Case Law Details
Hansraj Jain Vs ACIT (Central)-2 (ITAT Indore)
The appeals before the Income Tax Appellate Tribunal Indore arose from a consolidated order of the Commissioner of Income Tax (Appeals) dated 21.05.2024, which upheld a consolidated assessment order passed by the Assessing Officer for Assessment Years 2008–09 to 2014–15. The assessments for six years were framed under Section 153A read with Section 143(3), while the assessment for AY 2014–15 was completed under Section 143(3). The proceedings originated from a search conducted under Section 132 on 28.02.2014 in the “Doshi Group,” which included the assessee.
For AYs 2008–09 to 2013–14, the assessee challenged the ex-parte dismissal of appeals by the CIT(A). The appellate authority had granted multiple opportunities of hearing between 2017 and 2024, but the assessee failed to respond. The assessee explained non-appearance on account of advanced age (80 years), medical issues, limited family support, and disruptions caused during the COVID-19 period. It was also submitted that subsequent notices remained unnoticed. Considering these circumstances and the nature of search-related issues, the Tribunal accepted the request for restoration. The matters were remanded to the CIT(A) for fresh adjudication after granting another opportunity of hearing. However, a cost of ₹5,000 per appeal was imposed on the assessee, payable to the Income Tax Department. The Tribunal also noted that protective additions earlier deleted by the CIT(A) could be reconsidered during fresh proceedings.
For AY 2014–15, the assessee raised additional legal grounds challenging the validity of the assessment. It was contended that the notice under Section 143(2) was issued on 18.09.2015, whereas the return of income was filed later on 21.12.2015, and no fresh notice was issued thereafter. The Assessing Officer, in a report, admitted that the notice had indeed been issued prior to the filing of the return.
The Tribunal examined whether issuance of notice under Section 143(2) prior to filing of return satisfies statutory requirements. It relied on judicial precedents including CIT v. Laxman Das Khandelwal, which held that issuance of notice under Section 143(2) is mandatory and absence of such notice cannot be cured under Section 292BB. It also referred to the decision in ACIT v. G.M. Infrastructure, which held that notice issued before filing of return is invalid and does not confer jurisdiction.
Applying these principles, the Tribunal held that issuance of notice under Section 143(2) after filing of return is a sine qua non for assumption of jurisdiction under Section 143(3). A notice issued prior to filing of return is non-est in law and cannot validate assessment proceedings. Since no valid notice was issued after the return was filed, the Assessing Officer lacked jurisdiction to complete the assessment.
Accordingly, the Tribunal quashed the assessment order for AY 2014–15 as void ab initio. As a result, other grounds raised by the assessee became infructuous. The six appeals for earlier years were allowed for statistical purposes with remand, while the appeal for AY 2014–15 was allowed on legal grounds.
Assessee was represented by Shri Arpit Gaur & Shri Vivek Garg
FULL TEXT OF THE ORDER OF ITAT INDORE
The captioned seven (7) appeals have been filed by assessee against a consolidated order of first-appeal dated 21.05.2024 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] in Appeal Nos. CIT(A)-3, Bhopal/IT/10211, 10208, 10210, 10209, 10213, 10207 & 10212/2017-18, which is turn arises out of a consolidated assessment-order dated 29.03.2016 passed by ACIT (Central)-2, Indore u/s 153A r.w.s. 143(3) for AYs 2008-09 to 2013-14 and u/s 143(3) for AY 2014-15.
2. The background facts leading to these seven (7) appeals are as under:
(i) A search u/s 132 of the Act was carried out by income-tax authorities on 28.02.2014 on “Doshi Group” of Indore including assessee. The assessee is a money lender as well as one of the partners in certain concerns of “Doshi Group”. Pursuant to search, the notices were issued on 08.06.2015 for framing assessments u/s 153A of preceding six (6) AYs 2008-09 to 2013-14. In response, the assessee filed returns of those six (6) years. The position of those six (6) years, as noted by AO, in Para 4 of assessment-year is as under:
(ii) Further, for AY 2014-15 relevant to the previous year 2013-14 in which search was conducted, the assessee filed return on 21.12.2015 declaring a total income of Rs. 17,34,830/-.
(iii) Ultimately, the AO framed assessments of all seven (7) years after making certain additions. The AO, however, passed a single consolidated assessment-order for his convenience making following note in first para of assessment-order:
“Since, there are common issues involved. this is a common order for assessment years 2008-09 to 2014-15 in the case of the assessee. The order for assessment year 2008-09 to 2013-14 are being passed u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961 (Hereinafter called the Act) and order for 2014-15 is being passed u/s 143(3) of the Act.”
(iv) Aggrieved, the assessee carried matters in seven (7) separate appeals before CIT(A). The CIT(A) disposed of all seven (7) appeals through a single consolidated order dated 21.05.2024 dismissing all appeals.
(v) Now, the assessee has come in this bunch of seven (7) appeals before us.
IT(SS)A No. 58 to 63/Ind/2024 of Six (6) AYs 2008-09 to 2013-14:
3. Ld. AR for assessee submitted that the Ld. CIT(A) has dismissed assessee’s appeals for non-prosecution. Para No. 2 of impugned order of first-appeals shows that the CIT(A) granted hearings to assessee on 29.08.2017, 14.02.2019, 23.08.2019, 11.10.2019, 16.01.2020 & 21.12.2020 but the assessee did not respond. On 23.12.2020, the assessee filed an application for adjournment and considering same, the CIT(A) fixed hearings on 27.01.2021 & 04.03.2021. On 04.03.2021, the assessee again filed adjournment application and considering same, the CIT(A) fixed hearings on 23.06.2021, 05.08.2021, 24.09.2021, 12.11.2021, 11.03.2022, 01.02.2023, 11.10.2023 & 07.05.2024 but still the assessee remained non-compliant. Ultimately, the CIT(A) passed ex-parte order. In so far as the reason of non-participation is concerned, the Ld. AR submitted that the assessee is aged 80 years and had been suffering from various ailments. A bunch of medical prescriptions/reports is filed in Written-Submission. It is submitted that the assessee’s family comprises of two members only, viz. assessee and dependent wife. The assessee’s son has already expired in the year 2009. His daughter-in-law, Smt. Snigdha Jain, resides separately and does not provide much assistance to assessee. The assessee has to manage all his personal and legal matters despite advanced age and ailing condition. This apart, the hearings initially granted by CIT(A) from 29.08.2017 to 16.01.2020 could not be attended due to lack of preparation and thereafter, Covid-19 started from March, 2020. Hence, the assessee filed adjournment applications on 23.12.2020 & 04.03.2021. The Covid-19 continued till March, 2022 and during this entire period of Covid-19, there were disruptions and the assessee was not in a position to make representation. Subsequently, the CIT(A) issued notices dated 01.02.2023, 11.10.2023 & 07.05.2024 after a substantial gap which remained unnoticed by assessee. Therefore, the assessee could not represent his cases before CIT(A). Ld. AR submitted that these are search matters and involve substantial issues which require an apt adjudication by CIT(A). He asserted in open court that the assessee, despite of advanced age and ailing condition, is now ready and willing to make an effective representation and extend full co-operation to CIT(A). He prayed that, in the interest of justice and fair play, these six (6) matters must be restored at the level of CIT(A). He acknowledged that the assessee shall abide by any direction given by bench.
4. Ld. DR though dutifully supported the orders of lower authorities yet he could not controvert the submissions/prayer made by Ld. AR.
5. Having heard rival contentions and having perused the material on record, we are inclined to accept the prayer of Ld. AR/assessee and provide one more opportunity to assessee. We see no harm to revenue in giving such opportunity to assessee. The Ld. AR for assessee has also assured that the assessee shall extend full co-operation in fresh proceedings. In case, however, the assessee does not fully cooperate in expeditious disposal of remanded proceedings, Ld. CIT(A) will be at liberty to take such action, apart from disposal of appeals based on material on record, as he deems fit and proper and judicious. Therefore, these matters are restored to the file of Ld. CIT(A) for adjudication de novo after affording yet another opportunity of hearing to assessee, by way of a speaking order, and in accordance with the law. However, in order to offset the revenue’s efforts in dealing these six (6) cases of assessee, we impose a small cost of Rs. 5,000/- per case to be paid by assessee to Income-tax Department through appropriate challan. The assessee shall submit a copy of duly paid challans to CIT(A) during the proceeding of fresh adjudication and shall not claim any credit or refund of such payment.
6. At this stage, We would like to make a specific mention that during hearing, Ld. AR agreed in open court that the AO made protective additions of Rs. 25,93,300/-, Rs. 4,14,37,500/- and Rs. 20,42,000/- in AYs 2010-11, 2011-12 and 2012-13 respectively in assessee’s hands with corresponding substantive additions in the hands of other assessee “Smt. Snigdha Jain”. The Ld. CIT(A) has already given relief to assessee by deleting protective additions while sustaining substantial additions in the hands of “Smt. Snigdha Jain” but since the present assessee is requesting for remand to CIT(A), he will have no grievance against fresh adjudication of protective additions by CIT(A).
7. These six (6) appeals are accordingly allowed for statistical purpose in terms mentioned above.
ITA No. 542/Ind/2024 of AY 2014-15:
8. The assessee has raised following additional legal grounds of appeal:
“1. That, the learned AO has grossly erred, in law, in passing the Assessment Order for the relevant assessment year on the strength of an invalid Notice issued under sub-section (2) of section 143 of the Income-Tax Act, 1961 on 18-09-2015, without first having any return of income on record. Such an action of the Ld. AO has rendered the entire assessment proceedings as void ab initio, invalid, illegal and a nullity.”
2. That, the learned AO has grossly erred, in law, in passing the Assessment Order for the relevant assessment year without first issuing and serving a valid Notice under sub-section (2) of section 143 of the Income-Tax Act, 1961 subsequent to the filing of the return of income by the appellant under the provisions of section 139 of the Act. The failure to issue such notice vitiates the assessment proceedings and renders the assessment order as void ab initio, without jurisdiction, illegal and non-est in law.”
9. By means of these additional grounds, the assessee is raising a legal claim that the assessment-order passed by AO u/s 143(3), without issuing notice u/s 143(2) on the return filed by assessee, is invalid.
10. Learned Representatives of both sides fairly agree that the additional grounds are legal in nature; go to the root of the matter; do not call for any new evidence; and can be decided on the basis of material already held on record. Therefore, in view of the decision in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC), the additional grounds are admitted and taken for adjudication.
11. In so far these grounds are concerned, the Ld. AR carried us to Para No. 3 & 5 of assessment-order and submitted that the assessee filed return of income on 21.12.2015 and the AO issued notice u/s 143(2) on 18.09.2015. Further, he also referred copy of notice dated 18.09.2015 available in assessee’s Paper-Book at Page No. 187. By showing these facts, Ld. AR contended that the notice u/s 143(2) was issued on 18.09.2015 before filing of return of income on 21.12.2015 and also that no notice u/s 143(2) was issued after filing of return by assessee. Therefore, the assessment-order passed by AO u/s 143(3) is invalid.
12. When this contention was raised by Ld. AR, the Ld. DR for revenue sought time to file a report from AO’s office. Subsequently, Ld. DR filed AO’s report F.No. DCIT(Central)-2/Ind/Appeal-ITAT/2024-25 dated 14.05.2025 wherein the AO has made following reporting:
“On verification of the case record it has been noticed that:
(a) Notice u/s 143(2) of the Income Tax Act, 1961 was issued for A.Y. 2014-15 on 18.09.2015. The notice u/s 143(2) of the Income Tax Act, 1961 has been issued prior to filing of return of income by the assessee on 16.12.2015. The contention of the assessee in this regard is correct.”
13. Thus, the AO has accepted assessee’s contention that the notice u/s 143(2) was issued on 18.09.2015 i.e. before filing of return of income by assessee on 16.12.2015 (correct date is 21.12.2015, there is a typo mistake by AO).
14. In this factual backdrop, the Ld. AR relied upon following decisions:
(i) Hon’ble Supreme Court in Commissioner of Income-tax Vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) / (2019) 108 taxmann.com 183 (SC):
This case relates to AY 2010-11 pertaining to the previous year 200910 in which search was conducted (search was conducted on 11.03.2010). The assessee filed return on 24.08.2011. The AO completed assessment u/s 143(3) without issuing notice u/s 143(2). The ITAT, Agra bench and the Hon’ble Jurisdictional High Court of Madhya Pradesh held that the assessment-order was illegal. On further appeal, the Hon’ble Supreme upheld order of ITAT and Hon’ble High Court. The relevant paras of decision of Hon’ble Supreme Court read as under:
“3. The relevant facts leading to the filing of aforementioned Income Tax Appeal No.97 of 2018 before the High Court, as culled out from the judgment and order dated 27.04.2018 presently under appeal are as under:—
“The assessee is an individual carrying a business of brokerage. Search and seizure operation was conducted under Section 132 of the Act of 1961 on 11.03.2010 at his residential premises. The assessee submitted return of income on 24.08.2011, declaring total income of Rs. 9,35,130/-. The assessment was completed under Section 143(3) read with Section 153(D) of 1961 Act. Rupees 9,09,110/- was added on account of unexplained cash under Section 69 of 1961 Act. Rs. 15,09,672/- was added on account of unexplained jewellery. Rupees 45,00,000/- was added on account of unexplained hundies and Rs. 29,53,631/- was added on account of unexplained cash receipts.
Aggrieved, the assessee filed an appeal before the Commissioner Income Tax (Appeal). The Commissioner of Income Tax (Appeal) deleted an amount of Rs. 7,48,463/- holding that jewellery found in locker weighing 686.4 gms stood explained in view of circular No.1916 and further deleted the addition of Rs. 29,23,98,117/- out of Rs. 29,53,52,631/- holding that the correct approach would be to apply the peak formula to determine in such transaction which comes to Rs. 29,54,514/- as on 05.03.2010.
Aggrieved, Revenue filed an appeal. The Assessee filed cross objection on the ground ofjurisdiction of Assessment Officer regarding non-issue of notice under Section 143(2) of the Act of 1961. The Tribunal vide impugned order upheld the cross objection and quashed the entire reassessment proceedings on the finding that the same stood vitiated as the assessment Officer lacked jurisdiction in absence of notice under Section 143(2) of the act of 1961. The Tribunal observed:
“17. In conclusion, we find that there was no notice issued u/s 143(2) prior to the completion of assessment under section 143 (3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of Section 153A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined u/s 153A; that the AO has passed regular assessment u/s 143(3) of the Act; although the Ld. CIT has mentioned the section as 143 r.w. s. 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non-issuance thereof is not a curable defect. Even in case of block assessment u/s 158BC, it has been so held by the apex Court in the case of ‘ACIT v. Hotel Blue Moon’ [(2010] 321 ITR 362 (Supra).”
4. In said appeal arising from the decision of the Income Tax Appellate Tribunal (‘the Tribunal’, for short), the issue that arose before the High Court was the effect of absence of notice under Section 143(2) of the Income Tax Act, 1961 (‘the Act’, for short). The Respondent-Assessee relied upon the decision of this Court in Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113/321 ITR 362 (SC). On the other hand, reliance was placed by the Appellant on the provisions of Section 292BB of the Act to submit that the Respondent having participated in the proceedings, the defect, if any, stood completely cured.
5. At the outset, it must be stated that out of two questions of law that arose for consideration in Hotel Blue Moon’s case (supra) the first question was whether notice under Section 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act. It was observed:—
“3. The Appellate Tribunal held, while affirming the decision of CIT(A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Gauhati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were:
“(1) Whether on the facts and in circumstances of the case the issuance of notice under Section 143(3) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And
(2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside?”
4. The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and sub-sections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal.
** ** **
13. The only question that arises for our consideration in this batch of appeals is: whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961?
** ** **
27. The case of the Revenue is that the expression “so far as may be, apply” indicates that it is not expected to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression “so far as may be, apply”. In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143.”
6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:—
“292BB. Notice deemed to be valid in certain circumstances.—Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was –
| (a) | Not served upon him; or |
| (b) | Not served upon him in time; or |
| (c) | Served upon him in an improper manner: |
Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.”
7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer.
On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon’s case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act.
9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.
10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.
11. These Appeals are, therefore, dismissed. No costs.”
[emphasis supplied]
For immediate reference, we also re-produce the order of ITAT, Agra bench:
“8. We have considered the rival submissions on relevant facts brought on records and the Paper Book and Synopsis filed by the assessee. The fact of non-issue of notice is not in dispute neither at the first appeal stage, nor before the Tribunal. The Department is not in appeal on this issue before us.
9. It is noted that in this case, a search u/s 132 of the I. T. Act, 1961 was conducted from 11.03.2010 to 12.03.2010 as is verifiable from the copy of Panchnama, which is placed at Page 33-35 of paper book (Relevant page 35), although, the AO has mentioned the date of search as 11.03.2011 at page 1 of the assessment order. Meaning thereby, that the search was conducted from 11.03.2010 to 12.03.2010, i.e., during financial year 2009-10, relevant to assessment year 2010-11.
10. In pursuance of the search, notices 153A(1)(a), were to be issued to furnish the return of income in respect of each assessment year falling within the six assessment years as referred to in clause (b), meaning thereby, the six assessment years immediately preceding the assessment years relevant to the previous year in which the search was conducted. As the search in this case, was conducted from 11.03.2010 to 12.03.2010, i.e., during the previous year 2009-10 relevant to assessment year 2010-11, the six preceding years were 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 relevant to assessment year 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10, for the purpose of issue of notice u/s 153A(1)(a) of the Act.
11. We find that the year under consideration being the search year, notice u/s 153A was neither required to be issued, nor was issued in the case of the assessee. The return of income was furnished on 24.08.2011, as per the provisions of section 139 of the Act. The assessment for the previous year (Financial year) 2009-10 relevant to assessment year 2010-11 was completed u/s 143(3) of the Act, vide assessment order dated 23.12.2011 under the regular assessment procedure, as the AO noted the section 143(3) under which the assessment order is completed, at page 1 of his order. Non-issue of notice u/s 143(2) prior to completion of assessment is not a curable defect as held by the Apex court in the case of ‘Hotel Blue Moon’ (supra).
12. The Ld. CIT(A) has dismissed the legal ground observing that the assessee did not object to the fact of non issue of notice u/s 143(2) during the assessment proceedings and that therefore, in view of the provisions of section 292BB of the Act, the assessee is precluded from taking the ground regarding non issue of notice u/s 143(2) at the appeal stage. The CIT (A) has, thus, accepted the fact of non issue of notice u/s 143(2) and its impact on the assessment proceedings, considering it as a mandatory requirement.
13. The AO had issued notices u/s 142(1) on 18.11.2011 and 12.12.2011, as mentioned in the first para at page 2 of the assessment order and as such no notice u/s 143(2) was issued. The Ld. DR argued that once the assessee has been put to notice and has been given opportunity of being heard, the requirement of section 143(2) is complete, whether the notices are issued in Performa ITNS 33, or in any other format. In counter argument, the Id. Counsel for the assessee submitted that the purpose of issue of notice u/s 142(1) (format ITNS 32) and notice u/s 143(2) (format ITNS 33) are different, as provided in the section itself. When both the notices are meant for different purposes, then how one cannot be replaced by another. Notice u/s 142(1) may be issued even prior to filing the return of income, whereas notice u/s 143(2) can be issued only after filing of the return of income. The purposes of issue of the notices under different sections, i.e., sections 142(1) and 143(2) are different, as explained in the case of Orissa Rural Housing Development Corpn. Ltd. v. Asstt. CIT [2012] 343 ITR 316/204 Taxman 673/17 com 186 (Orissa).
14. The statutory provisions for issue of notice u/s 143(2) are given in subsection (3) of section 143 of the Act, which is being reproduced hereunder:
“143(3) – On the day specified in the notice issued in the sub-section (2) or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order inviting, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.”
Therefore, in view of this, the prerequisite condition for issuance of notice u/s 143(2) prior to making assessment u/s 143(3) of the Act, is embodied in the provisions of sections 143(3) and 158BC of the Act.
15. The decision of the Hon’ble Supreme Court in the case of ‘Hotel Blue Moon’ (supra) is in relation to assessment completed u/s 158BC, holding that the non-issue of notice u/s 143(2) is not curable. The requirement of issue of notice u/s 143(2) of the Act is embodied in the provisions of section 143(3) of the Act itself. Therefore, the issue involved in the impugned appeal under consideration is covered by the decision in the case of ‘Hotel Blue Moon’ (supra) and ratio involved in this decision will apply to the present appeal also. In the case of ‘Hotel Blue Moon’ (supra) it was held that if the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to the notice under section 158BC(a) of the Act relating to a block assessment, the Assessing Officer must necessarily issue a notice under section 143(2) of the Act, within the time prescribed in the proviso to section 143(2). It was further held that by making the issue of notice mandatory, section 158BC, dealing with block assessments, makes such notice the very foundation for assumption of jurisdiction; that Such notice is required to be served on the person who is found to have undisclosed income and that the requirement of notice under section 143(2) cannot be dispensed with.
16. The Hon’ble Madras High Court in the case of Gitsons Engineering Co. (supra) following the decision in the case of ‘Hotel Blue Moon’ (supra) has held as under: —
“Provision of section 143(2) makes it clear that service of notice u/s 143(2) within time limit prescribed is mandatory and it is not a mere procedural requirement. Therefore, the requirement of notice u/s 143(2) cannot be dispensed with.” (APB, Page 22)
17. In conclusion, we find that there was no notice issued u/s 143(2) prior to the completion of assessment under section 143(3) of the Act by the AO; that the year under consideration was beyond the scope of the provisions of section 153A of the Act, it being the search year and not covered in the six year to the year of search as per the assessment scheme/procedure defined u/s 153A; that the AO has passed regular assessment u/s 143(3) of the Act; although the ld CIT has mentioned the section as 143 r.w. s 153A and that the department had not controverted these facts at the stage of hearing. It is noted that issue of notice u/s 143(2) for completion of regular assessment in the case of the assessee was a statutory requirement as per the provisions of the Act and non-issuance thereof is not a curable defect. Even in case of block assessment u/s 158BC, it has been so held by the Apex court in the case of ‘Hotel Blue Moon’ (supra).
18. Considering the facts, as discussed above, we note that the assessment order is passes without issue of notice u/s 143(3) of the Act and this defect cannot be cured by taking recourse to the provisions of section 292BB of the Act.
19. In view of the above, we hold that the AO had no valid jurisdiction to pass the assessment order and the very foundation of the assessment proceedings is bad in law. Hence, these proceedings culminating in the assessment order, as well as the impugned order stand quashed. Nothing else remains to be adjudicated. In consequence, the revenue’s appeal is dismissed.
20. In the result, the Cross objection of the assessee is allowed and the appeal of the revenue is dismissed”
(ii) ITAT, Indore in Asst. Commissioner of Income-tax Vs. G.M. Infrastructure (2017) 3 ITJ Online 183 (Trib. – Indore):
“4. The facts, in brief, are that search u/s 132(1) and survey operation u/s 133A were carried out on 16.9.2005. Certain documents related to assessee firm were found during the course of said search, hence, notice u/s 153C read with section 153A was issued in this case on 22.3.2006, whereby the assessee was required to file the return within 30 days from the date of service of such notice. However, no return was filed within 30 days so stipulated. Subsequently, the assessee vide its letter Dated 21.8.2006 submitted that returns filed earlier u/s 139 for various years could be considered as filed in compliance to said notice. The A.O., however, rejected this plea of the assessee and required the assessee to file separate return. Subsequently, notice u/s 142(1) Dated 31st August, 2007, was issued requiring the assessee to produce the accounts or documents specified in Annexure to this letter before the A.O. on 13.9.2007. Notice u/s 143(2) was also issued alongwith such notice issued u/s 142(1). The assessee, however, filed return of income on 15.10.2007 declaring income of Rs. 1,15,840/-. The A.O., thereafter, noticing the fact of deliberate action of the assessee not to give an adequate opportunity to the A.O. completed the assessment proceedings on 31.12.2007, by making addition on account of undisclosed sale consideration and other minor additions. Aggrieved by this, the assessee carried the matter into appeal before the ld. CIT(A), wherein it was contended that the A.O. issued notice u/s 143(2) on 31.8.2007 prior to the filing of return, hence, it was illegal and invalid, because notice u/s 143(2) could be issued only when the assessee had filed the return and, accordingly, the order passed by the Assessing Officer was void ab initio. The Ld. CIT(A), however, held that though there was irregularity in the issue of notice u/s 143(2), however, merely for that reason the assessment proceedings could not be declared as void, particularly when such failure had not caused any prejudice to the assessee. Aggrieved by this, the assessee has filed this cross objection.
5. The Learned counsel for the assessee narrated the facts and contended that existence of a valid reason was a sine qua non for issuance of a valid notice u/s 143(2) and in the present case, it was an admitted fact that the assessee filed return of income only on 15.10.2007, hence, notice issued u/s 143(2) on 31.8.2007 was non est in law. Thereafter, he contended that the issuance of notice u/s 143(2) after filing of return was also a mandatory condition for making a valid assessment u/s 143(3) or u/s 15 of the Act. hence, assessment order passed without issuing a valid notice u/s 143(2) was an illegal order, and, therefore, a nullity. He further contended that the Ld. CIT(A) also admitted that there was some irregularity in issuing notice u/s 143(2), however, he treated such irregularity as a curable one, which was not a correct position in law, hence, the order of the Ld. CIT(A) was not correct in this regard. He further contended that the provisions of section 292BB were brought on statute with effect from 1.4.2008 and were of prospective nature, hence, the same could not also be of any help to the cause of Revenue.
6. The ld. Departmental Representative, first of all, pointed out the approach of the assessee in adopting the dilly delaying tactics. Thereafter, he contended that notice issued u/s 143(2) on 31.8.2007, was valid notice and referred to page 91 of the paper book. The Bench, on reading the contents of said notice, required the Department to clarify on the aspect whether the assessee had filed any return of income prior to issue of such notice as in para 1 of the said notice, the A.O. had stated that there were certain points in connection with the return of income submitted by you for the assessment year 2005-06, on which the A.O. required some further information, the ld. CIT DR admitted that it was an incorrect fact as the assessee had filed return of income only on 15.10.2007. This fact was also corroborated by the Learned counsel for the assessee. The ld. CIT(A), thereafter, contended that in Notice issued u/s 153A read with section 153C time of 30 days had been given to the assessee to file the return of income. However, the assessee did not file the return separately and instead submitted that returns filed u/s 139 originally could be treated as filed in response thereto, hence such letter of the assessee was to be deemed as a return filed u/s 153A read with section 153C, and, therefore, notice u/s 143(2) issued on 31.8.2007 was valid. He further contended that such notice was also served within 12 months, hence, for this reason also, there existed no infirmity. He further contended that there were two aspects u/s 142(1) of the Act i.e. the A.O. could require the assessee to file a return of income in case the assessee had not filed the return within the time allowed u/s 139(1) or before the end of relevant assessment year and secondly, the A.O. could require the assessee to produce said accounts or documents or information as the A.O. might require and, in this case, the notice u/s 142(1), had been issued on the second aspect and not for calling a return. Hence, the action of the A.O. in issuing notice u/s 143(2) on 31.8.2007 could not be considered as irregular or faulty. He further contended that in the original notice, the assessee was given 30 days period to file the return, which the assessee did not comply and the assessee intentionally chose to file the return as late as possible and, therefore, such action of the assessee was highly objectionable, because if such action of the assessee was upheld, then every assessee would file return of income on the last date for passing the assessment order and ,in that case, the A.O. would not get any opportunity to examine the claims of the assessee. He further contended that the assessee appeared and participated in the proceedings before and after filing of return, hence, for this reasons also, the assessment proceedings could not be declared null and void.
7. The Learned counsel, in the rejoinder, contended that return filed by the assessee was u/s 153C read with section 153A on 15.10.2007 and notice u/s 143(2) was issued before that date, hence, assessment proceedings were not valid. He further contended that Department had several options for enforcing the assessee to file the return before the time limitation for passing the assessment and also had powers within law to make a best judgment assessment u/s 114 on the basis of material available on record and, therefore, the action of the assessee in filingreturn in October, 2007, could not result into an adverse inference againstthe assessee. He further contended that, in this case, the return had been filed nearly one and a half months before the time barring period and not on the last date for passing assessment order. Hence, the relevant the contentions of the ld. CIT DR had to be rejected.
8. The ld. CIT DR, at this stage, submitted that matter could be heard on merits as well. Accordingly, he took up the issue of deletion of addition of Rs. 32,73,930/- made by the Assessing Officer on account of undisclosed sale proceeds. The ld. CIT DR, thereafter narrated the facts and took us through the assessment order as well as seized documents to support the order of the A.O.
9. The Learned counsel, on the other hand, submitted that the seized documents were only of planning nature and the interpretation of the same made by the Assessing Officer was a case of suspicion or presumption only. He further referred to pages 64 to 87 of the paper book containing detailed submissions made before the Revenue authorities, wherein the various aspects of the issue involved had been clarified. On a query from the Bench, as to on what basis, the A.O. made addition only @ 25 % to arrive at quantum of undisclosed sale proceeds. The Learned counsel for the assessee submitted that it was purely an ad hoc decisionwithout any material/basis. The ld. Departmental Representative, in the rejoinder, contended that Kachchi cash book was found wherein thetransactions of receipt of On money had been recorded by the partners of the firm, hence, the same should have been explained. However, the assessee gave evasive replies. The ld. CIT DR also drew our attention to page 60 to 63 of the paper book to show the contents of the seized papers and the basis adopted by the Assessing Officer for making such addition. The Ld.Authorized Representative with the permission contended that the entries pertained to different entities of the assessee group, which were duly explained in the respective cases, hence, it was not a case of evasive replies or non-furnishing of explanation. He further placed strong reliance on the order of the Ld. CIT(A).
10. We have considered the submissions made by both the sides, material on record and the orders of the authorities below.
11. Firstly, we would take up the legal issue.
12. It is an admitted fact that notice u/s 153A read with section 153C was issued on 22nd March, 2006, whereby the assessee was required to file the return of income within 30 days from the date of receipt of such notice. However, the assessee did not file a separate return but filed a letter on 21.8.2006 stating that the returns filed u/s 139 earlier should be treated as return filed in response to such notice. As per the assessment order, it is evident that the A.O. has not accepted this letter of the assessee, as he has himself observed that the assessee’s such plea was rejected and the assessee was made aware of the fact that return in response to notice issued u/s 153-A read with section 153C was to be filed separately. Accordingly, once the A.O. has taken a view in the matter, then such letter filed by the assessee has got no legal consequence, especially when the assessee had filed separate return, though subsequently, which has been acted upon by the Assessing Officer. Accordingly, we reject this contention of the Revenue that such letter should be treated as deemed return. Before deciding the core issue involved in this ground, we state that the Revenue Authorities have been given ample powers to compel the assessee to file the returns and in case the assessee does not comply with the notices issued by the Assessing Officer, in this regard, then penal provision exists, which can be invoked to penalize the assessee. The assessee can also be made liable to pay interest for the period offailure. Apart from that Assessing Authorities can make an assessment u/s 144 read with section 142(1). Hence, we do not find any merit in the contention of the Revenue that the assessee by not filing the return in accordance with the notice issued by the Assessing Officer can cause prejudice to the interests of the revenue. In this regard, it is further noteworthy that the A.O. issued notice u/s 153A read with section 153C on 22.3.2006 and, thereafter, till 31.8.2007 he has not bothered to take other measures as provided in the statute to get the return of income filed. It is further noted that even in the notice issued u/s 142(1), he has required the assessee to produce the accounts or documents and not the return of income. Similarly, in the notice issued u/s 142(1) on 3.10.2007, he has called certain information only. In the background of these facts, this contention of the Revenue, in our opinion, lacks substance because if the assessee has not filed the return, the A.O. is more responsible for not taking a timely action and at this stage, the assessee cannot be solely held responsible for such a situation. Our this view further finds strong support from the decision of Hon’ble Delhi High Court in the case of CIT vs. Divine and Finance Limited & Others, (2008) 298 ITR 268. The Hon’ble Court observed as under :-
“No question of law, far less any substantial question of law arises for our consideration. We may, however, briefly reflect upon a submission made by learned counsel for the respondent to the effect that the assessee had, by its letter Dated March, 8, 1999, requested the Assessing Officer to examine the assessment records of the share applicants whose GR Nos. had been supplied. It is not controverted that action was not taken by the A.O., but it has justifiably been contended that this inaction was due to paucity of time left at that stage since the assessment had to be framed by March 31,1999. It has been pointed out that several adjournments had been granted by the Assessing Officer on the asking of the assessee. The timing of the assessee’s said letter is most suspect. Generally speaking, it is incumbent on the A.O. to manage his schedule, while granting adjournments, in such a manner that he does not run out of time for discharging the duties cast on him by the statute. In the present case, the details had been furnished to the A.O. much before march, 1999, but he failed to react to the shifting of the burden to investigate into the creditworthiness of the share applicants. Therefore, the appeal is dismissed.”
13. Now, coming to the core issue, we find that provisions of section 143(1) and 143(2) come into play, only when a return has been furnished u/s 139 or in response to notice issued u/s 142(1) of the Act. Hence, we find sufficient force in the contention of the assessee that notice issued prior to filing of return, is non-est in law. In this regard, we are further of the view that provisions of section 143(2), not only a case of procedural provision but these also give jurisdiction to the A.O. to compute the total income in a particular manner and, thus, not an empty formality. Therefore, failure to comply with such provisions cannot be taken lightly and the action of the A.O. cannot be justified, merely because no prejudice has been caused to the assessee as held by the Ld. CIT(A). We also find that provisions of section 292BB, are of prospective nature, particularly having regard to the proviso thereto hence, do not come to the rescue of the Revenue. On the contrary, in our view, the very enactment of this provision makes it clear that legislature does not treat such nature and scope of section 143 merely as a formality and that is why the assessee has been given an opportunity even u/s 292BB to raise such plea before the completion of assessment.
14. It is also noteworthy that prior to such new procedure of assessment in search cases, the undisclosed income found as a consequence of search had to be assessed in accordance with the provisions of sections 158BC/158BD under Chapter XIVB of the Act. The provisions of section 153A serve the same purpose. Rather, if we take note of Explanation 1 to Section 153A, then it becomes apparent that provisions of section 143(2) have to be applied in its fullest scope in respect of assessment or reassessment to be made u/s 153A. Having stated so, we find that in the case of block assessment proceedings under Chapter XIV, the provisions thereof, being similar, in this regard, there was a controversy regarding no requirement of service of notice u/s 143(2) or non-applicability of time limit of service of notice u/s 143(2).However, recently, the Hon’ble Delhi High Court in the case of CIT vs. Pawan Gupta as reported in 318 ITR 322, after considering the decision of the Hon’ble Supreme Court in the case of R. Dalmia as reported in 236 ITR 480 and the decision of the Hon’ble Gauhati High Court in the case of Vandana Gogoi, as reported in 289 ITR 28 has held that service of notice u/s 143(2) was mandatory even in case of block assessment and, non-service of such notice would make the assessment order void. In that case also, pleas of participation by the assessee in the assessment proceedings and no prejudice to the interests of assessee were taken like the present case, however, the same did not find favour with the Hon’ble High Court. The provisions of section 143(2) are undisputedly applicable to the provisions of section 153A, hence, ratio of this decision is equally applicable here. Accordingly, in our opinion, the notice u/s 143(2) must be served in the manner as specified in law, which has not been done in the present case, as it is evident that no notice under this section has been served on the assessee after the filing of return on 15.10.2007. Consequently, we quash the assessment proceedings for all these years as null and void.
15. Before parting, we may also add that compliance of the provisions of section 143(2), having regard to nature and scope of these provisions and language employed therein, can happen only after the receipt of return or documents as specified u/s 142(1)(ii), hence, issue of notice u/s 143(2) prior to such stage does not serve any purpose, hence, redundant. We may also add that total non-compliance or part compliance of notice issued u/s 143(2) may also result into framing of assessment u/s 144, hence, for this reason also the compliance of provisions of section 143(2), in the manner as prescribed by law, is necessary.”
[emphasis supplied]
15. Ld. DR for revenue though dutifully supported the orders of lower authorities yet he could not controvert the above submissions of Ld. AR and judicial rulings cited by Ld. AR.
16. We have considered rival submissions of both sides and carefully considered the facts and issue involved in the light of provisions of the Act and judicial rulings cited before us. Admittedly, the assessee filed return of income on 21.12.2015 whereas the notice u/s 143(2) was issued on 18.09.2015 i.e. prior to filing of return and no notice u/s 143(2) was issued thereafter. The AO has also accepted this factual position.
17. It is a settled legal position that the issuance of notice u/s 143(2) after filing of return is a sine qua non for assuming jurisdiction to frame assessment u/s 143(3). A notice issued prior to filing of return is non-est in law and has no legal validity. These propositions are very much accepted in judicial precedents of Hon’ble Supreme Court in CIT Vs. Laxman Das Khandelwal (supra) and ITAT, Indore in ACIT Vs. G.M. Infrastructure (supra). Accordingly following these binding decisions, in present case the AO lacked jurisdiction to frame assessment u/s 143(2) there being complete absence of a valid notice u/s 143(2). The assessment-order is, therefore, held to be void ab initio and quashed. The assessee succeeds in its grounds.
18. Since we have quashed assessment-order itself, other grounds are rendered infructuous and do not require any adjudication at this stage.
19. Resultantly, IT(SS)A No. 58 to 63/Ind/2024 are allowed for statistical purposes and ITA No. 542/Ind/2024 is allowed.
Order pronounced in open court on 27/03/2026
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