Ramesh C. Salecha HUF Vs ITO (ITAT Mumbai)
“Notice Issued” Is Not Enough: Reassessment Falls When Department Cannot Prove Section 143(2) Notice
Mumbai ITAT quashes bogus purchase reassessment; section 292BB cannot supply a notice whose issuance is unproved
A reassessment may begin with information about suspicious purchases, but it must still follow the procedure required to complete the assessment. In Ramesh C. Salecha HUF v. ITO, ITA Nos. 1253 and 1370/Mum/2026, pronounced on 23 September 2026, the Mumbai ITAT quashed a reassessment for AY 2009–10 because the Department could not prove that the mandatory notice under section 143(2) had been issued and served. The assessee’s participation in the proceedings did not save the assessment under section 292BB.
How the purchase dispute arose
The assessee HUF carried on a business of trading in ferrous and non-ferrous metals. It filed its return declaring income of ₹5,45,892. Subsequently, the AO received information, based on enquiries by the Sales Tax authorities, concerning persons alleged to be issuing accommodation purchase bills. The assessee’s name appeared among the reported beneficiaries, and the AO reopened its assessment by issuing a notice under section 148 on 28 March 2013.
The enquiry focused on purchases reportedly made from three concerns. The assessee maintained that it had made no purchases from two of them during the relevant year. For purchases from Big Trade Agency, it supplied documents including a ledger account, purchase bill, bank payment details and stock register. Notices issued to the alleged suppliers under section 133(6) were returned with the postal remark “not known”. The AO was not satisfied with the assessee’s explanation and made an addition of approximately ₹4.52 crore under section 69C as unexplained expenditure.
In the first appeal, the assessee explained that a substantial part of its purchases comprised imports supported by customs clearance and duty payment. The CIT(A) found no basis to sustain the entire addition attributed to the alleged billers. However, the CIT(A) sustained ₹45,91,889, representing the purchases from Big Trade Agency, and deleted the balance ₹4,06,58,264.
Both sides came before the Tribunal. The assessee challenged the surviving addition and the validity of the reassessment. The Revenue sought restoration of the amount deleted by the CIT(A). Yet the dispute over whether the purchases were genuine was never reached: a defect concerning the section 143(2) notice decided both appeals.
The AO’s remand report became decisive
After receiving the section 148 notice, the assessee had asked that its original return be treated as the return filed in response. The assessee argued before the Tribunal that no notice under section 143(2) had thereafter been issued and served. It relied particularly on the AO’s own remand report.
The remand report stated that a section 143(2) notice was issued on 9 October 2013, with a date fixed for compliance. But it also admitted that no record of service of that notice was available. The Department argued that the assessee had participated in the assessment without objecting to non-service at that stage. According to the Revenue, section 292BB prevented the assessee from raising the objection later.
The Tribunal examined more than the statement in the remand report. It noted that the AO had failed to place on record the notice itself or speed-post evidence supporting its issuance. The assessment order sheet entry for the relevant date recorded issuance of a notice under section 142(1), but did not record issuance of a section 143(2) notice. In those circumstances, the Tribunal held that a bare assertion of issuance could not take the place of evidence. The Department had failed to prove both issuance and service of the mandatory notice.
Why participation did not cure the defect
The Tribunal relied on the Supreme Court’s ruling in CIT v. Lakshman Das Khandelwal. Section 292BB can address specified defects in the service of a notice when an assessee has participated in the proceedings without raising a timely objection. Its operation, however, presupposes that a notice emanated from the Department in the first place. It cannot create a statutory notice where the notice itself was never issued.
That distinction mattered here. If a notice exists but there is an irregularity in how it was served, section 292BB may become relevant. In this case, the Tribunal found that the AO could not substantiate the claimed issuance by producing the notice, a dispatch record or other supporting material. The assessee’s participation could not relieve the Department of the burden of establishing this jurisdictional step.
The Tribunal accordingly held that the reassessment had been completed without valid assumption of jurisdiction and quashed the assessment order. The assessee’s appeal was allowed. Once the assessment itself fell, the Tribunal found no need to decide the assessee’s remaining grounds or the Revenue’s challenge to the CIT(A)’s deletion. The Revenue’s appeal was dismissed.
Author’s comments
This decision is principally about proof of statutory procedure. The Revenue may possess material calling for an enquiry into purchases; that material does not dispense with a mandatory notice required after a return is filed in response to reopening. Equally, the phrase “notice issued” in a remand report is not conclusive when the underlying notice and evidence of its dispatch are absent from the record.
The ruling should be cited with care. The Tribunal did not hold that the purchases from Big Trade Agency were genuine, nor did it approve the deletion of the larger addition on merits. Both the sustained addition and the Revenue’s disputed deletion became academic because the reassessment was quashed at the jurisdictional stage.
For practitioners, the useful question is precise: Can the Department produce the section 143(2) notice and establish that it was issued? Where the objection concerns only a defect in service of a notice that demonstrably exists, section 292BB requires separate consideration. Where issuance itself remains unproved, participation in assessment proceedings cannot fill that gap.
Cases Discussed
- CIT v. Lakshman Das Khandelwal, (2019) 310 CTR 8 (Supreme Court) — followed for the proposition that section 292BB can cure specified infirmities in service where a notice has emanated from the Department, but cannot cure the complete absence/non-issuance of the mandatory notice.
- ACIT v. Greater Noida Industrial Development Authority, 379 ITR 14 (Allahabad High Court) — relied upon by the assessee on the requirement that the statutory notice must be served upon the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross-appeals, filed by the Assessee as well as the Revenue, are directed against the common order passed under Section 250 of the Income-tax Act, 1961 (“the Act”) by the National Faceless Appeal Centre (“NFAC”), Delhi, for the assessment year 2009-10, arising out of the assessment order passed by the Assessing Officer under Section 143(3) read with Section 147 of the Act.
2. The Assessee raised the following grounds of appeal filed in ITA No. 1253/M/2026:
1. Orders passed by the learned lower authorities are bad in law and bad in facts.
2. Assessment order passed and upheld by the learned lower authorities is ab-initio void, inasmuch as, no notice u/s 143(2) of the I.T. Act, 1961, was issued and served upon the appellant prior to completion of the impugned assessment.
3. Notice issued under section 148 of the I.T. Act, 1961, is ab-initio void, inasmuch as, said notice was issued on the basis of wrong information and non existent material.
4. Notice issued under section 148 of the I.T. Act, 1961, is ab-initio void, inasmuch as, the Assessing Officer did not annex the informations received from Sales Tax Department to the notice issued. Thus the impugned notice was a non-est notice.
5. The learned Assessing Officer has grossly erred in issuing the notice u/s 148 of the I.T. Act, 1961, on the basis of informations received from Sales Tax Authorities without application of his own mind and without recording his own satisfaction. Thus the impugned notice has been issued on the basis of borrowed satisfaction which is not permissible in law.
6. The learned lower authorities have grossly erred in making/upholding an addition of Rs.45,91,889/- merely on the basis of informations received from Sales Tax Authorities even though complete details in support of claim of purchase was filed.
7. The learned Assessing Officer has grossly erred in not granting an opportunity to cross examine alleged hawala dealers, even though a specific request in this regard was made to grant such an opportunity.
8. The learned lower authorities have grossly erred in making impugned addition of Rs. 45,91,889/- by recourse to sec. 69C of the I.T. Act, 1961, as said section has no application, inasmuch as there is no finding in the assessment order that payments of goods purchased was made otherwise than out of unrecorded bank account.
9. Having regard to the facts of the case, provisions of law and judicial propositions, impugned addition of Rs.45,91,889/- is wholly uncalled for and untenable in law.
10.The appellant may please be permitted to raise any additional or alternative ground on or before hearing of the appeal.
3. The revenue also raised the following grounds of appeal in ITA No. 1370/MUM/2026:
1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in restricting the addition made u/s 69C of the Income-tax Act, 1961 to ₹45,91,889/- and deleting the balance addition of ₹4,06,58,264/-.”
2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has failed to appreciate that all the notices issued u/s 133(6) of the Act to the alleged suppliers were returned unserved with the remark “Not Known”, clearly indicating that the parties were non-existent and the purchases were not genuine.”
3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC erred in granting relief without appreciating that the assessee failed to produce the alleged suppliers or furnish any independent evidence such as transportation details, delivery challans, or proof of actual receipt of goods.”
4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC erred in law and on facts in accepting the assessee’s explanation merely on the basis of entries in books of accounts and banking transactions, ignoring the settled legal position that book entries alone do not establish genuineness of purchases.”
5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC failed to appreciate that once the suppliers were found to be untraceable and non-existent, the entire amount of such purchases was liable to be treated as unexplained expenditure u/s 69C of the Act.”
6. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal
4. The brief relevant facts of the case are that Assessee HUF has been engaged in the proprietary business of trading of ferrous and non-ferrous metals, and filed its return of income on 29th September 2009, declaring income of Rs.5,45,892/-. Subsequently, the assessing officer has received information from the investigation wing based on the investigation carried out by the sales tax authorities, wherein, they identified bogus billers/accommodation entry providers, and recorded their statements. The list of such bogus billers was shared, with details of beneficiaries, wherein, name of the Assessee was appearing. Accordingly, the assessing officer has reopened the case under section 147 of the Act, by issue of notice under section 148 on 28th March 2013, in compliance to that, assessee vide letter dt 27-09-2013, requested to treat the return of income u/s 139(1) dated 29-09-2009 as compliance to that notice.
5. During the course of assessment proceedings, with reference to statement of hawala operators, the assessee was asked to explain purchases made from three parties:
– M/s Ruchi Impacts
– M/s Parswan Company
– M/s Big Trade Agency
with direction to furnish following documents :
– ledger account in the books of Account
– copy of relevant purchase bills and delivery challans
– copy of this tax register for verification
– evidence to show the goods purchased have been sold or utilized by the Assessee
– bank statement showing payment made for the purchases.
6. In response to that, the Assessee has furnished:
– a copy of the ledger account of M/s Big Trade Agency;
– purchase bill of the said concern;
– bank statement for payment made against those purchases
– stock register
7. The Assessee stated before AO, that it did not purchase any goods from M/s. Ruchi Impacts and Parshva and Company during the year under consideration.
8. Looking to the partial compliance, the assessing officer issued notice under Section 133(6) to Ruchi Impex, M/s. Parshva & Co, and M/s.Big Trade Agency, requiring personal attendance with details and documents relating to the purchase transactions carried by the Assessee.
9. These notices under Section 133(6) sent by speed post were returned by the Postal Authority with the remark “not known”, so, the assessee was asked to produce these parties along with the relevant details for examination and verification of facts, and show cause why the entire purchases should not be taken as cash purchases made from the above three parties. The assessee did not produce any one of them. Moreover, assessee requested to grant an opportunity to cross-examine the hawala operator, whose statements were recorded by Sales Tax dept and proposed to relied upon by assessing officer.
10. Finally, based on details and documents, the assessing officer observed that since, assessee failed to produce evidence of receipt of goods from the inward / outward from all suppliers, and genuineness of the movement of the goods through the transport evidences. In view of that, the purchases to the tune of Rs.4,52,53,153/- treated as bogus and added as unexplained expenditure under Section 69C of the Income Tax Act.
11. The Assessee, aggrieved by the assessment order, preferred an appeal before the Ld. Commissioner of Income Tax (Appeals), raising certain legal grounds, one amongst them, was relating to the non-issuance of notice under Section 143(2) of the Income Tax Act, and further on merits additions of ₹4,52,53,153/- under Section 69C of the Act.
12. The Learned Commissioner of Income Tax (Appeals), called remand report from the assessing officer on the issue of service of notice under Section 143(2) of the Act upon assessee. The AO responded that notice under Section 143(2) was issued on 9th October 2013, served through speed post as evident from records. It is also submitted by AO that assessee did not raise objections during the assessment proceedings for non issue / service of such notice, and participated in assessment proceedings.
13. Ld. CIT Appeal observed that during the course of assessment proceeding, the assessee did not raise objections for non-issue and service of the notice under Section 143(2) of the Act. Therefore, in terms of the provisions of Section 292BB of the Act, the objection for non-service of notice under Section 143(2) is dismissed with regard to the issue on merits.
14. With regards to merits of the case, issue relating to addition under Section 69C of ₹4,52,50,053/- on account of unexplained expenditure for the purchases, before CIT(A), the assessee submitted with supporting documents, that out of total reported purchases of Rs 10,17,55,523/- of the whole year, there were imports of Rs 9,55,13,377/- ( i.e. 99.87%), such imports were cleared through the customs department after payment of custom duty. Therefore, local purchases were remained only Rs.62,42,146/- and out of that Rs 45,91,889/- were made from the one of the listed party M/s Big Trade Agency.
15. Considering the submissions, the Ld.CIT(A) observed that there was no evidence to show that, assessee had made bogus purchases of Rs. 4,52,50,153/- from three alleged entry operators, and considering non reply from M/s Big Trade Agency for purchases of Rs. 45,91,889/-, held that assessee failed to substantiate genuineness of purchase of goods worth Rs. 45,91,889/- from M/s. Big Trade Agency. So, Ld. CIT(Appeals) restricted the additions Rs. 45,91,889/-, and the balance of Rs. 4,06,58,264/- is deleted.
16. Now, the revenue is in appeal against the deletion of addition of Rs. 4,06,58,264/- and also assessee against the sustaining additions under Section 69C of Rs. 45,91,889/- towards unexplained purchases.
17. Before us, the Assessee empathetically raised legal issue of non-service of notice under Section 143(2) by the assessing officer for qassumption of valid jurisdiction for the assessment. The learned authorized representative, referred the remand report ( PB 48) issued by the assessing officer, and findings therein, “… no service of the said notice is on record”. With that he strongly asserts that when the assessing officer himself admitted that there was no evidence available to substantiate the service of statutory notice under Section 143(2) of the Act, the subsequent whole reassessment proceeding became void.
18. Per contra, learned DR strongly objected and submitted that since, assessee did not raise any objection for non-service of notice under Section 143(2) during the course of assessment proceedings, and participated therein till passing of an assessment order. So, the legal challenge for non-service of notice under Section 143(2) is not sustainable in terms of the provision of Section 292BB of the Act for failure to furnish objection within a period of 30 days. The details of remand report are as under :
“In continuation of this office letter no. No.ITO-14(2)(3)/Remand Report/2014-15 dtd. 16.10.2014 it has been brought to your kind notice that the notice u/s 143(2) was issued on 09.10.2013 wherein the date of assessee’s compliance was 18.10.2013 at 04.00 pm. However, no service of the said notice is on record. During the course of assessment proceedings the assessee did not mention about the non-service of notice u/s 143(2) nor did the assessee file any objection about the same. In the context of assessee’s objection for non service of notice u/s 143(2) the provision of section 292BB may kindly be applied.”
19. The learned AR of the assessee in the rejoinder submitted that the issue of non-service of notice under Section 143(2) cannot save the subsequent assessment proceeding. He relied upon the judgment of the Honorable Apex Court in the case of CIT v. Lakshmandas Khandelwal,(2019) 310 CTR 8, also relied upon the judgment of the Honorable Allahabad High Court in the case of ACIT v. Greater Noida Industrial Development Authority [379 ITR 14], wherein it was held that notice must be served to the Assessee.
20. We have considered the rival submissions, perused the material available on record, particularly the remand report dated 22nd September 2015, issued by the Income Tax Officer-18(3)(1), Mumbai, containing the admission that no-service of the notice under Section 143(2) is on record.
21. We may herein observe that the mandate of the provision of Section 143(2) of the Act contemplates the service of statutory notice is sine qua non for assumption of valid jurisdiction to continue the assessment proceedings. The onus to prove the service of notice under Section 143(2) of the Act lies upon the assessing officer. The matter of non-issue of notice under Section 143(2) of the Act, reached the Honorable Apex Court, and has been Settled in the case of CIT v. Lakshman Das Khandelwal holding at para 8 to 10 (PB page 66) :
“8. The law on the point as regards applicability of the requirement of notice under s. 143(2) of the Act is quite clear from the decision in Blue Moon’s case (supra). The issue that however needs to be considered is the impact of s. 292BB of the Act.
9. According to s. 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the section does not save complete absence of notice. For s. 292BB to apply, the notice must have emanated from the Department. It is only the infirmities in the manner of service of notice that the section seeks to cure. The section is not intended to cure complete absence of notice itself.
10. Since the facts on record are clear that no notice under s. 143(2) of the Act was ever issued by the Department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.
22. Here in the case, it is undisputed fact that assessing officer failed to substantiate by placing on record an evidence of issue and service of notice under Section 143(2) of the Act upon the assessee, either before the Ld. Commissioner of Income Tax (Appeals) or Tribunal as well.
23. We also noticed that assessment order sheet (PB 49) entry dated 09-10-2023, not reflecting any recording of assessing officer about issue of notice u/s 143(2) of the Act. On that date an entry contains the issuance of notice u/s 142(1) of the Act, by this recorded fact, we, found that there was no notice u/s 143(2) issued by assessee. Further, the assessing officer failed to place on record the evidence of speed post to support issuance of said notice. Mere statement alone cannot be treated as an evidence for issue of notice. The issuance and service of statutory notice u/s 143(2) of the Act for valid assumption of jurisdiction for continuation of assessment proceedings cannot be dispensed with.
24. Therefore, we respectfully following the judgment of the Honorable Supreme Court in the case of CIT v. Lakshman Das Khandelwal (supra), wherein it is held that the failure of service of notice under Section 143(2) upon the Assessee is not a curable defect under Section 292BB of the Act. Consequently, the impugned assessment order passed without assumption of valid jurisdiction, therefore, is hereby quashed, and the legal ground raised by the Assessee is hereby allowed.
25. Since, the assessment order is quashed for non-issuance of notice under Section 143(2) of the Act herein above; the remaining grounds of appeal of the Assessee are not required to be adjudicated. Further, the appeal of the revenue is also not required to adjudicate.
26. In the result, appeal of the Assessee is allowed and appeal of the revenue is dismissed.
Order pronounced in the open court on 23.09.2026.
