Hari Shankar Kumar Vs ITO (ITAT Delhi)
Delhi ITAT Quashes Reassessment for Non-Issuance of Section 143(2) Notice-Participation Cannot Cure Complete Absence of Mandatory Notice Under Section 292BB
The Delhi ITAT quashed the entire reassessment as void ab initio because the mandatory notice under Section 143(2) had never been issued. It held that issuance of a notice under Section 142(1) and the assessee’s active participation in reassessment proceedings cannot confer jurisdiction upon the AO or cure the defect under Section 292BB.
The assessee had purchased an immovable property for ₹18.50 lakh, whereas its stamp-duty/circle-rate value was ₹36.90 lakh. Based on the difference of ₹18.40 lakh, the assessment was reopened on the ground that the differential amount was taxable in the buyer’s hands under Section 56(2). The AO ultimately added the entire ₹18.40 lakh to the returned income.
The assessee challenged the reassessment before the CIT(A), specifically contending that it was void ab initio because no notice under Section 143(2) had been issued. On merits, he also argued that the property had been acquired at a distress value, that a registered valuer’s report had been ignored, and that the AO had failed to refer the valuation dispute to the DVO.
The CIT(A) rejected the jurisdictional objection by invoking Section 292BB, reasoning that the assessee had actively participated in the reassessment proceedings and had furnished replies, documents and a valuation report.
The ITAT categorically disagreed. It found as a fact that no statutory notice under Section 143(2) had been issued at all. Such notice was held to be a mandatory condition precedent for framing a scrutiny assessment. A notice under Section 142(1), even coupled with complete participation by the assessee, does not substitute for Section 143(2) and cannot confer jurisdiction on the AO.
Relying upon the Supreme Court decision in ACIT v. Hotel Blue Moon, 321 ITR 362 (SC), the Tribunal held that failure to issue Section 143(2) notice renders the assessment void and incurable. It also relied upon the Delhi High Court judgment in PCIT v. Silver Line, 382 ITR 455 (Del), which specifically holds that participation in reassessment proceedings does not dispense with the mandatory requirement of issuing Section 143(2) notice.
The Tribunal accordingly held that the omission was “substantive, fatal, illegal and cannot be cured” by Section 292BB. The reassessment was declared void ab initio and quashed in its entirety. Consequently, it became unnecessary to examine the merits of the ₹18.40 lakh addition.
Cases Discussed:
- ACIT v. Blue Moon (SC), 321 ITR 362 (SC)
- PCIT v. Silver Line (Delhi HC), (2016) 382 ITR 455 (Del)
FULL TEXT OF THE ORDER OF ITAT DELHI
The instant appeal filed by the assessee is directed against the order dated 08..01.2026 passed by the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the Ld. CIT(A)/NFAC] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 29.05.2023 passed by the Assessment Unit, Income-tax Department (hereinafter referred to as ‘the Ld. AO’) under Section 147 read with Section 144B of the Act for Assessment Year 2017-18.
2. For A.Y. 2017-18 the assessee filed his return on 4.1.2018 declaring total income of Rs. 10,12,970/-.On receipt of information that the assessee had purchased immovable property below circle rate at Rs. 18,50,000/- as against circle rate at Rs. 36,90,000/-, the sale consideration of the property was much less than the stamp duty valuation, the case of the assessee was reopened by issuing notice under Section 148 after recording reasons that income chargeable to tax had escaped assessment and the differential amount of Rs. 18,40,000/- was to be taxed under Section 56(2) in the hands of the assessee (buyer), notice under Section 142(1) of the Act was issued on 22.03.2023 which was responded. The AO reframed the assessment by adding Rs. 18,40,000/- to the returned income. In appeal before the Learned CIT(A) it was stated that the reassessment was void ab initio due to non issuance of notice under Section 143(2) and approval under Section 151 was not provided. Addition based on circle rate was not justified. The property was purchased at distress value and the valuation report issued by a registered valuer was ignored. The AO failed to refer the matter to the DEVO despite requires.
3. The learned CIT(A) observing that the assessee actively participated in the proceedings and furnished reply, documents and valuer’s report. Section 292BB provides power if assessee has participated in the proceedings he cannot subsequently object to non-service or improper service rejected the objection made by the assessee and affirmed the action of the learned AO. Aggrieved the assessee is in appeal before this Tribunal.
4. I have heard the rival submissions made by the respective parties and perused the material available on record. There is nothing to deny the fact that in this particular case mandatory statutory notice under Section 143(2) was not issued by the department. Section 143(2) is a mandatory condition precedent without which the Ld. AO has no power to frame a scrutiny assessment. So as far as the contention of the Learned DR that notice under Section 142(1) was issued and the assessee actively participated in the proceedings does not confer jurisdiction to complete a regular scrutiny assessment under Section 143(3). The omission to issue notice under Section 143(2) is substantive, fatal, illegal and cannot be cured by provision of Section 292BB of the Act. The Hon’ble Supreme Court in the case of ACIT v. Blue Moon reported in321 ITR 362 (SC) has settled that the requirement of a notice under Section 143(2) is mandatory and failure to issue renders the entire assessment void and incurable. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT v. Silver Line reported in (2016) 382 ITR 455 (Del) in respect to invoking of provision of Section 148 read with section 292BB it has dealt with the issues as to whether Section 292B would apply with regard to failure to issue notice in reassessment proceedings and held that the failure to issue of notice under Section 143(2) of the Act cannot be condoned by referring to Section 292BB and merely because assessee participated in proceedings pursuant to notice issued under Section148 does not obviate mandatory requirement of Assessing Officer to issue notice under Section 148 143(2) to the assessee before finalising the reassessment. Respectfully following the aforesaid judicial precedent it is held that for want of issuance of notice under Section 143(2) of the Act, the scrutiny assessment framed by the Assessing Officer is void-ab-initio and is unsustainable in the eye of law. The assessment is, thus, quashed.
5. In the result, assessee’s appeal is allowed.
Order pronounced in the open court on 10/08/2026.
