Section 143(2) – Validity in Set-Aside Reassessment Proceedings and Effect of Non-Verification of Return of Income

PCIT Vs Ashish Gupta (Allahabad High Court)

Section 143(2) – Validity in Set-Aside Reassessment Proceedings and Effect of Non-Verification of Return of Income

The jurisdictional validity of reassessment proceedings hinges fundamentally on compliance with statutory safeguards embedded in the Income-tax Act, 1961. Among these, issuance of notice under Section 143(2) occupies a central and non-negotiable position. The decision of the Allahabad High Court in Principal Commissioner of Income Tax v. Ashish Gupta decisively reiterates that failure to issue notice under Section 143(2) renders reassessment proceedings void ab initio, and that such a defect cannot be cured by invoking Section 292B, even where the return filed in response to notice under Section 148 is alleged to be non-verified or defective.

The appeal before the High Court arose from an order of the Income Tax Appellate Tribunal, Delhi Bench, which had affirmed the order of the Commissioner of Income Tax (Appeals) setting aside the reassessment order passed under Section 147 read with Sections 144 and 144B of the Act for Assessment Year 2015–16. Primarily, for the reason that no notice under Section 143(2) was issued to the assessee, the reassessment proceedings were set aside by the CIT (Appeals), and that finding stood confirmed by the Tribunal.

The factual foundation of the case was not in dispute. The assessee had originally filed a return under Section 139(1) declaring taxable income of ₹9,42,790/-. Pursuant to issuance of notice under Section 148, the assessee filed another return on 25.05.2021, declaring the same income. Crucially, the Assessing Officer computed the reassessed income on the basis of the figures disclosed in the return so filed, without relying upon any external or independent material. It was also an admitted position that no notice under Section 143(2) was ever issued during the reassessment proceedings.

The principal objection raised by the Revenue was that the return filed in response to the notice under Section 148 was non est, as it was allegedly filed beyond the stipulated time and was not e-verified within the prescribed period. On this basis, it was contended that issuance of notice under Section 143(2) was not mandatory. This objection was categorically rejected by the High Court.

The Court noted that the CIT (Appeals) and the Tribunal had examined this issue in detail and recorded a clear factual finding that the Assessing Officer himself had acted upon the return filed by the assessee, treating it as a valid return for the purpose of reassessment. Once the Assessing Officer proceeds to compute income on the strength of a return filed in response to Section 148, the statutory obligation to issue notice under Section 143(2) becomes unavoidable. The Revenue could not be permitted to simultaneously rely upon the return for computation while denying the assessee the procedural protection flowing from it.

The High Court further observed that the defect of non-verification was, in any event, purely technical in nature, particularly when the assessee had e-verified the return immediately upon the defect being pointed out. The Court held that substantial compliance stood established, and the Revenue’s attempt to elevate a curable technical lapse into a jurisdiction-saving argument was wholly misconceived.

Placing reliance on the authoritative decision of the Supreme Court in Assistant Commissioner of Income Tax v. Hotel Blue Moon, the Court reiterated that issuance of notice under Section 143(2) is not a procedural formality but a jurisdictional requirement. The omission to issue such notice goes to the root of the matter and is not curable under Section 292B of the Act, regardless of the stage at which the defect is noticed. The High Court emphasized that statutory safeguards cannot be diluted by administrative convenience or technical objections raised ex post facto.

The Court also took note of the fact that the assessee’s request for supply of “reasons to believe” for reopening had never been complied with, further reinforcing the conclusion that the reassessment proceedings suffered from serious jurisdictional infirmities. However, the Court made it clear that even independently of that lapse, the failure to issue notice under Section 143(2) was sufficient to invalidate the reassessment in its entirety.

Final Determination :-The High Court held that no substantial question of law arose for consideration, and that the questions framed by the Revenue deserved to be answered against the Revenue and in favour of the assessee. It was conclusively held that reassessment proceedings stood vitiated solely on account of non-issuance of notice under Section 143(2), a defect not curable under Section 292B, notwithstanding any alleged non-verification of the return. Accordingly, the appeal filed by the Revenue was dismissed.

This decision reinforces a well-settled but frequently contested principle of tax jurisprudence: jurisdictional defects cannot be cured by procedural arguments. The ruling serves as a clear warning that non-issuance of notice under Section 143(2) strikes at the very foundation of reassessment proceedings, and that Revenue cannot approbate and reprobate by treating a return as valid for computation while denying the statutory consequences flowing therefrom.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Mr. Ankur Agarwal, learned counsel for the revenue and perused the record.

2. Present appeal has been filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act) arising from the order of the Income Tax Appellate Tribunal, Delhi Bench “A”, New Delhi, dated 30.06.2025, in ITA No. 560/Del/2024 for A.Y. 2015-16. By that order, learned Tribunal has dismissed the revenue’s appeal filed against the order of the Commissioner of Income Tax (Appeals) dated 13.12.2023 whereby CIT (Appeals) had allowed the assessee’s appeal and set aside the reassessment order dated 30.3.2022 passed by the National Faceless Assessing Authority.

3. Present appeal has been preferred on the following question of law:

“(i) Whether on the facts, circumstances and in law, the Ld. ITAT has erred in law in not appreciating that the return of income filed by the assessee in compliance to notice u/s 148 of the Income Tax Act 1961 on 25.05.2021 was neither filed within the stipulated time period of 30 days from the issue of notice u/s 148 of the I.T. Act and was neither e-verified nor condonation was allowed, and thus, there was no requirement for issue of notice u/s 143(2) of the I.T. Act for invalid (non-est) return?

(ii) Whether on the facts, circumstances and in law, the Ld. ITAT has erred in law and on fact while affirming the quashing of the assessment order passed u/s 147 r.w.s. 144B of the Income Tax Act by holding that merely by starting the computation of income of Rs. 9,42,790/-. which was declared by the assessee in the return filed u/s 139(1) on 15.09.2015, it was mandatory for the Assessing Officer to issue notice u/s 143(2) disregarding the fact that the return filed in response to notice u/s 148 was non-est as having being filed beyond the time allowed in the said notice and not being e-verified within the prescribed time?

(iii) Whether on the facts, circumstances and in law, the Ld. ITAT has erred in law by ignoring the decision of Hon’ble Supreme Court in the case of M/s GKN Driveshafts (India) Ltd vs ITO (Appeal 7731 of 2002) that holds that after filing a valid ITR, assessee, if desired, can ask for reasons of reopening of the assessment?

(iv) Whether the Ld. ITAT has erred in overlooking the adverse facts and findings against the assessee were duly communicated through the show cause notice u/s 142(1) r.w.s. 144 disregarding the fact that the return filed in response to notice u/s 148 was non-est as having being filed beyond the time allowed in the said notice and not being e-verified within the prescribed time?

(v) Whether on the facts, circumstances and in law, the Ld. ITAT has erred in law in affirming the quashing of the assessment order passed u/s 147 r.w.s 144 r.w.s 144B of the Income Tax Act 1961 by overlooking the fact that the Assessment Order in this case was actually passed u/s 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (as mentioned clearly in para 10 and para 11 of the Assessment Order dated 30/03/2022).?”

4. No other question of law has been framed or pressed during hearing of this appeal.

5. There is no challenge to the fact finding recorded by the CIT (Appeals) as confirmed by the Tribunal that the assessee had filed his original return on 15.09.2015 for the A.Y. 2015-16 or that upon issuance of the reassessment notice under Section 147 read with Section 148 of the Act, the assessee filed his return on 25.05.2021. In both returns, he disclosed his taxable income Rs. 9,42,790/-. There is no challenge to the finding of the Tribunal that the computation of the income was made by the assessing authority in the reassessment proceedings on the strength of return thus filed. Further, there is no challenge to the finding of the CIT (Appeals) as confirmed by the Tribunal that the ‘reasons to believe’ to initiate the reassessment proceedings, though prayed for by the assessee, were never supplied. Last, it is also not in doubt that no notice of the reassessment proceedings was issued to the assessee under Section 143(2) of the Act.

6. Primarily, for the reason of notice not issued to the assessee under Section 143(2) of the Act, the reassessment proceedings have been set aside by the CIT (Appeals). That order has been confirmed.

7. The objection raised by the learned counsel for the revenue that the assessee had not confirmed the return filed in response to the reassessment notice issued under Section 148 of the Act, we find, the CIT (Appeals) and the Tribunal have dealt with that issue and found that the assessing officer has made the computation of the income of the assessee not on the strength of any other material but primarily on the strength of the facts disclosed in the physical return filed. Inferentially, it may be observed, the reasoning of the CIT (Appeals) as confirmed by the Tribunal appears to be that though the return filed through physical mode may not have been confirmed through electronic mode at the relevant time, at the same time, substantially, procedural requirement stood fulfilled inasmuch as the assessing officer himself made the computation of income on the basis of the figures disclosed in the return filed through the physical mode. Further, the Tribunal had noted, upon such defect being pointed out, the next date itself, the assessee e-verified the same. In Assistant Commissioner of Income Tax and Another vs Hotel Blue Moon, (2010) 3 SCC 259, it has been held, notice under Section 143(2) is not procedural and omission to serve that notice is not curable. Requirement of its issuance cannot be dispensed with.

8. In view of such fact, we find no good ground to offer interference on the hair-splitting objection raised by the revenue. As to any other defect in the conclusion reached by the CIT (Appeals) and the Tribunal, in absence of any question framed or objection raised, we are not inclined to offer our minds any further.

9. Accordingly, the appeal fails and is dismissed.

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Disclaimer :-This article is intended solely for academic, informational, and professional discussion purposes. It is based on the judgment of the Allahabad High Court in Principal Commissioner of Income Tax & Another v. Ashish Gupta and reflects the legal position emerging therefrom as on the date of the decision. It does not constitute legal or tax advice and should not be relied upon as a substitute for professional consultation. Readers are advised to seek independent expert advice before acting on any issue discussed herein.