The ITAT Hyderabad held that a belated return filed in response to notice under section 148 cannot be treated as non-est if filed during ongoing reassessment proceedings. The Assessing Officer (AO) had ignored the delayed return and completed reassessment without issuing notice under section 143(2), treating it as invalid. The CIT(A) upheld this approach. However, the Tribunal ruled that a return filed under section 148 assumes the character of a return under section 139, thereby triggering all mandatory procedural requirements, including issuance of notice under section 143(2). It emphasized that failure to issue such notice is a jurisdictional defect, not a procedural lapse, rendering the reassessment void ab initio. Relying on established judicial precedents, the ITAT quashed the reassessment order without examining the merits. The ruling reinforces that procedural safeguards in reassessment are mandatory and cannot be bypassed even in cases of delayed compliance.
Case Citation & Core Issue
In Nisha Kapistalamchetlur vs ITO, ITA Nos. 1935 & 1936/Hyd/2025 (ITAT Hyderabad), order dated 30.03.2026, the Tribunal was called upon to adjudicate a significant jurisdictional issue, namely, whether a return of income filed belatedly in response to notice under section 148 can be treated as non-est in law, and whether the failure of the Assessing Officer to issue notice under section 143(2) prior to completion of reassessment renders the entire proceedings invalid and void ab initio.
Facts of the Case
The assessee had not filed her original return of income for the relevant assessment years. Based on information relating to sale of immovable property, the Assessing Officer initiated reassessment proceedings under section 147 and issued notice under section 148 dated 31.03.2021. In response, the assessee filed her return of income on 13.12.2021, though beyond the time prescribed in the notice. In the return, the assessee declared nominal income and contended that the property sold was ancestral in nature, subject to legal disputes, and that no real income had accrued to her.
However, the Assessing Officer disregarded the return on the ground that it was filed beyond the stipulated time and treated it as non-est. Proceeding on this basis, the AO dispensed with the requirement of issuing notice under section 143(2) and completed reassessment under section 147 read with section 144 by determining long-term capital gains at ₹20.16 lakh.
Findings of the AO and CIT(A)
The Assessing Officer took a strict view that since the return was not filed within the time allowed under section 148, it was invalid in the eyes of law, and therefore, there was no obligation to issue notice under section 143(2). The AO further held that capital gains arising from the property transfer were taxable irrespective of disputes or claims regarding ownership and completed the assessment on a best judgment basis.
The CIT(A) affirmed the action of the AO, concurring that the belated return could be ignored and that the reassessment was validly framed. The appellate authority also upheld the addition towards capital gains and rejected the assessee’s challenge on jurisdictional grounds, thereby sustaining the reassessment order.
Findings of the ITAT
The ITAT, however, reversed the findings of the lower authorities and allowed the appeal on jurisdictional grounds. The Tribunal held that a return of income filed in response to a notice under section 148 does not lose its legal character merely because it is filed beyond the time prescribed in the notice, so long as it is filed during the pendency of assessment proceedings. Such a return is required to be treated as a valid return in the eyes of law.
The Tribunal further emphasized that, by virtue of the statutory scheme, a return filed under section 148 assumes the character of a return filed under section 139. Consequently, all procedural requirements applicable to a regular assessment, including the mandatory issuance of notice under section 143(2), become applicable. The failure to issue such notice was held to be a fatal jurisdictional defect, not a mere procedural irregularity, thereby vitiating the entire reassessment proceedings. On this basis alone, the Tribunal quashed the reassessment order without adjudicating the merits of the additions.
Cases Relied Upon – Gist and Legal Principles
The Tribunal’s decision is strongly supported by a consistent line of judicial precedents. In Chirakkal Service Co-operative Bank Ltd. vs CIT, the Kerala High Court held that a return filed beyond the prescribed time cannot be treated as non-est if proceedings are still pending, thereby affirming the validity of belated returns in ongoing assessments.
In CIT vs Rajeev Sharma and CIT vs M. Chellappan, the High Court categorically held that issuance of notice under section 143(2) is mandatory even in reassessment proceedings, and failure to do so renders the assessment invalid. Similarly, in CIT vs Salarpur Cold Storage, relying on the Supreme Court judgment in ACIT vs Hotel Blue Moon, it was reiterated that notice under section 143(2) is a jurisdictional requirement and not a procedural formality.
The Delhi High Court in PCIT vs S.G. Portfolio Pvt. Ltd. reinforced that once a return is filed in response to section 148, the Assessing Officer must follow the complete assessment procedure, including issuance of notice under section 143(2).
Further, in Raj Kumar Chawla vs ITO (Special Bench), it was held that a return filed pursuant to section 148 is to be treated as a return under section 139, thereby attracting all procedural safeguards. The principle laid down in CIT vs Vegetable Products Ltd.—that in case of two possible interpretations, the one favourable to the assessee should be adopted—was also invoked to support a liberal and taxpayer-friendly interpretation.
Additionally, in CIT vs Nagendra Prasad, it was held that even a delayed return filed in response to notice under section 148 necessitates issuance of notice under section 143(2). The Tribunal also relied on its own coordinate bench rulings in Sanghi Textiles Pvt. Ltd. and Komma Reddy Satyanarayana Reddy, which reiterated the same legal position and strengthened the consistency of judicial interpretation.
Final Outcome
In conclusion, the ITAT held that a belated return filed in response to section 148 is a valid return, and once such return is filed, the Assessing Officer is mandatorily required to issue notice under section 143(2) before completing reassessment. The failure to do so constitutes a jurisdictional defect, rendering the reassessment proceedings void ab initio. Accordingly, the reassessment orders were quashed and the appeals of the assessee were allowed.
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