2026 (1) TMI 1107 - AT - Income Tax

Non-issuance of notice under section 143(2) invalidates assessment and results in deletion of section 271B penalty

Return filed in response to a notice under section 142(1) is valid and the assessing officer is statutorily obliged to issue a notice under section 143(2) ... Assessment framed u/s 144 - non issuance of the statutory notice u/s 143(2) after a return filed in response to notice u/s 142(1) - Statutory mandate and jurisdictional requirement for issuing notice under section 143(2) - Principle that omission to issue mandatory notice - Penalty u/s 271B - maxim “Sublato fundamento cadit opus” HELD THAT:- Return filed by the assessee is valid. Notice u/s 143(2) of the Act is the starting point of assessment proceedings, whereby assessing officer seeks documents/ evidences from the assessee to support the claims made in the return of income. On perusal of provisions contained in subsection (2) of section 143 it is stated that the provisions are mandatory in nature and Legislature has cast duty upon the assessing officer to apply mind to the material on record and after being satisfied with regard to escaped income is required to serve notice specifying particulars of such claim. Therefore, after receipt of return of income in response to notice u/s 142(1) it is mandatory for the AO to serve a notice, under sub-section (2) of section 143 of the Act. As find that the return of income filed by the assessee is duly forming part of the reply filed in response to the show-cause notice and the same is duly accepted by the AO. Therefore, once the return of income is accepted by the assessing officer, the assessing officer is bound to issue notice u/s 143(2) for the furtherance of the proceedings. Issue under consideration is squirely covered in favour of the assessee by the judgement in the case of Shri Haresh Jayantibhai Rathod [2025 (5) TMI 1869 - ITAT RAJKOT] Since the assessing officer has not issued the notice u/s.143(2) of the Act, which is statutory notice, which should be issued by the assessing officer, invariably to acquire the jurisdiction to frame the assessment order. Since, no notice has been issued to the assessee u/s. 143(2) of the Act, therefore following the binding precedents in the case of Haresh J Rahtod [2025 (5) TMI 1869 - ITAT RAJKOT] allow the appeal of the assessee. Penalty u/s 271B - assessee failed to get his accounts audited u/s 44AB - HELD THAT:- As we quashed the assessment framed by the assessing officer for assessment year 2017-18, therefore, penalty imposed by the assessing officer does not have leg to stand. Once the foundation fails, the superstructure also fails, that is, the penalty under section 271B of the Act, also is to be deleted. We rely on the legal maxim “Sublato fundamento cadit opus” (meaning thereby that foundation being removed, structure /work falls). Hence the initial action of the assessing officer (in making the assessment without issuing notice u/s 143(2) itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. Both of appeals filed by the assessee are allowed. Issues: (i) Whether an assessment framed under section 144 of the Income-tax Act, 1961, without issuance of the statutory notice under section 143(2) after a return filed in response to notice under section 142(1), is valid; (ii) Whether penalty under section 271B survives when the underlying assessment is quashed for non-issuance of notice under section 143(2).Issue (i): Whether an assessment framed without issuing notice u/s 143(2) after the assessee filed return in response to notice u/s 142(1) is valid.Analysis: The Tribunal examined the statutory scheme where a return filed in response to a notice under section 142(1) engages the Assessing Officer's duty to issue notice under section 143(2) to acquire jurisdiction for assessment. The Tribunal relied on coordinate-bench authority and the mandatory character of section 143(2), noting the return was filed, accepted and formed part of the record but no notice u/s 143(2) was issued prior to framing assessment u/s 144.Conclusion: The assessment framed without issuance of notice u/s 143(2) is quashed; decision in favour of the assessee.Issue (ii): Whether the penalty under section 271B can stand when the foundational assessment is quashed for lack of notice u/s 143(2).Analysis: The Tribunal applied the principle that a consequential penalty based on an invalid assessment falls with the underlying order (sublato fundamento cadit opus) and observed that if the foundational assessment is void for want of jurisdiction, the penalty has no independent leg to stand on.Conclusion: The penalty under section 271B is deleted; decision in favour of the assessee.