Issue of Notice u/s 143(2) after filing of return u/s 139 or in response to Notice issued u/s 142(1) or 148 is mandatory

CIT Vs Laxman Dass Khandelwal (Supreme Court of India)

After filing a return of income u/s 139(1), 139(4),  139(5), 142(1) if income tax authority considers, it is necessary or expedient to ensure that assessee has not understated the income or has not computed excessive loss or has not under-paid the taxes in any manner, shall serve on the assessee a notice requiring him, on a date to be specified thein, either to attend the office of Assessing Officer or to produce or cause to be produced before Assessing Officer any evidence on which the assessee may rely in support of the return. Provided that no notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished.

A return of income filed in response to Notice u/s 148 is also treated as a return filed u/s 139 and provisions of income tax act so far as may be, apply accordingly as if such return were a return required to be furnished u/s 139. When a return of income filed in response to notice u/s 148 is deemed as filed u/s 139 also, then it is necessary that to make an assessment it is necessary to issue a notice u/s 143(2) to proceed further with assessment proceedings.

In view of the decision of the Honourable Supreme Court in case of ACIT V. Hotel Blue moon vide order dated 2.2.2010 has held that omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. It is to be noted that the above said judgment was in the context of Section 158BC. Clause (b) of Section 158BC expressly provides that “the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of Section 142, sub sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. 

Not issuing notice within prescribed time renders the assessment invalid and participation of assessee in assessment proceedings also does not validate the assessment and protection is also not covered u/s 292BB. This position was cleared by Supreme Court in the case of CIT. V. Laxman Dass Khandelwal vide order dated 13.8.2019. Main portion is reproduced below:

Please become a Premium member. If you are already a Premium member, login here to access the full content.