2025 (9) TMI 218 - AT - Income Tax

Reassessment under section 147 r.w.144B quashed for failure to prove service of notice under section 143(2)

ITAT, Raipur - AT held reassessment framed under s.147 r.w.s.144B invalid and quashed where department failed to prove service of notice under s.143(2); ... Reassessment of assessment u/s 147 - department has failed to produce any proof as regards the service of notice u/s. 143(2) - HELD THAT:- Reassessment framed by the A.O vide his order passed u/s. 147 r.w.s 144B without any service of notice u/s. 143(2) to the assessee, is held to be invalid, arbitrary and bad in law, hence quashed. Appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether completion of reassessment under section 147 read with section 144B of the Income Tax Act is valid in the absence of issuance and service of notice under section 143(2) after filing of return in response to notice under section 148. 2. Whether failure to issue and serve notice under section 143(2) is a curable procedural irregularity or a jurisdictional defect rendering reassessment void ab initio, and the consequent legal effect on all consequential and merit-based additions. ISSUE-WISE DETAILED ANALYSIS Issue 1: Necessity of notice under section 143(2) for valid reassessment under section 147/144B Legal framework: Sections 143(2), 147, 144B and 148 of the Income Tax Act prescribe the procedure for scrutiny and reassessment; section 143(2) requires issuance of a notice (with reasons where required) to enable assessment under section 143(3). Where a return is filed in response to a notice under section 148, the Assessing Officer must, before completing reassessment, issue notice under section 143(2) to examine the return. Precedent treatment: The Court relied upon higher and coordinate judicial authorities holding that issuance of notice under section 143(2) is mandatory and foundational for assumption of jurisdiction in assessment/reassessment proceedings. These authorities were followed for their ratio that omission to issue such notice is not a curable procedural lapse. Interpretation and reasoning: The Court examined the record and the A.O.'s report which admitted issuance of a notice but recorded that there were 'no details of its service' and no proof of service could be produced. The Court reasoned that mere generation/recording of a notice without proof of service is insufficient because service is essential to afford the assessee opportunity to prepare defence and participate in proceedings - a requirement rooted in principles of natural justice. The Court observed that where the A.O repudiates or treats the return as not acceptable on its face, a formal notice under section 143(2) within prescribed time is indispensable before framing an order under section 143(3) or reassessment under section 147/144B. Ratio vs. Obiter: Ratio - The failure to issue and serve notice under section 143(2) after filing of return in response to reopening notice renders the assumption of jurisdiction invalid and the reassessment void. Obiter - Observations on procedural mechanisms for tracing dispatch registers and administrative practices for notice service (fact-specific and not general rule). Conclusions: The reassessment completed without service of a valid notice under section 143(2) is invalid, arbitrary and void ab initio; therefore the reassessment order must be quashed. Issue 2: Whether failure to issue/serve notice under section 143(2) is curable (role of deeming provision) and the effect on consequential merit issues Legal framework: Section 292BB creates a deeming fiction regarding service of notices where the assessee has appeared or cooperated, subject to an exception if objection is raised before completion of assessment. The interplay between sections 143(2), 148 and 292BB must be considered when service is disputed. Precedent treatment: The Court referenced decisions of appellate and high courts distinguishing the scope of the deeming fiction: section 292BB can apply to cure defects of service but cannot cure failure to issue the jurisdictional notice itself. The Court followed the line of authority that treats omission to issue a notice under section 143(2) as a jurisdictional defect not remedied by section 292BB. Interpretation and reasoning: The Court distinguished defects of service (which the deeming fiction may address where the assessee has participated and not objected) from non-issuance of notice (a substantive omission). Since the record contained no proof of service and the A.O. admitted lack of service details, the deeming fiction could not be invoked to validate the reassessment. The Court also emphasized that where an assessee raises objection to notice/service during proceedings, the proviso to section 292BB prevents the deeming fiction from operating. Ratio vs. Obiter: Ratio - Section 292BB cannot validate an assessment where the Assessing Officer failed to issue the mandatory notice under section 143(2); absence of issuance/service is fatal. Obiter - Discussion of various factual permutations under which section 292BB might apply (illustrative, not dispositive). Conclusions: Failure to issue/service of the mandatory notice is not curable by section 292BB; reassessment is therefore jurisdictionally invalid. Given quashing of reassessment, all consequential additions and merit-based grounds become academic and cannot survive. Issue 3: Consequence of quashing reassessment on other appellate grounds Legal framework: Where an assessment or reassessment order is held void for want of jurisdictional compliance, consequential assessments/additions founded on that order typically fall away; appellate consideration of merits becomes academic unless reassessment is valid. Precedent treatment: The Court followed established practice that once foundational jurisdictional infirmity is established and the reassessment order is quashed, all other proceedings stemming from that reassessment lapse. Interpretation and reasoning: The Court held that because the reassessment order was quashed on the jurisdictional ground of non-issuance/non-service of notice under section 143(2), the additions upheld by the lower authority require no adjudication on merits; they stand extinguished as non-est. Ratio vs. Obiter: Ratio - Quashing of reassessment on jurisdictional ground renders subsidiary merit-based grounds academic and results in allowing the appeal; Obiter - No detailed adjudication of the factual sufficiency of evidentiary materials supporting specific additions was undertaken. Conclusions: The appeal is allowed on jurisdictional grounds; all merit-based grounds raised by the assessee are rendered academic and are not decided on merits. Cross-references For interrelated points: the analysis of Issue 1 (mandatory nature of notice under section 143(2)) and Issue 2 (non-availability of section 292BB as a cure for non-issuance) are interdependent and together form the core ratio that led to the quashing of the reassessment and disposal of all other grounds as academic.