2026 (1) TMI 696 - HC - Income Tax

Reassessment u/s 148 without mandatory Section 143(2) notice invalid; non e-verification of return not fatal

Dominant issue: validity of reassessment initiated under Section 148 in absence of notice under Section 143(2). Reasoning: failure to issue mandatory ... Reopening of assessment - 'reasons to believe' to initiate the reassessment proceedings, though prayed for by the assessee, were never supplied - no notice of the reassessment proceedings was issued to the assessee u/s 143(2) of the Act. HELD THAT:- The objection raised by revenue that the assessee had not confirmed the return filed in response to the reassessment notice issued under Section 148 of the Act, we find, the CIT (Appeals) and the Tribunal have dealt with that issue and found that the assessing officer has made the computation of the income of the assessee not on the strength of any other material but primarily on the strength of the facts disclosed in the physical return filed. Inferentially, it may be observed, the reasoning of the CIT (Appeals) as confirmed by the Tribunal appears to be that though the return filed through physical mode may not have been confirmed through electronic mode at the relevant time, at the same time, substantially, procedural requirement stood fulfilled inasmuch as the assessing officer himself made the computation of income on the basis of the figures disclosed in the return filed through the physical mode. Tribunal had noted, upon such defect being pointed out, the next date itself, the assessee e-verified the same. In Assistant Commissioner of Income Tax and Another vs Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] it has been held, notice under Section 143(2) is not procedural and omission to serve that notice is not curable. Requirement of its issuance cannot be dispensed with. Decided against revenue. Issues: (i) Whether the ITAT erred in not holding the return filed in response to notice under Section 148 as invalid/non-est because it was filed beyond 30 days and not e-verified; (ii) Whether ITAT erred in affirming quashing of reassessment under Section 147 r.w.s.144B by holding that computation based on the return required issuance of notice under Section 143(2) despite alleged non-est return; (iii) Whether ITAT erred in ignoring GKN principle that after filing a valid ITR assessee can seek reasons for reopening; (iv) Whether ITAT erred in overlooking that adverse findings were communicated through show cause notice under Section 142(1) r.w.s.144 despite alleged non-est return; (v) Whether ITAT erred in affirming quashing of assessment passed u/s 147 r.w.s.144 r.w.s.144B while assessment order used those provisions.Issue (i): Whether the return filed in response to notice under Section 148 was invalid/non-est because filed beyond the stipulated 30 days and not e-verified.Analysis: The facts show original return was filed earlier and a return was filed on response to reassessment notice; the assessing officer in reassessment computed income on the basis of the figures disclosed in the physical return. The appellate authority and the Tribunal considered the lack of e-verification and the timeline but noted the assessing officer relied on the return to compute income and that the assessee e-verified the return subsequently.Conclusion: In favour of Assessee.Issue (ii): Whether issuance of notice under Section 143(2) was mandatory despite the assessing officer having made computation from the return filed in reassessment proceedings.Analysis: There is no dispute that no notice under Section 143(2) was issued. The authorities concluded that omission to issue the statutory notice was material; precedent recognising non-curability of omission to serve notice under Section 143(2) was treated as applicable, and reassessment was set aside for lack of that notice.Conclusion: In favour of Assessee.Issue (iii): Whether the ITAT erred by not applying the principle that a taxpayer filing a valid ITR can seek reasons for reopening (GKN principle).Analysis: The appellate findings recorded that the reasons to believe were not supplied to the assessee despite being prayed for; the Tribunal and CIT(A) relied on absence of relevant procedural compliance by the revenue when deciding the legality of reassessment.Conclusion: In favour of Assessee.Issue (iv): Whether adverse facts and findings communicated via show cause notice under Section 142(1) r.w.s.144 cured the alleged non-est status of the return.Analysis: The appellate authorities found that the assessing officer's computation was based on the return and not on independent material; absence of Section 143(2) notice remained decisive despite any show cause communication under Section 142(1).Conclusion: In favour of Assessee.Issue (v): Whether quashing of the assessment under Sections 147 r.w.s.144 r.w.s.144B was erroneous because the assessment order invoked those provisions.Analysis: The authorities considered the recitation of provisions in the assessment order but focused on the procedural requirement of issuing notice under Section 143(2) and on the reliance on the return for computation; the absence of the mandatory notice led to setting aside the reassessment despite the provision identifiers used in the assessment order.Conclusion: In favour of Assessee.Final Conclusion: The appellate and tribunal conclusions that the reassessment proceedings were vitiated by omission to issue the mandatory notice under Section 143(2) and that the assessing officer's reliance on the return did not cure that omission are upheld, resulting in dismissal of the revenue's appeal.Ratio Decidendi: Omission to issue the mandatory notice under Section 143(2) of the Income-tax Act is not curable, and where reassessment proceedings rest primarily on a return without issuance of that statutory notice, the reassessment is liable to be quashed.