Hiteshbhai Mansukhbhai Patel Vs ITO (ITAT Surat)
AO Relied on Return but Issued No Section 143(2) Notice: Surat ITAT Allows Assessee’s Appeal
Return Treated as Invalid but Used in Assessment
The Surat Bench of the Income Tax Appellate Tribunal allowed an assessee’s challenge concerning non-issuance of notice under section 143(2) after finding that the Assessing Officer had effectively accepted the return by incorporating its income into the assessed total income.
The AO had described the return as time-barred and invalid. However, while computing the assessment, he included the ₹3,840 income disclosed in that return.
The Tribunal held that this treatment demonstrated acceptance of the return filed after the section 148 notice. It therefore sustained the assessee’s additional legal ground concerning the absence of a section 143(2) notice.
The Tribunal also examined the additions on merits and held that both disputed additions were unsustainable.
Reassessment and Additions for Bank Deposits
The assessee had not originally filed a return for assessment year 2012–13. The AO reopened the assessment by issuing a notice under section 148 dated 28 March 2019.
During the proceedings, the assessee explained that he cultivated and sold agricultural produce, principally green bananas supplied to wholesale merchants.
He furnished 7/12 extracts of agricultural landholdings, a bank statement, bills for agricultural produce sold to Naeem Kela Suppliers, and other details.
The AO nevertheless rejected the explanation and made two additions:
- ₹11,84,000 under section 69A as unexplained income.
- ₹4,63,939 towards unexplained credits in the assessee’s SBI account.
The aggregate disputed additions amounted to ₹16,47,939.
Dispute Returns to Tribunal After Earlier Remand
The CIT(A) initially dismissed the assessee’s appeal by an order dated 5 October 2023.
The Tribunal subsequently restored the matter to the CIT(A) for a fresh decision through its order dated 28 May 2024.
Thereafter, by an order dated 30 September 2025 under section 154 read with section 250, the CIT(A) set aside the matter and referred it to the AO for a fresh assessment.
The assessee again approached the Tribunal, maintaining that the jurisdictional objection concerning section 143(2) required adjudication rather than another remand.
He also challenged the additions relating to agricultural receipts and bank credits.
Revenue Contends That No Valid Return Existed
The Revenue argued that the assessee had failed to furnish a valid return in response to the section 148 notice within the prescribed period.
According to the Department, the later communication and return-related material could not substitute for compliance with that notice. It therefore contended that no obligation to issue notice under section 143(2) arose.
The Revenue additionally relied on section 292BB, arguing that the assessee had participated in the proceedings without raising the objection before completion of assessment.
These were the Department’s submissions. The Tribunal ultimately allowed the assessee’s legal ground on the basis of the AO’s treatment of the return in the assessment computation.
AO’s Own Computation Establishes Acceptance
The Tribunal identified an inconsistency in the assessment order.
While the AO called the return invalid, he incorporated the income declared in it when determining the assessed total income. The Tribunal considered this to mean that the AO had accepted the return of income.
It acknowledged that the additional ground was not properly framed but examined its substance: notice under section 143(2) had not been issued despite acceptance of the return.
On these facts, the Tribunal allowed the additional ground.
It also rejected the CIT(A)’s observation that the assessee had made no compliance. The assessment order itself recorded the assessee’s reply dated 21 November 2019, together with the agricultural land records, bank statement and sale bills.
Consequently, the Tribunal found the assessment under section 144 unjustifiable on this issue.
Agricultural Income and Withdrawals Explain the Amounts
The Tribunal separately considered the merits.
For the ₹11,84,000 addition under section 69A, it found that the AO had not properly considered the details demonstrating that the assessee derived exempt agricultural income. It held that the addition did not survive.
Regarding the ₹4,63,939 unexplained-credit addition, the Tribunal noted that the assessee had furnished a profit and loss account demonstrating substantial cash withdrawals during the relevant assessment year.
It accepted that the credits stood explained and held that this addition also could not be sustained.
The assessee’s appeal was accordingly allowed.
Author’s Comments
The ruling highlights the importance of consistent treatment of a return throughout assessment proceedings. Here, the AO’s reliance on the returned income was decisive in rejecting the argument that no accepted return existed.
Equally significant is the Tribunal’s examination of the supporting documents. Agricultural land records, produce-sale bills and evidence of withdrawals supported the explanations independently of the legal objection.
The decision remains tied to these findings. It should not be read as declaring that every belated return automatically becomes valid or that every bank deposit is explained merely by ownership of agricultural land.
Cases Discussed
- CIT Vs Laxman Das Khandelwal (Supreme Court), Civil Appeal Nos. 6261–6262/2019: Cited in the grounds of appeal concerning the consequences of failure to issue the statutory notice.
- ITO Vs Mukesh Mahavir Prasad Sen: Referred to in the assessee’s grounds of appeal concerning jurisdictional requirements.
- Atul K. Mehta: Referred to in the assessee’s grounds of appeal.
- NTPC Ltd. Vs CIT (Supreme Court), 229 ITR 383: Cited concerning the raising of an additional legal ground before the Tribunal.
- Parmanand Vs ITO (ITAT Agra), ITA No. 447/Agr/2025, dated 17/04/2026: Relied upon by the assessee.
- Wazeera Saleh Mithiborwala Vs DCIT (ITAT Mumbai), ITA No. 484/MUM/2025, dated 15/10/2025: Relied upon by the assessee.
- SATYA Enterprises Vs ITO (ITAT Raipur), (2025) 180 taxmann.com 808: Relied upon by the assessee.
- PCIT Vs Cosmat Traders (P) Ltd. (Calcutta High Court), (2023) 146 taxmann.com: Relied upon by the assessee.
- CIT Vs Shankar Lall Goenka (Gauhati High Court), (2025) 174 taxmann.com 31: Relied upon by the Revenue concerning Section 292BB
FULL TEXT OF THE ORIGINAL ORDER OF ITAT SURAT
The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 30.09.2025 for the Assessment Year (in short “AY”) 2012-13.
2. The assessee has raised the following grounds of appeal:
“1. LD NFAC has failed to appreciate that assessee has filled his return of income in pursuance of notice u/s 142(1) dated 23/08/2019 on 20/09/2019 hence return of income filed in pursuance of notice u/s 147 is valid therefore LD AO shall get jurisdiction of assessment only if notice u/s 143(2) is issued which is jurisdictional fact and unless such fact is adjudicated, remand u/s 251(1)(a) of the IT Act, is infructuous and bad in law.
2. LD NFAC has failed to appreciate that past history by reproducing order of ITAT is itself irrelevant and specific direction of Hon’ble ITAT that grounds of appeal raised by assessee is restored back to file of CIT(A) to pass order afresh on considering merits of the case which implies that LD NFAC has failed to adjudicate upon jurisdictional fact.
3. LD NFAC has failed to appreciate that there are Supreme Court judgements CIT Vs Laxman Khandelwal in Civil Appeal Number-6261-6262/19 as well as ITO Vs Mukesh Mahavir Prasad Sen and Atul K Mehta etc. and LD NFAC has failed to note implications of directions of ITAT as well as jurisdictional fact and mandatory supreme court judgements.
4. LD NFAC has failed to appreciate that cash is deposited out of agriculture income and evidence of agriculture income is also provided and alternatively assessee has no other source of income therefore LD AO has failed to exercise judicial discretion in judicial manner solely relying upon statement of banana dealer which itself violates rule of natural justice because of copy such statement of banana dealer is never provided to assessee.
5. As entire exercise of assessment is violative of fundamental rules of natural justice therefore entire assessment is null and void and therefore assessment order needs to be annulled.”
3. The assessee did not file return of income for AY 2012-13. Assessment was reopened by issuing notice u/s. 148 of the Income Tax Act, 1961 (in short “the Act”) dated 28.03.2019. The assessee did not file return of income in response to notice u/s. 148 of the Act, but filed return of income after awaiting 30 days of time limit on 21.11.2019. Notice u/s. 142(1) was issued on 23.08.2019 & 20.09.2019 but as per postal remark “assessee denied to receive notice”. The assessee did not give reply. However, assessee replied vide letter dated 21.11.2019 to notice u/s. 141 of the Act issued on 18.11.2019 that the assessee is engaged in carrying out business activities in the field of cropping and selling agriculture produces & mainly involved in producing Green Bananas and sale it to wholesale merchants. The assessee also produced 7/12 extracts of agricultural land holding, copy of bank statement and bill of agriculture produce sold to Naeem Kela Suppliers & other details. The Assessing Officer (in short “the AO”) rejected assessee’s explanation and made addition on account of unexplained income amounting to Rs.11,84,000/- u/s. 69A of the Act. The AO also made addition of Rs.4,63,939/- towards unexplained credit amount in assessee’s bank account maintained with SBI. The AO while computing the taxable income taken into account the return of income of the assessee (Rs.3,840/-) which was stated by AO as time barred & invalid return in para 2 of assessment order. The assessee filed appeal before CIT(A) & CIT(A) vide order dated 5.10.2023 dismissed the appeal which was restored by ITAT to the file of CIT(A) for fresh order vide order dated 28.05.2024.
4. The CIT(A) set aside and referred back the case to the AO for making fresh assessment vide order dated 30.09.2025 passed u/s. 154 r.w.s. 250 of Act.
5. The Ld. Authoritised Representative (in short “the Ld. AR”) for the assessee submitted that the assessee has taken additional ground of non-issuance of notice u/s. 143(2) of the Act vide synopsis of submission dated 04.05.2026 filed before Tribunal on 06.05.2026. The Ld. AR submitted that neither Sec. 147 nor 144 has laid down that belated return is null and void. Secondly, assessee has responded to the notice u/s. 142(1) of the Act, therefore conditions of Sec. 144 are complied, hence it is incorrect to assessee u/s. 147 r.w.s. 144 of the Act. Besides, Rule 11 of ITAT rules, 1962 does not permit additional ground of appeal at the discretion of the Tribunal. Hon’ble Supreme Court in case of NTPC Ltd. 229 ITR 383 (SC) laid down the principle to raise additional legal ground. The Ld. AR relied upon following decisions:
“i) Parmanand vs. ITO (ITA No. 447/Agr/2025 order dt. 17.04.2026) (2026) (4) TMI 1257 – ITAT AGRA
ii) Wazeera Saleh Mithiborwala vs. DCIT (ITA No. 484/MUM/2025 order dated 15.10.2025) (2025) (11) TMI 1299 – ITAT MUMBAI
iii) SATYA Enterprises vs. ITO (2025) 180 taxmann.com 808 (Raipur Trib)
iv) PCIT vs. Cosmat Traders (P) Ltd. (2023) 146 taxmann.com (Calcutta HC)”
6. The Ld. Departmental Representative (in short “Ld. DR”) submitted as under:
“The legal ground raised by the assessee proceeds on an erroneous factual premise and, therefore, deserves to be rejected at the threshold. The assessment records unmistakably demonstrate that the reassessment proceedings were initiated by issuance of notice under section 148 dated 28.03.2019, which was duly served upon the assessee. The statutory obligation thereafter was upon the assessee to furnish a return of income in response to the said notice.
3. Admittedly, the assessee failed to do so. Even after repeated statutory notices and adequate opportunities granted by the Assessing Officer, no return was furnished in compliance with section 148. The assessee now seeks to contend that the return already available on record should be regarded as a return filed pursuant to notice under section 148. This contention is completely unsupported by the record. Neither was any fresh return filed nor was there any communication requesting the Assessing Officer, within the prescribed time, to treat the earlier return as one filed in compliance with section 148.
4. On the contrary, the assessment order specifically records that only on 21.11.2019, long after expiry of the statutory period, the assessee merely furnished a copy of the earlier return and requested that it should not be treated as an valid return. The Assessing Officer rightly held that such belated communication could not substitute the statutory requirement of furnishing a return in response to notice under section 148.
5. The assessee’s reliance upon the order-sheet entry dated 17.09.2019 is equally misplaced. The said noting merely records the receipt of correspondence and cannot, by any stretch of interpretation, be construed as acceptance of the original return as a valid return furnished pursuant to notice under section 148. No such satisfaction has ever been recorded by the Assessing Officer.
6. Once these admitted facts are appreciated, the entire legal plea advanced by the assessee necessarily fails. The requirement of issuing notice under section 143(2) presupposes the existence of a valid return filed in response to notice under section 148. In the absence of such a return, no statutory obligation to issue notice under section 143(2) ever arose. A person who has himself failed to comply with the mandatory requirement of law cannot subsequently seek to invalidate the reassessment by alleging non-compliance with a procedural requirement that never became operative.
7. Without prejudice, the assessee actively participated in the reassessment proceedings and never questioned the alleged absence of notice under section 143(2) before completion of the assessment. Such an objection has been raised for the first time at the appellate stage. The Hon’ble Gauhati High Court in CIT v. Shankar Lall Goenka [(2025) 174 taxmann.com 31] has categorically held that an assessee who has participated in the assessment proceedings without raising such objection is precluded, by virtue of section 292BB, from questioning the validity of the assessment on that ground at a later stage.
8. In the present case, therefore, the assessee’s challenge is liable to fail on both counts-first, because no valid return was ever furnished pursuant to notice under section 148 and consequently the question of issuing notice under section 143(2) never arose; and secondly, because the objection is clearly barred by section 292BB. Accordingly, the legal ground deserves to be dismissed.”
7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the AO while computing assessed total income has also taken the income as per return filed by the assessee. At one point, AO held that the said return filed by the assessee is time barred and invalid, but while computing assessed total income add the same, that means the AO accepted the return of income filed by the assessee. Besides, this, the observation made by the CIT(A) that neither before AO nor before CIT(A) compliance was made by the assessee, is incorrect observation by the CIT(A) as the AO in Para 3 of the Assessment Order categorically mentions assessee’s reply dated 21.11.2019 alongwith 7/12 extract of agricultural land holdings, copy of Bank Statement and bill of agricultural produce sold to Naeem Kela Suppliers & other details. Thus, the assessment passed u/s 144 is also not justifiable on this issue. The additional ground taken by the assessee is not properly formed. But the substance of ground is that notice u/s 143(2) is not issued to the assessee and hence assessment becomes invalid. In present case the assessee filed return after issuance of notice u/s. 148 of the Act which was accepted by Assessing Officer as per computation of income mentioned at para 6 of Assessment Order. Therefore, the additional ground does sustain. Hence additional ground is allowed. As relates to merit, the action of AO has not considered Assessee’s details which clearly shows that the assessee is deriving exempt agriculture income and the return filed by the assessee are accepted by the AO. Thus, addition on unexplained income u/s. 69A does not survive. As relates to addition on unexplained credit, the assessee has given the profit and loss account, therein demonstrating that the assessee has substantially withdrawn the cash during present assessment year. Thus, the credits were also explained. Therefore, this addition also does not sustain.
8. In result, appeal of the assessee is allowed.
Order pronounced in the open court on 22.10.2026
