Mandatory section 143(2) notice and co-terminus appellate powers governed the reassessment challenge and remand issue.

The first appellate authority could set aside an ex parte assessment for denovo adjudication where additional documents such as ledgers, invoices, gate passes, weighment slips and bank records required fresh verification; the remand was treated as a proper exercise of co-terminus appellate powers, so the Revenue's challenge failed. A reassessment was also held unsustainable because no notice under section 143(2) had been issued; that notice is mandatory for validity, and section 292BB cures only defects in service, not complete non-issuance. The reassessment was invalid and the addition was deleted in favour of the assessee.

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Issues: (i) Whether the first appellate authority was justified in setting aside the assessment for denovo adjudication on the basis of additional documentary evidence and in exercise of appellate powers under section 251(1)(a) of the Income-tax Act, 1961. (ii) Whether the reassessment was vitiated for want of notice under section 143(2) of the Income-tax Act, 1961 despite the assessee's participation in the proceedings.

Issue (i): Whether the first appellate authority was justified in setting aside the assessment for denovo adjudication on the basis of additional documentary evidence and in exercise of appellate powers under section 251(1)(a) of the Income-tax Act, 1961.

Analysis: The assessee produced ledger accounts, tax invoices, gate passes, weighment slips, audited financial statements, tax audit report, bank statements and return acknowledgments before the first appellate authority. The assessment had been completed ex parte without proper examination of those materials. The appellate authority, acting within its co-terminus powers, directed fresh verification by the Assessing Officer. Such remand was treated as a legitimate exercise of appellate jurisdiction because the factual claims required scrutiny at the assessment stage.

Conclusion: The setting aside of the assessment for denovo adjudication was upheld and the Revenue's challenge failed.

Issue (ii): Whether the reassessment was vitiated for want of notice under section 143(2) of the Income-tax Act, 1961 despite the assessee's participation in the proceedings.

Analysis: The record showed that no notice under section 143(2) had been issued. The statutory requirement of such notice is mandatory for a valid reassessment, and section 292BB cures only defects in service, not complete absence of notice. On that basis, the reassessment proceedings were held to be fundamentally defective and incapable of being sustained.

Conclusion: The reassessment was held invalid and the addition was deleted in favour of the assessee.

Final Conclusion: The Revenue's appeal failed, while the assessee's cross objection succeeded, resulting in deletion of the addition and invalidation of the reassessment.

Ratio Decidendi: A reassessment under the Income-tax Act, 1961 cannot be sustained in the complete absence of a notice under section 143(2), and section 292BB does not cure such total non-issuance of notice.

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