Non-Complince with CBDT’s 143(2) Notice Format Renders Assessment Invalid: Kolkata ITAT

 

 

In tax jurisprudence, procedure is not a mere technicality- it is a matter of jurisdiction. The Income Tax Appellate Tribunal (Kolkata Bench) has recently reaffirmed that any notice issued under Section (2) which does not comply with the format prescribed by CBTD is invalid, and any assessment based on such notice is void.

The Legal Foundation
CBDT Circular No. F. No.  225/157/2017/ITA-II dated 23.06.2017, issued under Section 119 of the Income-tax Act, mandates that every notice under Section 143(2) must clearly mention the type of scrutiny involved:
• Limited Scrutiny (CASS)
• Complete Scrutiny (CASS)
• Compulsory Manual Scrutiny

This classification is not optional. It defines the scope of inquiry and forms the foundation of a valid assessment proceeding.

Key judicial Precednts
In a consistent line of decisions, the Kolkata ITAT has invalidated assessments where this procedural requirement was not followed and the notices were issued in the standard format:

1.  𝘛𝘢𝘱𝘢𝘴 𝘒𝘶𝘮𝘢𝘳 𝘋𝘢𝘴 𝘷𝘴. 𝘐𝘛𝘖 – 𝘐𝘛𝘈 𝘕𝘰. 1660/ 𝘒𝘖𝘓 /2024, 𝘰𝘳𝘥𝘦𝘳 𝘥𝘢𝘵𝘦𝘥  11.03.2025
2.  𝘚𝘩𝘪𝘣 𝘕𝘢𝘵𝘩 𝘎𝘩𝘰𝘴𝘩 𝘷𝘴. 𝘐𝘛𝘖 – 𝘐𝘛𝘈 𝘕𝘰. 1812/ 𝘒𝘖𝘓/2024,  𝘦𝘳 𝘥𝘢𝘵𝘦𝘥  29.11.2024
3.  𝘚𝘢𝘫𝘢𝘭 𝘉𝘪𝘴𝘸𝘢𝘴 𝘷𝘴. 𝘐𝘛𝘖 – 𝘐𝘛𝘈 𝘕𝘰. 1244/𝘒𝘖𝘓/2023, 𝘰𝘳𝘥𝘦𝘳 𝘥𝘢𝘵𝘦𝘥 26.03.2025

In each case, the Tribunal held that non-specification of scrutiny type in the 143(2) notice vitiates the very jurisdiction of the AO to proceed with assessment.

Caution note
The Tribunal’s reasoning though upholds procedural discipline as the CBDT circulars issued under Section 119 have statutory force and binding, and clarity on scrutiny type is essential for a fair process.

However, while Circulars are binding on the department, circulars do not override the Act. If the Act itself does not mandate such classification in the notice, there could be debate on whether non-mention truly vitiates jurisdiction or is just an irregularity.

Further, if the notice, though incomplete, was followed by clear communication of issues and the assessee fully participated in the proceedings, a hyper-technical view could elevate form over substance. The doctrine of prejudice and “substantial compliance” may be argued by the Revenue in future appeals.

Ideally, the law should balance rule-based compliance with practical fairness and non-hyper technical prejudice-not every procedural misstep should invalidate substantive proceedings.

The copy of the order is as under:

1742989562-cPxgyB-1-TO