TaxTMI 
TaxTMI 
Deeming Service of Notice in Tax Proceedings Under Income Tax Law : Clause 523 of the Income Tax Bill, 2025 Vs. Section 292BB of the Income-tax Act, 1961
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....pportunity to be heard, thus upholding the principles of natural justice. However, procedural lapses in the service of notices have historically led to litigation, often resulting in assessments being invalidated on technical grounds, even where the assessee had participated in the proceedings. Section 292BB was introduced by the Finance Act, 2008, to address such technical objections and to promote procedural certainty. Clause 523 of the Income Tax Bill, 2025, seeks to carry forward and, in substance, replicate the effect of Section 292BB in the new legislative framework. This commentary provides a comprehensive analysis of Clause 523, its objectives, detailed provisions, practical implications, and a comparative evaluation with Section 29....
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.... relating to an assessment or reassessment, it shall be deemed that any notice required to be served under the Act has been duly served upon him in time as per the provisions of the Act. The legal consequences are twofold: * Deeming Fiction: This provision creates a legal fiction that notice has been properly served, irrespective of actual service, provided the assessee has participated or co-operated. * Preclusion of Objection: The assessee is precluded from taking any objection in any proceeding or inquiry under the Act that the notice was: * not served upon him; * not served upon him in time; * served upon him in an improper manner. This effectively bars the assessee from raising technical pleas regarding notice service after ....
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....re participation is under protest or where the assessee claims ignorance of the legal consequences of participation. * The interaction of this deeming provision with mandatory jurisdictional notices (such as u/s 148 or 143(2) of the 1961 Act) may require judicial clarification, especially where such notices are jurisdictional prerequisites. Practical Implications Clause 523, like its predecessor, has significant practical consequences for both assessees and the tax administration: For Assessees * Assessees must be vigilant in raising objections regarding notice service at the earliest opportunity. Failure to do so before assessment finalization will result in waiver of such objections. * The provision places an onus on assessees an....
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....ities Both provisions state that if an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice required to be served upon him has been duly served in time, and the assessee shall be precluded from objecting that the notice was (a) not served, (b) not served in time, or (c) served in an improper manner. Both also contain an exception for objections raised before completion of assessment or reassessment. Textual Differences * Wording: The language of Clause 523 is almost verbatim to Section 292BB, with minor editorial changes to fit the drafting style of the new Bill. * Placement: Clause 523 is part of the new Income Tax Bill, 2025, which is expe....
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....preted in light of these judicial precedents, given its identical wording and purpose. Potential Areas of Conflict or Reform * Jurisdictional Notices: Courts have held that Section 292BB does not cure the complete absence of a jurisdictional notice (e.g., section 148 or 143(2)), as issuance of such notice is a condition precedent for valid assessment. This distinction may need to be clarified in the new legislation to avoid confusion. * Scope of "Co-operation": The term "co-operation" is not defined, leading to potential disputes over what constitutes sufficient co-operation to trigger the deeming provision. * Participation under Protest: The effect of participation under protest or under mistaken belief may require clarification to ....
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....horities: * Should ensure that notices are issued as required by law, as the provision does not cure the absence of notice. * Can rely on the deeming provision to defend assessments against technical challenges, provided the assessee participated without objection. * Litigation and Compliance: * The provision reduces the scope for litigation on notice service, but may lead to disputes over the timing and nature of objections. Conclusion Clause 523 of the Income Tax Bill, 2025, is a continuation of the legislative policy embodied in Section 292BB of the Income-tax Act, 1961. Both provisions serve to prevent assessees from raising technical objections to notice service after participating in assessment or reassessment proceedings, s....