2025 (8) TMI 1712 - AT - Income Tax

Assessment under section 143(3) held void ab initio where section 143(2) notice lacked CBDT-prescribed format

ITAT DELHI - AT held that an assessment framed u/s 143(3) based on a notice issued u/s 143(2) which did not follow the CBDT-prescribed format is void ab ... Validity of the assessment based on the notice issued u/s 143(2) the same is admitted for adjudication - contention of the assessee that the notice issued u/s 143(2) dated 30.06.2022 by the AO is in violation of the CBDT instruction dated 23.06.2017 as it is not in the specified format - HELD THAT:- Similar view has been taken by the Kolkata Bench of the Tribunal in the case of Sajal Biswas [2025 (3) TMI 1494 - ITAT KOLKATA], Srimanta Kumar Shit [2024 (11) TMI 970 - ITAT KOLKATA], Tapas Kumar [2025 (3) TMI 1481 - ITAT KOLKATA]. We observed that coordinate bench of Delhi Bench had taken similar view in the case of Anita Garg [2025 (7) TMI 1907 - ITAT DELHI] Therefore, facts being identical respectfully following the above said decisions, we hold that the assessment framed by the AO u/s 143(3) pursuant to the notice issued u/s 143(2) which was not in the prescribed format as notified by the CBDT, is bad in law and void ab initio and the same is hereby quashed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under Section 143(2) issued in a format not conforming to CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017 is invalid and, if so, whether the assessment framed pursuant thereto is void ab initio. 2. Whether an additional ground challenging the validity of a Section 143(2) notice for non-conformity with the CBDT Instruction (a jurisdictional objection) can be admitted and raised for the first time before the Appellate Tribunal. 3. Whether additions to income based on an alleged entry in a WhatsApp chat (without material linking receipt to the assessee) can be sustained - specifically, the validity of addition of Rs. 1,77,00,000 as unexplained cash on that basis. (Note: this ground was raised by the assessee but not adjudicated on merits after the assessment was quashed.) ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of notice under Section 143(2) vis-à-vis CBDT Instruction and consequence for assessment framed thereunder Legal framework: CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017 prescribes mandatory formats for notices issued under Section 143(2) - distinguishing limited scrutiny, complete scrutiny and compulsory manual scrutiny. The CBDT issues such instructions under Section 119 of the Income-tax Act. A valid notice under Section 143(2) is a precondition for jurisdiction to proceed to scrutiny assessment under Section 143(3). Precedent treatment: The Court treated the CBDT Instruction as binding on assessing authorities, following apex-court authority establishing the binding character of Board instructions under Section 119. The Tribunal relied on a series of coordinate-bench decisions that held non-conforming 143(2) notices invalid and consequent assessments void (decisions of co-ordinate benches referenced in the judgment). Interpretation and reasoning: The Tribunal observed that the notice dated 30.06.2022 did not conform to the prescribed formats and did not specify whether the scrutiny was limited, complete or compulsory manual. That fact was not controverted by Revenue. The Tribunal reasoned that the Board's instruction is mandatory and administrative compliance is required; violation of the mandatory format goes to jurisdiction because the notice is the foundational step conferring power to proceed with scrutiny assessment. The Tribunal accepted that a defect in the notice format is not a mere technicality but a jurisdictional defect rendering the notice invalid and all consequential proceedings (including the assessment order) void ab initio. Ratio vs. Obiter: Ratio - The Tribunal's holding that a Section 143(2) notice not issued in the prescribed CBDT format is invalid and that an assessment framed pursuant to such invalid notice is void ab initio. This is the operative legal conclusion on which the appeal was allowed. The Tribunal expressly followed coordinate-bench precedents and applied the principle as binding for the facts at hand. No separate obiter pronouncement was relied upon to decide the main issue. Conclusions: The notice under Section 143(2) not in the prescribed format was held invalid. The assessment order passed under Section 143(3) pursuant to that notice was quashed as void ab initio. The additional ground challenging the notice was allowed and the appeal was partly allowed on that ground. Issue 2 - Admissibility of additional ground raising jurisdictional defect at appellate stage Legal framework: Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 allows the Tribunal to admit additional grounds in appropriate cases; principles permit raising jurisdictional questions at appellate stage since they go to the root of the matter. Precedent treatment: The Tribunal admitted and relied on established precedents recognizing that questions of jurisdiction can be raised for the first time on appeal (citing Supreme-court and High-court authorities and prior Tribunal decisions). The judgment cited decisions holding that legal issues where facts are on record and no fresh factual investigation is required may be entertained at appellate stage. Interpretation and reasoning: The Tribunal accepted the assessee's submission that the additional ground raised a pure question of law (jurisdictional defect) and that all necessary facts were on record. On that basis, it admitted the additional ground for adjudication, observing that coordinate benches have entertained and decided similar additional grounds. The Tribunal applied settled principles that permit admission of jurisdictional objections at appellate levels to prevent enforcement of void proceedings. Ratio vs. Obiter: Ratio - The admission of the additional ground challenging validity of the Section 143(2) notice as a permissible appellate ground is part of the decision's operative rationale. The Tribunal's allowance to admit and decide the additional ground is an authoritative application of appellate practice in jurisdictional matters. Conclusions: The additional ground challenging non-conformity of the Section 143(2) notice with the CBDT Instruction was admitted for adjudication; this admission was proper because the issue was purely legal and went to jurisdiction. Issue 3 - Merits of addition of unexplained cash based on WhatsApp chat (evidential sufficiency) - not adjudicated on merits Legal framework: Additions to income require nexus between alleged receipt and the assessee; documentary or corroborative evidence is necessary to establish that a particular entry or communication denotes receipt by the assessee. Precedent treatment: The assessee challenged the addition as arbitrary and unsupported; the Tribunal noted the grounds raised but did not reach merits because the foundational assessment was quashed on jurisdictional grounds. Coordinate-bench decisions were cited in support of admitting the jurisdictional ground; no adjudication of evidentiary sufficiency occurred in the present judgment. Interpretation and reasoning: The Tribunal expressly declined to decide other grounds, including the challenge to the addition of Rs. 1,77,00,000, because quashing of the assessment made further adjudication academic at that stage. The Tribunal left those contentions open for decision if required in future proceedings. Ratio vs. Obiter: Obiter - Any observations about the unexplained cash addition are not judicial determinations on the merits. The Tribunal's refusal to adjudicate constitutes an express reservation rather than substantive reasoning on that issue. Conclusions: The addition based on the WhatsApp chat was not decided; the Tribunal quashed the assessment on the notice-format ground and left other grounds, including the evidentiary sufficiency of the alleged WhatsApp material, undecided and open for future consideration if necessary. Cross-references and Applied Outcomes 1. The Tribunal's determination that non-conforming Section 143(2) notices are invalid follows and respectfully applies coordinate-bench decisions that treated the CBDT Instruction as mandatory and binding under Section 119, and the Apex-court principle that Board instructions must be followed by income-tax authorities. 2. Admission of the additional ground as a jurisdictional question followed established appellate practice; because the Tribunal quashed the assessment on that ground, all other grounds were not adjudicated and remain open for determination in subsequent valid proceedings (if any).