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
