Mandatory Section 143(2) Notice Required Before Assessment Order, Even for Belated Returns Under Section 148

The ITAT Delhi held that issuance of notice under section 143(2) is mandatory before framing an assessment order, even if the return is filed belatedly in response to a notice under section 148. Failure to issue such notice is a jurisdictional error and not a curable defect under section 292BB. Consequently, the assessment order passed without issuing the mandatory notice under section 143(2) was quashed. The assessee's appeal was allowed.

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ISSUES:

Whether the claim of exemption under Section 10(38) of the Income Tax Act on long term capital gains can be disallowed on the basis that other investors indulged in price manipulation and ingenuine LTCG.Whether addition under Section 69C of the Act on assumption of payment of commission for arrangement of bogus LTCG is justified.Validity of reassessment completed without considering return filed in response to notice under Section 148 of the Act.Validity of reassessment proceedings initiated by an Assessing Officer lacking jurisdiction as per pecuniary limits and CBDT instructions.Whether reassessment proceedings initiated without proper application of mind and without compliance with Sections 147/148/151 of the Act are void ab initio.Validity of reassessment proceedings completed without issuance/service of mandatory notice under Section 143(2) of the Act.Whether notice under Section 148 issued after 31.03.2021 without compliance with amended provisions and relevant case law is invalid.Whether addition of sale proceeds treated as unexplained cash credit under Section 68 is sustainable.

RULINGS / HOLDINGS:

The disallowance of exemption under Section 10(38) on the premise of other investors' alleged price manipulation is not upheld as a ground for denial without direct evidence against the assessee.Addition under Section 69C on assumption of commission payments related to bogus LTCG is not sustained without concrete proof.The reassessment completed without considering the return filed in response to notice under Section 148 and without issuing mandatory notice under Section 143(2) is invalid and suffers from jurisdictional error.Reassessment proceedings initiated by an Assessing Officer without jurisdiction as per pecuniary limits and CBDT Instructions No. 1/2011 are invalid.Reassessment proceedings initiated without application of mind and non-compliance with Sections 147/148/151 are void ab initio and liable to be quashed.Issuance of notice under Section 143(2) is mandatory before framing assessment order, even if the return filed in response to Section 148 notice is belated or invalid; failure to do so renders the assessment invalid and not a curable defect under Section 292BB.Notice under Section 148 issued after 31.03.2021 without compliance with amended provisions and relevant judicial decisions is invalid.Addition treating sale consideration as unexplained cash credit under Section 68 is unsustainable as such credits fall outside the ambit of Section 68; invoking wrong section constitutes jurisdictional error incurable under Section 292BB.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, specifically Sections 10(38), 68, 69C, 143(2), 144, 147, 148, 151, and 292BB.The Court relied heavily on precedent, notably the judgment of the Hon'ble Delhi High Court in PCIT vs. Dart Infrabuild P Ltd., which held that issuance of notice under Section 143(2) is mandatory even if the return filed under Section 148 is belated or invalid, and that non-issuance is not a curable defect under Section 292BB.The Court emphasized the principle that jurisdictional defects such as non-issuance of mandatory notices and lack of jurisdiction of the Assessing Officer render proceedings void ab initio.The Court rejected the Revenue's contention that non-issuance of notice under Section 143(2) could be excused on the ground of invalid return, holding that procedural safeguards must be strictly observed.The Court followed a doctrinal approach affirming the mandatory nature of procedural compliance in reassessment proceedings to protect assessee's rights and maintain the integrity of the assessment process.

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