Mandatory notice before invalid return treatment and best-judgment assessment; consequential demand notice cannot survive defective procedure.

Notice or intimation is described as a mandatory precondition before treating a return as invalid under Section 139(9) of the Income-tax Act, 1961, and a specific show-cause notice is required before invoking best-judgment assessment under Section 144. The commentary states that action taken without such prior notice offends natural justice and cannot be sustained as a final adverse order. It further notes that a demand notice under Section 156, being consequential to procedurally defective foundational orders, cannot survive independently and is liable to be quashed, with the matter requiring reconsideration after objections.

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Issues: (i) Whether the order treating the return as invalid under Section 139(9) of the Income-tax Act, 1961 and the assessment made under Section 144 of the Income-tax Act, 1961 were sustainable in the absence of notice or intimation; (ii) whether the demand notice issued under Section 156 of the Income-tax Act, 1961 could be sustained.

Issue (i): Whether the order treating the return as invalid under Section 139(9) of the Income-tax Act, 1961 and the assessment made under Section 144 of the Income-tax Act, 1961 were sustainable in the absence of notice or intimation.

Analysis: The orders under Section 139(9) and Section 144 were passed without prior intimation or a specific show-cause notice. The Court treated notice or intimation as a mandatory precondition for action under Section 139(9), and held that a specific show-cause notice was also necessary before invoking best-judgment assessment under Section 144. The impugned action was found to violate the principles of natural justice.

Conclusion: The orders under Section 139(9) and Section 144 were not sustained as final adverse orders and were to be treated as show-cause notices, with liberty to file objections and have the matter reconsidered in accordance with law.

Issue (ii): Whether the demand notice issued under Section 156 of the Income-tax Act, 1961 could be sustained.

Analysis: Since the foundational orders were found to suffer from procedural infirmity, the consequential demand notice could not stand independently.

Conclusion: The demand notice under Section 156 was quashed.

Final Conclusion: The petitioner obtained limited substantive relief against the consequential demand notice, while the writ petition was otherwise disposed of with directions for fresh consideration after objections.

Ratio Decidendi: A notice or intimation is a mandatory precondition for adverse action under Section 139(9), and a specific show-cause notice is required before best-judgment assessment under Section 144; consequential demand action cannot survive when the foundational procedure is defective.

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