Reassessment under Sections 147, 144, 144B quashed for failure to issue mandatory Section 143(2) notice

ITAT Raipur allowed the assessee's appeal and quashed the reassessment framed u/s 147 r.w.s. 144 r.w.s. 144B. The Revenue had completed the best judgment reassessment without issuing mandatory notice u/s 143(2), and without informing the assessee that the return was treated as invalid, despite several notices u/s 142(1). Relying on SC in ACIT v. Hotel Blue Moon and Delhi HC in Shaily Juneja, the Tribunal held that issuance of notice u/s 143(2) is sine qua non even in reassessment, rendering the assessment invalid and bad in law.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether reassessment completed under sections 147/144/144B without issuance of notice under section 143(2) is valid in law.

1.2 Whether alleged invalidity of the return filed in response to notice under section 148 dispenses with the mandatory requirement of notice under section 143(2).

1.3 Whether non-issuance of notice under section 143(2) in reassessment proceedings can be cured or condoned, including by application of section 292BB.

1.4 Consequential effect on merits of additions once reassessment is held invalid.

---

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Validity of reassessment under sections 147/144/144B without notice under section 143(2); effect of alleged invalidity of return

Legal framework

2.1 The assessment in question was framed under sections 147 read with 144 and 144B of the Act.

2.2 Section 143(2) mandates issuance of notice to the assessee where the Assessing Officer does not accept the return at its face and proposes scrutiny/assessment under sections 143(3) or 144.

2.3 Sections 142(1) and 143(2) operate as distinct but cumulative statutory requirements: section 142(1) to call for basic details, and section 143(2) to initiate scrutiny and afford opportunity before completing assessment under sections 143(3) or 144.

2.4 Judicial precedents, including the decisions in Hotel Blue Moon and Shaily Juneja and the line of authorities referred to therein, hold that issuance of notice under section 143(2) is "sine qua non" and a jurisdictional requirement for completing scrutiny/best judgment assessments, including in reassessment proceedings under section 147.

Interpretation and reasoning

2.5 The record showed that the assessee had filed a return in response to notice under section 148 dated 03.08.2021.

2.6 The Assessing Officer thereafter issued several notices under section 142(1) and a show cause notice, but no notice under section 143(2) was issued at any stage prior to completion of reassessment.

2.7 The stand of the Assessing Officer, as conveyed through the report of the Departmental Representative, was that since the return filed was "invalid", there was no occasion to issue notice under section 143(2).

2.8 The Court noted that none of the notices issued under section 142(1) or the show cause notice informed the assessee that its return was being treated as invalid or that notice under section 143(2) would not be issued for that reason.

2.9 Having repeatedly invoked section 142(1) in relation to the return filed, the Assessing Officer in substance proceeded on the footing that a return stood filed and was being acted upon; in such a situation, the statutory scheme required that if the return was not to be accepted at face value, notice under section 143(2) had to be issued before resorting to best judgment assessment under section 144.

2.10 The Court emphasized that issuance of notice under section 143(2) is foundational to the "audi alteram partem" requirement and to fair process before framing a scrutiny or best judgment assessment, and that both notices under sections 142(1) and 143(2) are mandatory where the assessment ends under sections 143(3) or 144.

2.11 It was further held, following Hotel Blue Moon and the authorities surveyed in Shaily Juneja and Delhi Kalyan Samiti, that the requirement of notice under section 143(2) is jurisdictional, not a mere procedural formality; omission to issue such notice cannot be dispensed with on the ground of invalidity of return or otherwise.

2.12 The contention that no notice under section 143(2) is necessary when the assessment is framed under section 144, or when the return is treated as invalid, was rejected as contrary to the settled scheme and case law, which hold that whenever the return is not accepted at face value, notice under section 143(2) must precede an assessment under section 143(3) or resort to section 144.

Conclusions

2.13 The reassessment framed under sections 147/144/144B without issuance of mandatory notice under section 143(2) is vitiated and invalid in law.

2.14 The Assessing Officer was not entitled to proceed to best judgment assessment under section 144 without first issuing notice under section 143(2), and the plea of "invalid return" does not dispense with or override this statutory and jurisdictional requirement.

Issue 3: Curability of non-issuance of notice under section 143(2) and role of section 292BB

Legal framework

3.1 Section 292BB creates a deeming fiction regarding proper service of notices where the assessee has participated in the proceedings, but does not cure failure to issue a notice that is jurisdictionally mandatory.

3.2 Judicial authorities referred to in Shaily Juneja and Delhi Kalyan Samiti, including Salarpur Cold Storage and other High Court decisions, hold that section 292BB does not apply to non-issuance of a mandatory notice such as under section 143(2); it only addresses defects in service, timing, or manner of service of a notice that has in fact been issued.

Interpretation and reasoning

3.3 The Court found that in the present case the very issuance of notice under section 143(2) was absent and that the Department had itself conceded non-issuance.

3.4 On the authorities cited, omission to issue notice under section 143(2) constitutes a jurisdictional defect that cannot be treated as a mere procedural irregularity and is not curable under section 292BB or otherwise.

Conclusions

3.5 Failure to issue notice under section 143(2) before completion of reassessment is a fatal jurisdictional defect; it cannot be cured or condoned, and section 292BB has no application where the notice itself was never issued.

Issue 4: Consequential effect on merits of additions and other proceedings

Legal framework

4.1 Once the foundational reassessment order is held invalid, consequential proceedings and additions flowing therefrom cannot survive in law.

Interpretation and reasoning

4.2 Having held the reassessment order under sections 147/144/144B to be invalid, arbitrary and bad in law, the Court observed that all subsequent and dependent proceedings automatically become non est.

4.3 The assessee had raised grounds both on law and on merits; the Court, having allowed the legal ground, considered that adjudication on merits would be purely academic.

Conclusions

4.4 The reassessment order dated 30.03.2022 is quashed as invalid; all consequential proceedings and additions are rendered non est.

4.5 The legal issue is decided in favour of the assessee, and the grounds on merits are treated as academic; the appeal is allowed accordingly.

---