Reassessment quashed for failure to issue mandatory notice under section 143(2); section 292BB cannot cure absence

HC held reassessment proceedings invalid and quashed them for failure to issue the mandatory notice under section 143(2). The court reaffirmed that compliance with s.143(2) is mandatory for reassessment; the defect conceded by the revenue was fatal. Section 292BB could not cure the defect because it applies only to defects in manner of service where a notice has emanated from the department; it does not validate complete absence of a departmental notice. Consequently, reassessment action was set aside on that short ground.

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Issues Involved:

1. Validity of reassessment action under Section 147/148 of the Income Tax Act, 1961.
2. Compliance with Section 143(2) of the Income Tax Act, 1961.
3. Applicability of the decision in Ashok Chaddha vs. Income-tax Officer to reassessment proceedings.

Issue-Wise Detailed Analysis:

1. Validity of Reassessment Action under Section 147/148 of the Income Tax Act, 1961:

The writ petitions impugn the reassessment action initiated by the respondents through notices dated 27 March 2022 and 26 July 2022 under Section 147/148 of the Income Tax Act, 1961. The petitioners also challenge the final and draft orders of assessment drawn pursuant to these notices.

2. Compliance with Section 143(2) of the Income Tax Act, 1961:

The principal ground of challenge to the reassessment action was based on the failure of the respondents to comply with the requirements of Section 143(2) of the Act. The petitioners contended that a failure to issue a notice under this provision would render the entire proceedings invalid. The court noted that the mandatory imperatives of Section 143(2) and its applicability to reassessment action had been consistently upheld in several judgments.

A significant passage from a recent decision in Pr. Commissioner of Income Tax-Central-1 vs. Grant Express Developers Pvt Ltd was cited, which emphasized that the absence of notice under Section 143(2) would render the assessment order defective. The court also referenced the Supreme Court's decision in Commissioner of Income-tax v. Laxman Das Khandelwal, which stated that the issuance of notice under Section 143(2) is a prerequisite, and its absence would invalidate the entire proceedings.

The court reiterated this view in Principal Commissioner of Income-Tax vs. Dart Infrabuild Pvt Ltd, emphasizing that the absence of notice under Section 143(2) impregnates the proceedings with a jurisdictional defect, rendering them invalid.

3. Applicability of the Decision in Ashok Chaddha vs. Income-tax Officer to Reassessment Proceedings:

The respondents contended that the decision in Ashok Chaddha vs. Income-tax Officer, which dealt with the necessity of issuing a notice under Section 143(2) in the context of Section 153A, should apply to the present case. However, the court distinguished the facts, noting that Ashok Chaddha was concerned with assessments predicated upon a search and regulated by Section 153A, where the issuance of a notice under Section 143(2) was not deemed mandatory.

The court observed that the decision in Ashok Chaddha was not applicable to reassessment proceedings under Section 147/148. It cited several decisions where it was held that a notice under Section 143(2) is mandatory in reassessment proceedings. This view was also supported by the decision in Commissioner of Income-Tax vs. Delhi Kalyan Samiti, which established that the failure to issue a notice under Section 143(2) when the return filed by an assessee is not accepted at face value is fatal to the reassessment order.

Conclusion:

The court found the failure to comply with Section 143(2) to be a valid ground for quashing the reassessment action. Consequently, the writ petitions were allowed, and the impugned notices under Section 147/148 dated 30.03.2021 and 30.05.2022, as well as the orders of assessment dated 27.03.2022 and 26.07.2022, were quashed.

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