Issuance of notice u/s 143(2) mandatory for assessments under section 144; assessments without it are void ab initio

ITAT Raipur (AT) held that issuance of notice u/s 143(2) is mandatory for assessments framed u/s 144 (and u/s 143(3)); where such notice was never issued, the assessment completed u/s 144 on 24.11.2019 was arbitrary, bad in law and void ab initio and was therefore quashed, decision rendered in favour of the assessee.

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ISSUES PRESENTED AND CONSIDERED

1. Whether issuance of a notice under section 143(2) of the Income Tax Act is a mandatory prerequisite (sine qua non) to framing an assessment or reassessment under section 143(3) / section 144 / section 147 (read with applicable provisions) where the return is repudiated and assessment is sought to be completed by the Assessing Officer.

2. Whether the deeming provision in section 292BB (relating to deemed service by conduct/co-operation) can cure the failure to issue (as distinct from failure to serve) a notice under section 143(2) in reassessment proceedings.

3. Consequence of absence of issuance and service of notice under section 143(2) on the validity of the assessment/reassessment order and on all consequential proceedings.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Mandatory nature of notice under section 143(2) before framing assessment/reassessment

Legal framework: The assessment scheme contemplates that when the return filed is not accepted on its face or a return is filed in response to a reopening notice, the Assessing Officer is required to issue a notice under section 143(2) and proceed to complete assessment under section 143(3) (or follow analogous machinery provisions when section-specific cross-references apply), failing which jurisdiction to make the assessment is vitiated.

Precedent treatment: This view has been consistently adopted in authoritative decisions of higher fora which hold that issuance of the section 143(2) notice is mandatory where the return is not accepted and an enquiry/assessment under section 143(3) (or analogous provisions) is to be completed; omission is not a mere procedural irregularity and is not curable.

Interpretation and reasoning: The Tribunal reasons that the statutory scheme imposes a duty on the Assessing Officer to apply mind and inform the assessee of particulars by issuing a section 143(2) notice so that the assessee gets an opportunity to produce material/support the return or explain discrepancies. Where the Assessing Officer repudiates a return and proceeds to complete assessment under section 144 (or under reassessment provisions read with section 144/143 machinery), the absence of a prior section 143(2) notice deprives the officer of jurisdiction because the foundational step of statutory notice and opportunity to be heard is missing.

Ratio vs. Obiter: Ratio - issuance of section 143(2) notice is jurisdictional and mandatory before completing assessment/reassessment where the return is not accepted on its face; absence thereof renders the assessment void. Obiter - factual permutations such as whether a formal waiver occurred may be considered in other fact patterns.

Conclusion: The Tribunal holds that failure to issue the mandatory notice under section 143(2) invalidates the assessment/reassessment completed by the Assessing Officer and such assessment is quashed.

Issue 2 - Effect of section 292BB (deeming of service by conduct) on failure to issue notice under section 143(2)

Legal framework: Section 292BB creates a deeming fiction that where an assessee appears or cooperates in proceedings, notices required to be served shall be deemed to have been duly served; the proviso preserves the assessee's right to object if raised before completion of assessment/reassessment.

Precedent treatment: Higher decisions distinguish failure of service from failure to issue. The deeming fiction in section 292BB addresses defects in service (i.e., notice issued but not properly served), but does not absolve the Assessing Officer of the statutory obligation to issue the notice in the first place; the requirement to issue is jurisdictional and not cured by constructive service.

Interpretation and reasoning: The Tribunal adopts the distinction that section 292BB deals with service by conduct and cannot be invoked to validate an assessment where no notice was ever issued. The deeming fiction cannot supply the jurisdictional act of issuance; absent issuance, the assessee lacks notice of specific particulars and the procedural foundation for assessment is missing.

Ratio vs. Obiter: Ratio - section 292BB cannot cure non-issuance of a mandatory notice required for jurisdictional exercise; it only applies where a notice has been issued but service is challenged.

Conclusion: The Tribunal concludes that the deeming provision cannot validate proceedings where the Assessing Officer never issued a section 143(2) notice; section 292BB is inapplicable to cure failure to issue.

Issue 3 - Consequences of omission to issue/serve section 143(2) notice: validity of assessment and downstream proceedings

Legal framework: A jurisdictional defect (non-issuance of a mandatory notice) vitiates the order and renders it void ab initio; consequently, any proceedings or orders founded on the void assessment stand dissolved for want of legal basis.

Precedent treatment: Authoritative rulings establish that omission to issue a mandatory notice renders the assessment void and any consequent notices/orders (including reassessment orders, consequential assessments, or recovery actions) lack legal validity.

Interpretation and reasoning: Applying the settled principle, the Tribunal finds documentary/report evidence from the Assessing Officer confirming that no notice under section 143(2) was issued. In those circumstances the reassessment/assessment completed under the challenged provisions is declared invalid, arbitrary and void ab initio. The Tribunal further reasons that once the foundational assessment is quashed, subsequent or consequential proceedings are non-est and cannot stand.

Ratio vs. Obiter: Ratio - non-issuance of mandatory section 143(2) notice renders the assessment/reassessment void ab initio and quashes all consequential proceedings; Obiter - none material beyond application to the facts.

Conclusion: The Tribunal quashes the assessment/reassessment for failure to issue section 143(2) notice and holds all downstream proceedings to be without legal validity; as the legal issue is decided in favour of the assessee, merits grounds are rendered academic.

Cross-references and Application to Present Facts

On the facts before the Tribunal, the Assessing Officer's report and record confirmed that no notice under section 143(2) was issued to the assessee prior to completion of assessment/reassessment. Following the legal framework and authoritative precedents, the Tribunal applied the above ratio and quashed the assessment/reassessment as void ab initio and held consequential proceedings to be non-est.

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