section 127 affects validity of reassessment proceedings (raised but not pursued to finality given the Court's treatment).

3. Consequence of quashing reassessment on subsequent proceedings and on the remaining merits grounds (connection between the threshold legal defect and downstream issues).

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Mandatory nature of notice under section 143(2) for framing reassessment under section 147 read with section 143(3)

Legal framework: Section 147 empowers reopening of assessment where income has escaped assessment; after return filed in response to notice under section 148, the reassessment machinery operates and section 143(2) contemplates issuance of a notice to the assessee for scrutiny prior to framing assessment under section 143(3). Section 292BB contains a deeming fiction as to service of notices but contains a proviso excepting cases where objection is raised before completion of assessment.

Precedent treatment: The Court relied on binding and persuasive higher-court precedents establishing that issuance (and where relevant service) of notice under section 143(2) is a jurisdictional requirement for framing an assessment under section 143(3) and for reassessment under section 147 read with section 143(3). Decisions of apex and high courts were followed in holding the requirement mandatory and non-curable; decisions that applied different facts or provisions (e.g., those concerning block assessments, special sections, or where service was proved) were distinguished on facts.

Interpretation and reasoning: The Tribunal analyzed the record and found no proof of issuance/service of notice under section 143(2) after the return was filed on 17.11.2018. The assessment order itself recorded issuance of notice on a date preceding the filing of the return, which the revenue could not substantiate or explain as a typographical error. The Tribunal treated the absence of valid issuance/service of section 143(2) notice as a defect going to jurisdiction - not a mere procedural irregularity - because issuance of that notice is foundational to the Assessing Officer's jurisdiction to proceed to section 143(3) assessment. The Tribunal examined the interplay with section 292BB and noted that the deeming fiction cannot validate failure to issue the notice (as opposed to mere failure of service) nor can it cure a jurisdictional defect where objection is raised before completion. The Tribunal also relied on prior reasoning that where the AO repudiates/does not accept the return and proceeds to reassessment, the AO must mandatorily issue section 143(2) notice within the prescribed period; omission is fatal.

Ratio vs. Obiter: Ratio - The mandatory requirement of issuing a notice under section 143(2) after filing of return in response to section 148 is jurisdictional for framing reassessment under section 147 read with section 143(3); absence thereof renders reassessment void ab initio. Obiter - Observations about typographical error claims by the department and discussions of varied factual scenarios in other jurisprudence (e.g., where service is established or where different statutory provisions apply) serve as illustrative guidance but do not alter the core holding.

Conclusions: Reassessment completed without issuance/service of notice under section 143(2) following filing of return in response to section 148 is invalid, arbitrary, and void ab initio. The Tribunal quashed the reassessment on this ground.

Issue 2: Validity of multiple section 148 notices issued by different assessing officers without a transfer order under section 127

Legal framework: Section 127 governs transfer of cases between assessing officers; notices must be issued by proper jurisdictional officer. The legitimacy of notices issued by different officers without formal transfer raises jurisdictional and procedural questions.

Precedent treatment: The assessee raised the issue; the Tribunal noted the allegation but did not materially decide it as the primary legal defect (non-issuance of section 143(2) notice) proved dispositive. The Tribunal observed absence of transfer order for a subsequently issued section 148 notice but treated it as a factual contention not fully pressed where the earlier jurisdictional defect disposed of the appeal.

Interpretation and reasoning: Although the first section 148 notice dated 23.03.2018 and a second dated 03.08.2018 by another AO were on record without evidence of a section 127 transfer, the Tribunal indicated that such irregularity exists on the papers. However, because the reassessment was quashed on the basis of mandatory non-issuance of section 143(2) notice, the Tribunal did not need to adjudicate the transfer/notice multiplicity issue to reach the final result.

Ratio vs. Obiter: Obiter - The observations regarding multiple section 148 notices and absence of transfer under section 127 remain ancillary and were not essential to the Court's final decision.

Conclusions: The transfer/duplicate-notice issue was noted but left academically unresolved because the primary jurisdictional defect (failure to issue section 143(2) notice) sufficed to quash the reassessment; consequent findings on this point are not binding ratio.

Issue 3: Consequence of quashing reassessment on subsequent proceedings and merits grounds

Legal framework: If a foundational jurisdictional order is void ab initio, subsequent consequential proceedings (orders flowing from that assessment) lack legal validity and become non est.

Precedent treatment: The Tribunal applied established principle that when a reassessment is quashed for want of jurisdictional requirement, all subsequent proceedings predicated on it stand extinguished.

Interpretation and reasoning: Given the Court's affirmative answer to the mandatory-nature issue (Issue 1), it held that all subsequent proceedings emanating from the reassessment are non est and that grounds on merits become academic.

Ratio vs. Obiter: Ratio - Quashing of a jurisdictionally invalid reassessment order renders subsequent proceedings non est; merits need not be adjudicated where the threshold defect is dispositive.

Conclusions: All subsequent proceedings were held to be nullified and the appeal was allowed on the jurisdictional ground; the remaining merits grounds were rendered academic.

Cross-references and procedural observations

1. The Tribunal explicitly relied on higher-court jurisprudence establishing the non-curable, jurisdictional nature of the section 143(2) notice requirement and treated conflicting or distinguishable authorities as inapplicable on their specific facts.

2. The Tribunal emphasized that assertions of typographical error by the revenue must be substantiated by evidence; unsupported assertions cannot cure absence of statutory compliance.

3. The Tribunal's decision is unanimous in attributing finality to the jurisdictional defect and thereby avoids determination of collateral procedural irregularities (e.g., transfer under section 127) or the substantive merits of the assessment adjustments.

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