Kamlesh Pramod Gandhi Vs ITO (ITAT Pune)
Pune ITAT Quashes Reassessment for Failure to Issue Mandatory Notice under Section 143(2) Despite Return Filed in Response to Section 148
The ITAT Pune held that a reassessment completed without issuing a mandatory notice under Section 143(2) of the Income-tax Act, 1961 after the assessee filed a return in response to a notice under Section 148 was invalid. The Tribunal found that although the Assessing Officer and CIT(A)/NFAC treated the return as invalid, the record showed that it had been e-verified and therefore could not be regarded as invalid. Since the return filed pursuant to Section 148 was valid, issuance of notice under Section 143(2) was mandatory even if the return was filed belatedly. Relying on earlier judicial precedents and its coordinate bench decisions, the Tribunal held that non-issuance of notice under Section 143(2) constituted a jurisdictional defect rendering the reassessment proceedings a nullity. Accordingly, it set aside the order of the CIT(A)/NFAC, held the reassessment invalid, and allowed the assessee’s appeal. As the appeal succeeded on the legal issue, the Tribunal did not adjudicate the grounds challenging the additions on merits.
The Pune Bench of the Income Tax Appellate Tribunal held that issuance of a notice under section 143(2) is mandatory where an assessee files a return in response to a notice under section 148, even if such return is filed belatedly. Since the Assessing Officer completed the reassessment without issuing the mandatory notice under section 143(2), the Tribunal declared the reassessment invalid in law and quashed the assessment.
The assessee’s case was reopened on the basis of information regarding cash deposits of ₹30.70 lakh in a bank account. In response to the notice under section 148, the assessee filed a return declaring a lower income and explained that the cash deposits represented business receipts from the sale of automobile spare parts. The Assessing Officer, however, rejected the explanation for want of supporting evidence and added the entire cash deposits as unexplained income besides making another addition on account of reduction in returned income.
Before the CIT(A), the assessee specifically challenged the reassessment on the ground that no notice under section 143(2) had been issued after filing the return in response to section 148. The CIT(A) rejected the contention by holding that the return was treated as invalid by the system, and therefore issuance of notice under section 143(2) was unnecessary.
The Tribunal found this reasoning to be factually incorrect. Examining the material placed on record, including the screenshot from the income-tax portal, it noted that the return had in fact been successfully e-verified and was reflected on the portal as a valid return filed in response to section 148. The Tribunal also observed that the Assessing Officer himself had computed the reassessed income by taking the income declared in that return as the starting point, thereby treating it as a valid return for assessment purposes.
Relying on its earlier decisions in Bharat Kantilal Chengede and Bababhai Sadarbhai Shaikh, as well as the judgments of the Patna High Court in CIT v. Nagendra Prasad, the Delhi High Court in PCIT v. Draft Infrabuild (P.) Ltd., and other judicial precedents, the Tribunal reiterated that non-issuance of notice under section 143(2) after receipt of a return in response to section 148 is a jurisdictional defect, which renders the reassessment proceedings void. The Tribunal further held that this mandatory requirement cannot be dispensed with merely because the return was filed beyond the time stipulated in the notice under section 148.
Accordingly, the Tribunal held that the reassessment order suffered from a fatal jurisdictional defect, set aside the orders of the lower authorities, and quashed the reassessment itself. Having allowed the appeal on the legal issue, the Tribunal did not consider the additions on merits.
Author’s Comments:
This ruling further strengthens the growing line of judicial precedents holding that issuance of notice under section 143(2) is an indispensable jurisdictional requirement in reassessment proceedings whenever a return is filed in response to section 148. The Tribunal has also made an important factual observation that where the Income-tax portal reflects a return as successfully e-verified, the Revenue cannot subsequently contend that it was an invalid return merely to justify the omission of issuing a notice under section 143(2). The decision is likely to be of considerable significance in reassessment cases where the Department seeks to sustain assessments despite non-compliance with this mandatory procedural safeguard.
Cases Discussed
- Bharat Kantilal Chengede vs. ITO, ITA No. 1902/PUN/2025, order dated 13.01.2026, Assessment Year 2012-13.
- Bababhai Sadarbhai Shaikh vs. ITO, ITA No. 144/PUN/2025, order dated 23.10.2025, Assessment Year 2015-16.
- CIT vs. Nagendra Prasad, (2023) 156 com19 (Patna).
- Chand Bihari Agrawal v. Commissioner of Income Tax, Central, Patna, M.A. No. 239 of 2011, decided on 25-7-2023.
- PCIT vs. Draft Infrabuild (P.) Ltd. (Delhi High Court)
- PCIT vs. Shri Jai Shiv Shankar Traders (P.) Ltd., [2015] 64 taxmann.com 220/383 ITR 448 (Delhi).
- DIT v. Society for Worldwide Interbank Financial Telecommunications, [2010] 323 ITR 249 (Delhi).
- CIT v. Rajeev Sharma, [2010] 192 Taxman 197/336 ITR 678 (Allahabad).
- CIT v. Salarpur Cold Storage (P.) Ltd., [2014] 50 taxmann.com 105/228 Taxman 48 (Allahabad).
- Hotel Blue Moon.
- Sapthagiri Finance & Investments v. ITO, [2012] 25 taxmann.com 341/210 Taxman 78 (Madras) (Mag.).
FULL TEXT OF THE ORDER OF ITAT PUNE
