Return filed two days late to section 148 notice valid; assessment without section 143(2) notice quashed

ITAT Delhi allowed the assessee's appeal, holding that a return of income filed in response to notice u/s 148 cannot be treated as invalid merely because it was filed two days beyond the date of issue of notice, particularly when there was no delay from the date of actual receipt. The Tribunal further held that issuance and service of notice u/s 143(2) is mandatory even where the return in response to notice u/s 148 is belated. In the absence of such notice, the assessment order u/s 144 was quashed as invalid.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a return of income filed in response to a notice under section 148, though belated vis-à-vis the time mentioned in the notice, could be treated as an invalid return for purposes of completing assessment under section 144.

1.2 Whether issue and service of notice under section 143(2) is mandatory before completing an assessment under section 144 pursuant to a notice under section 148, even where the return is filed belatedly.

1.3 Consequence in law of completing assessment under section 144 without issuance of notice under section 143(2) when a return exists on record.

1.4 Necessity of adjudicating grounds on merits when the assessment is set aside on a technical/jurisdictional ground.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of return filed belatedly in response to notice under section 148

Interpretation and reasoning

2.1 The Assessing Officer recorded in the assessment order that the assessee had failed to furnish the return of income for the year and therefore proceeded to complete a best judgment assessment under section 144.

2.2 The record showed that the assessee had filed a return of income on the e-filing portal on 30.04.2022 in response to a notice under section 148 dated 29.03.2022. This was beyond the 30 days mentioned but was only by two days from the date of issue, and there would be no delay if reckoned from the date of receipt of notice.

2.3 The Tribunal noted that the return so filed appeared on the e-filing portal as a valid return and held that the act of the Assessing Officer in treating such belated filing as an invalid return was contrary to the provisions of the Act.

2.4 It was further held that a return of income filed in response to a notice under section 148 cannot be declared invalid merely because it is filed belatedly beyond the period mentioned in the notice, in the factual matrix of a marginal delay as in the present case.

Conclusion

2.5 The return of income filed by the assessee in response to the notice under section 148 was a valid return on record and could not be ignored or treated as invalid for completing assessment under section 144.

Issue 2 - Mandatory nature of notice under section 143(2) where return is filed pursuant to section 148, even if belated

Legal framework discussed

2.6 The Tribunal referred to the ratio that notice under section 143(2) is mandatory where an assessment is framed pursuant to a notice under section 148, irrespective of the fact that the return in response to such notice is filed belatedly.

2.7 It was noted that non-issuance of notice under section 143(2) is not a curable defect under section 292BB when the jurisdictional requirement itself is not satisfied.

Interpretation and reasoning

2.8 The Tribunal observed that once a return is filed in response to a notice under section 148 and is available on record as a valid return, the Assessing Officer is required in law to issue a notice under section 143(2) before completing the assessment.

2.9 Reliance was placed on binding judicial precedents to hold that the issue of notice under section 143(2) is mandatory even in cases where the return pursuant to section 148 is filed belatedly, and that failure to do so vitiates the reassessment proceedings.

2.10 The Tribunal further took note that in earlier decisions following the same principle, orders passed under section 144 had been quashed where no notice under section 143(2) was served, even if the return was belated.

Conclusion

2.11 The issue and service of notice under section 143(2) was a mandatory pre-condition for framing the assessment pursuant to the notice under section 148; the Assessing Officer could not dispense with this requirement on the ground that the return was filed belatedly.

Issue 3 - Validity of assessment under section 144 in absence of notice under section 143(2)

Interpretation and reasoning

2.12 The Tribunal found as a fact that the Assessing Officer completed the assessment under section 144 without issuing any notice under section 143(2) despite there being a valid return of income on record.

2.13 In light of the legal position that notice under section 143(2) is mandatory and not a mere procedural formality, the Tribunal held that the assessment framed under section 144 without such notice is invalid in law.

2.14 It was also implicitly accepted that such a defect, being jurisdictional, is not curable, and therefore the assessment cannot be sustained on the ground that addition on merits was otherwise justified.

Conclusion

2.15 The assessment order passed under section 144 without issuance of notice under section 143(2), despite a valid return being on record, was invalid and liable to be set aside. Consequently, the appellate order affirming such assessment was also set aside.

Issue 4 - Necessity of deciding grounds on merits after setting aside the assessment on technical ground

Interpretation and reasoning

2.16 Having set aside the assessment order on the technical/jurisdictional ground of non-issuance of notice under section 143(2), the Tribunal observed that adjudication of the remaining grounds on merits was not required.

Conclusion

2.17 The Tribunal refrained from examining the grounds on merits relating to the addition under section 69A since the assessment itself stood quashed on a technical ground, and the appeal was partly allowed to that extent.

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