TaxTMI 
TaxTMI 
2026 (7) TMI 1968
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.... constituted by the Hon'ble President vide his order dated 10.11.2025 in the case of the assessee M D Sons due to conflicting decisions of various Co-ordinate Benches of the Tribunal. The question referred for adjudication to the Special Bench reads as follows :- "Whether notices issued u/s 143(2) of the Income Tax Act, 1961 on or after 23rd June 2017 which are not in the prescribed format as per CBDT Instruction/F No.225/157/2017/ITA.II), despite the provisions of section 292B of the Income Tax Act, renders the consequent assessment orders invalid?". Brief facts necessary for the disposal of the above question are as follows: 2. The assessee is a partnership firm. It is engaged in the business of trading in cigarettes and food items. For the Assessment Year (A.Y) 2017-18, the return of income was filed on 04.11.2017 declaring a loss of Rs. 2,30,72,700/-. The said return was processed u/s 143(1) of the Income Tax Act, 1961 (the Act).The case was selected for scrutiny through 'Computer Aided Selection Scrutiny'(CASS) and statutory notice u/s 143(2) of the Act was issued on 21.09.2018, and served on the assessee on e-mail address. Subsequently the Assessing....
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....dated 08.10.2025 made a reference was made to the Hon'ble President. The Hon'ble President vide order dated 10.11.2025 constituted the Special Bench to decide the question as extracted in the beginning of this order. 5. Submissions of assessee's Authorised Representative (AR) The ld AR, presented elaborate submissions during the course of hearing and also submitted written submissions. The arguments and the written submissions made by the ld AR are summarised hereunder - 5.1 The tax administration has transitioned to a technology-driven scrutiny framework under Digital India, with Project Insight and Operation Clean Money initiatives using advanced data analytics and intelligence tools to promote transparency, reduce litigation, improve assessment quality, and enable non-intrusive, risk- based compliance verification. 5.2 CASS-based scrutiny selection relies on automated risk profiling using CPC- processed returns and multi-source data (AIR, CIB, 26AS, TDS, reporting entities, etc.), generating issue-specific case packets; CBDT observed misuse through unfocused enquiries and therefore directed officers to restrict verification to system-flagged issues (Instr....
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....ice, provided the notice is otherwise in substance and effect in conformity with the intent and purpose of the Act. It does not validate a notice that suffers from a jurisdictional defect. 5.13 The object behind insertion of section 292B by the Finance Act, 1975 was to prevent purely technical objections without substance from invalidating assessment proceedings, as clarified in CBDT Circular No.179 dated 30.09.1975. 5.14 The "intent and purpose of the Act" must be understood in the context of assessment proceedings, which form a core function under the Act (Chapter XIV). Therefore, statutory notices governing assumption of scrutiny jurisdiction must satisfy prescribed procedural requirements. 5.15 Under section 119(1) and 119(2), CBDT is empowered to issue binding circulars/instructions regarding assessment procedure. Pursuant to these powers, the Board issued the 2017 Instructions mandating that notices under section 143(2) must be issued only in the prescribed format. Such instructions are binding on income-tax authorities. 5.16 When the Board mandates a specific format for notice under section 143(2), compliance becomes a condition precedent for valid assumption of ....
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....ecord despite specific direction, and therefore an adverse inference ought to be drawn against the Revenue. 5.26 The assessee has placed on record copies of notices issued under section 143(2) to other assessees post 31.07.2018, which clearly follow the 2017 prescribed format and specifically mention "Limited Scrutiny (CASS)", thereby evidencing the actual practice followed by the Department. 5.27 The assessee submits that the above material directly contradicts the Revenue's contention regarding the existence of a revised format, inasmuch as notices issued subsequent to the alleged approval continue to follow the earlier prescribed format. 5.28 The assessee submits that the annexed notices are system-generated, and therefore the format is centrally controlled; consequently, the plea that the prescribed format was dispensed with is factually incorrect. 5.29 The assessee submits that where similarly placed assessees have been issued notices in the prescribed format, failure to follow the same in the present case results in discrimination and arbitrary exercise of power. 5.30 The assessee submits that such inconsistency causes real prejudice, as the absence of a pr....
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.... section 292BB is also attracted as the assessee has participated in the proceedings without objection. It is emphasized that the assessee has fully participated in the assessment proceedings in response to notices issued u/s 143(2) and 142(1) and has failed to demonstrate any prejudice caused. A detailed chronology of events is also furnished to substantiate due compliance and participation. 6.4. The ld DR placed heavy reliance on the decision of the Hon'ble Delhi High Court in the case of Bharat Bansal v. NFAC (Delhi High Court), [W.P.(C) 2238/2026, CM APPL. 10798/2026 & CM APPL. 10799/2026 dated 17.02.2026] where it is held that - "2. Learned counsel for the petitioner relied upon the circulars dated 23.06.2017 and 13.10.2021 and contended that if an assesse's case has been selected for scrutiny, the respondents are required to indicate in the notice that why his/her/its case has been taken up for scrutiny so also the fact that whether the scrutiny is limited or complete (circular dated 23.06.2017). 3. Learned counsel for the petitioner argued that since the impugned notice does not fulfil such requirements, the same is fundamentally barred in the ey....
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....(C) No. 1702 of 2017 (K) ii. Rani Kusum v. Kanchan Devi (2005) 6 SCC 705 (Supreme Court), iii. CIT v. Jagat Novel Exhibitors Pvt. Ltd. 356 ITR 559 (Delhi), iv. CIT v. Sudev Industries Ltd. 405 ITR 325 (Delhi), v. Shirish Madhukar Dalvi v. ACIT 287 ITR 242 (Bom), 6.6. It is submitted that procedural law is a handmaid of justice and technical defects, in the absence of prejudice, cannot invalidate the proceedings. In view of the above, it is prayed that the notice issued u/s 143(2) and the consequent assessment be held to be valid. 7. Submissions of the intervener - Bhimaji Maganlal Patel in ITA No.86/PAN/2024 The written submissions of the intervener are summarised hereunder - 7.1 Nature of Defect in the Impugned Notice u/s 143(2) The Intervenor submits that the defect in the notice issued under Section 143(2) is undisputed and goes to the root of the matter. The notice merely mentioned that the case was selected for "Scrutiny (CASS)" but failed to specify whether the scrutiny was Limited Scrutiny, Complete Scrutiny, or Compulsory Manual Scrutiny. As per CBDT Instruction dated 23.06.2017, notices under section 143(2) are required to....
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....ny, on the other hand, carry wider jurisdictional amplitude. Therefore, informing the assessee of the scrutiny category at the threshold is essential to define both the scope of enquiry and the assessee's rights. Failure to specify the scrutiny type creates uncertainty and defeats the very purpose of the CBDT instructions. Reliance is placed on decisions such as Weilburger Coatings (Calcutta High Court) reported in 463 ITR 89 (Cal)(HC) to show that breach of scrutiny-scope limitations renders additions without jurisdiction. 7.5 Jurisdictional Defects Not Curable u/s 292B / 292BB The Intervenor contends that the Revenue cannot invoke sections 292B or 292BB to cure the present defect, as these provisions apply only to minor procedural mistakes and not to foundational jurisdictional errors. Section 292B saves notices only where they are in substance and effect in conformity with the Act. A notice issued in violation of a binding CBDT format, instruction, meant to define jurisdictional scope, cannot be said to be in substance compliant. Reliance is placed on Maruti Suzuki (SC), reported in (2019) 416 ITR 613 (SC),where the Supreme Court held that substantive illegality cannot....
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....settled jurisprudence on penalty notices under section 274, where courts have held that failure to strike off irrelevant portions in a show cause notice renders the notice vague and invalid. Decisions such as CIT -vs .- Manjunatha Cotton & Ginning Factory reported in(2013) 359 ITR 565(Karnataka HC) and the Full Bench decision in Mohd. Farhan A. Shaikh vs. CIT reported in (2021) 434 ITR 1 (Bomb)(HC) hold that an omnibus notice reflects non-application of mind and vitiates penalty proceedings. The Intervenor submits that if such strict standards apply even to penalty show-cause notices, a higher standard must necessarily apply to a jurisdictional notice under section 143(2), which forms the foundation of assessment proceedings. Therefore, non-compliance with mandated notice format should equally result in invalidation. 8. Submissions of the intervener - Arpit Patel (ITA No.1144/Ind/2025) The summary of the submissions of the above intervener is as under - 8.1 It is submitted that CBDT, in exercise of statutory powers under section 119, issued Instructions dated 23.06.2017, prescribing three exclusive formats for section 143(2) notices - Limited Scrutiny (CASS), Complete Scru....
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.... unauthorized expansion of enquiry and defeats these safeguards. Instructions of CBDT are cited to show that unauthorized expansion of limited scrutiny has been treated as serious misconduct, reinforcing that disclosure of scope in the notice is integral to lawful jurisdictional exercise. 8.6 Recent Tribunal decisions across benches are cited where assessments were annulled for failure to comply with the 23.06.2017 Instruction and for not specifying scrutiny scope in section 143(2) notice. It is pointed out that in some high tax effect matters, revenue has not pursued further appeals, which indicates departmental acceptance of the legal position. Consistency principles are invoked to submit that the department cannot accept the position in some cases and contest it in others on identical facts. 8.7 It is submitted that sections 292B and 292BB cure only technical or procedural defects and cannot validate an inherently void jurisdictional notice. Courts have held that where jurisdiction itself is defective, saving provisions do not apply. Since the defect here affects the very scope and authority of scrutiny, it is characterized as jurisdictional and not curable. Allowing secti....
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.... specifying the nature of scrutiny, when the CBDT has expressly mandated such disclosure through prescribed formats. 9.4 The CBDT, in exercise of statutory powers under section 119, has directed that notices under section 143(2) "shall" be issued only in specified formats. Such instructions are binding on the Department. Non-adherence is not a mere procedural irregularity but a jurisdictional defect vitiating the entire assessment. 9.5 The High Court's view that CBDT circulars operate in the realm of internal administration overlooks settled law that binding instructions regulating the exercise of statutory power must be strictly followed. Once the format of the notice itself is prescribed, compliance ceases to be an internal matter and becomes a condition precedent for valid assumption of jurisdiction. 9.6 The finding that the initial notice under section 143(2) is merely an intimation is, with respect, contrary to settled legal position. The notice under section 143(2) is the foundation of jurisdiction for scrutiny assessment, and its validity must be tested independently. A defective notice cannot be treated as a curable procedural lapse. 9.7 The High Court's....
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.... the material available on record. The undisputed facts reveal that the notice under section 143(2) was issued within the prescribed limitation period and was duly served upon the assessee. Pursuant thereto, notices under section 142(1) were issued, details were called for from time to time, and the assessee participated fully in the assessment proceedings without raising any objection regarding the format of the notice. The challenge raised by the assessee is confined to the contention that the notice issued under section 143(2) did not conform to the format prescribed in CBDT Instruction dated 23.06.2017 and the said deviation cannot be cured under section 292B making the entire assessment invalid. 10.2 Section 143(2) mandates issuance of a notice requiring the assessee to attend and produce evidence in support of the return and neither the Act nor the Rules prescribe any statutory format for such notice. In our view the CBDT Instruction relied upon by the assessee is an administrative instruction intended to standardize departmental procedures and facilitate efficient conduct of scrutiny assessments. Therefore such instructions cannot elevate a procedural requirement into a s....
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.... Act having expressly prescribed the conditions for a valid notice under section 143(2) of the Act. No further jurisdictional requirements can be imported into the provision on the basis of administrative instructions. Therefore, non-mentioning of the category of scrutiny in the notice cannot be treated as a jurisdictional defect, warranting annulment of the assessment proceedings. Rather, such omission, if at all, remains a procedural irregularity protected by section 292B of the Act. 10.6 The Revenue's contention is that the alleged defect, even if assumed to exist, is at best a procedural irregularity curable under section 292B. The revenue contends that the notice issued under section 143(2) substantially fulfills the purpose contemplated by the Act, namely informing the assessee that the return had been selected for scrutiny and requiring participation in assessment proceedings and that the defect complained of neither affects the existence of jurisdiction nor goes to the root of the assessment. The revenue further contends that the provisions of section 292B were enacted precisely to prevent invalidation of proceedings on account of technical mistakes, defects or omiss....
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....y restrictive manner. The defect alleged by the assessee does not relate to absence of notice, lack of authority, limitation, or any condition expressly prescribed by the statute. It concerns only the format in which the notice was issued pursuant to an administrative instruction. A distinction must necessarily be drawn between a case where jurisdiction is never assumed due to absence of a valid statutory notice and a case where jurisdiction is properly assumed but the notice contains an irregularity in form. Section 292B is intended to protect the later category. To hold otherwise would render the statutory saving provision otiose and permit technical objections to defeat substantive proceedings despite full compliance with the underlying requirements of law. 10.11 We are unable to accept the contention of the assessee that every breach of a CBDT Instruction issued under section 119 necessarily renders the consequential proceedings void. There is a distinction between the binding nature of an instruction upon departmental authorities and the legal consequences flowing from its breach. An instruction issued under section 119 undoubtedly binds the officers administering the Act. ....
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....enacting section 292B, consciously provided that notices and proceedings should not fail on account of defects of form if they are in substance and effect in conformity with the Act. Therefore, the binding nature of the instruction and the curative operation of section 292B must be harmoniously construed, with the result that breach of the instruction may constitute an administrative irregularity but not necessarily a jurisdictional nullity. 10.16 We are therefore of the considered view that the alleged non-conformity with the prescribed format neither affects the jurisdiction of the Assessing Officer nor causes any failure of the statutory purpose underlying section 143(2). The defect, if any, is one of form and not of substance. Such a defect squarely falls within the curative ambit of section 292B and cannot be invoked to invalidate the assessment proceedings. 10.17 The reliance placed by the assessee on decisions dealing with absence of notice, notices issued to non-existent entities, deceased persons, or other foundational jurisdictional defects is misplaced. In the present case, there is no dispute regarding issuance, service, limitation, identity of the assessee, or th....
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....less the assessee is specifically informed as to the particular limb under which penalty proceedings are initiated, the assessee would be deprived of an effective opportunity to defend the proceedings. Consequently, failure to specify the applicable limb which is a statutory requirement causes prejudice to the assessee and amounts to a violation of the principles of natural justice. In the present case, however, there is no statutory mandate requiring the notice issued under section 143(2) of the Act to specify whether the case has been selected for limited scrutiny or complete scrutiny. Such a requirement emanates only from the format prescribed through administrative instructions issued by the CBDT and not from the provisions of the Act. Therefore, an administrative prescription governing the format of the notice cannot be elevated to the status of a statutory requirement, for initiating penalty proceedings under section 271(1)(c) of the Act. 11.6 Azadi Bachao Andolan (supra) was a case which arose out of the interpretation of Circular No. 789 dated 13.4.2000 issued by the CBDT in the context of the Indian Mauritius Double Taxation Avoidance Agreement (DTAC). The Hon'ble S....
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....sion of the Division Bench of this Tribunal in Tapas Kumar Das, Sajal Biswas, Hind Ceramics Pvt. Ltd., Anita Garg, Allied Concepts India Pvt. Ltd. mostly rely upon the previous decisions including that of Srimanta Kumar Shit which are all in favour of the assessee. None of these decisions have taken note of the decision of the Bangalore Benches in the case of Shri Veeranna Murthy Raghavendra Dikshit (supra) which is decided on 19.8.2024 which records a contrary view in favour of the revenue. Further, the issue of whether the notice u/s.143(2) of the Act not in the specified format is curable u/s.292B has not been considered in the orders of ITAT rendered in favour of the assessee. We have carefully gone through these decisions and we tend to approve the view taken by the Division Bench in Shri Veeranna Murthy Raghavendra Dikshit (supra). The Division Bench after taking note of the CBDT instruction dt. 23.6.2017 and section 282A and Section 292B of the Act has rightly come to the conclusion that the defective notice, if any, is protected under Section 292B of the Act. Following observations in para 13.6 and 13.7 are to the point. "13.6 On going through the above section, we....
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.... in his mind about initiation of proceedings under the Act, the defective notice is protected under section 292B. In the present case, we found that no prejudice/confusion was caused to the assessee and the assessee filed explanation/submission & co-operated during the course of assessment proceedings & therefore, merely because of the procedural irregularities, we cannot accept the plea of the assessee that notice not served as per format prescribed by the CBDT instruction cited (supra), the entire consequential assessment proceedings including the assessment order are to be rendered bad in law and accordingly dismissed." 12.2 We record our concurrence with the principle as expressed. Therefore, in our considered view, the notice u/s 143(2) of the Act will not be invalidated merely on account of non-compliance with the format as prescribed by CBDT instruction dated 23.06.2017. The question would be of facts and circumstances of each case including as to the manner in which the assessee has participated in the proceedings indicating that he was aware of the issues which are proposed to be examined in the scrutiny proceedings along with the incidental issue of prejudice, if any, ....