Mandatory section 143(2) notice in reassessment is jurisdictional; absence of it renders the assessment and penalty unsustainable.

In reassessment proceedings, failure to issue notice under section 143(2) after notices under sections 147 and 148 was treated as a mandatory jurisdictional defect. The Tribunal held that completion of reassessment only on the basis of sections 148 and 142(1) notices, without section 143(2) scrutiny notice, rendered the reassessment void ab initio and not curable by section 292BB. Because the reassessment order was annulled, the section 271(1)(c) penalty had no independent basis and was deleted as consequential to the invalid assessment.

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Issues: (i) Whether reassessment under the Income-tax Act was valid when no notice under section 143(2) was issued after initiation of proceedings under sections 147 and 148. (ii) Whether the penalty levied under section 271(1)(c) survived after the reassessment was quashed.

Issue (i): Whether reassessment under the Income-tax Act was valid when no notice under section 143(2) was issued after initiation of proceedings under sections 147 and 148.

Analysis: The reassessment proceedings were found to have been completed only on the basis of notices under sections 148 and 142(1), without issuance of notice under section 143(2). The Tribunal treated issuance of notice under section 143(2) as a mandatory jurisdictional requirement for framing reassessment where the return is scrutinised and higher income is proposed. The defect was held not curable by section 292BB. Reliance was placed on binding judicial authority to hold that absence of notice under section 143(2) goes to the root of jurisdiction.

Conclusion: The reassessment was held invalid and quashed as void ab initio, in favour of the assessee.

Issue (ii): Whether the penalty levied under section 271(1)(c) survived after the reassessment was quashed.

Analysis: Once the reassessment order itself was annulled, the penalty had no surviving foundation. The penalty was treated as consequential to the reassessment and incapable of independent survival after the basic assessment order was set aside.

Conclusion: The penalty was deleted, in favour of the assessee.

Final Conclusion: Both appeals were allowed because the reassessment failed for want of mandatory jurisdictional compliance, and the penalty could not survive the collapse of the assessment order.

Ratio Decidendi: In reassessment proceedings, failure to issue notice under section 143(2) within the prescribed framework is a jurisdictional defect that renders the reassessment unsustainable, and any consequential penalty based on such reassessment falls with it.

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