Failure to issue a notice under Section 143(2) is a jurisdictional defect, rendering the entire assessment void ab initio: Agra ITAT

 

ITAT Agra in the case of Veerendra Singh v. Income Tax Officer, Ward 2(1)(5), Jalaun (U.P.)
[ITA No. 169/Agr/2022, decided on 19.02.2025] has reiterated that Failure to issue a notice under Section 143(2) is a jurisdictional defect, rendering the entire assessment void ab initio.

Let us have a Short Overview of the case:

Reopening of Assessment under Section 147:
• The assessment was reopened under Section 147 based on Annual Information Report (AIR) data, which indicated that the assessee had deposited ₹26,78,350/- in his bank account during the relevant assessment year. The Assessing Officer (AO) found no PAN linked to the transaction and noted that no return was available on record, leading to a “reason to believe” that income had escaped assessment. A notice under Section 148 was issued on 23.03.2018, requiring the assessee to furnish a return.

Return Filing and Reassessment Proceedings:

The assessee filed a return on 16.07.2018 in response to the notice under Section 148.
The AO, however, mistakenly treated this return as the original return rather than a response to the reassessment notice.

Additions Made by the AO:

Total additions: ₹13,81,377/-

4. First Appeal to CIT(A):

• The CIT(A) partly allowed the appeal, modifying the additions made by the AO.

5. Assessee’s Contention Before ITAT:
• The assessee argued that the reassessment order was invalid due to non-service of a mandatory notice under Section 143(2).
• The AO was required to issue this notice before proceeding with reassessment under Section 147, as per established judicial precedents.

Key Legal Issue:

Whether the failure to issue a notice under Section 143(2) in reassessment proceedings renders the reassessment order invalid?

ITAT Agra’s Observations & Decision:
1. Erroneous Assumption by AO Regarding Non-Filing of Return:
• The tribunal observed that the AO incorrectly stated that the assessee had not filed a return under Section 139, whereas the assessee’s original return was on record (as placed in the paper book).

2. Mandatory Requirement of Section 143(2) in Reassessment Cases:
• Even if a return is filed in response to a notice under Section 148, the AO is obligated to issue a notice under Section 143(2) before completing the reassessment.

• The tribunal relied on the following judicial precedents:
(i) PCIT v. Dart Infrabuild Pvt. Ltd. [(2024) 460 ITR 532 (Delhi HC)] • Held that failure to issue notice under Section 143(2) before reassessment vitiates the entire proceedings.
(ii) Indus Towers Limited v. DCIT [(2017) 6 TMI 24 (Delhi HC)]

• The Delhi High Court ruled that even in reassessment cases, a notice under Section 143(2) is mandatory, failing which the order is invalid.

(iii) ACIT v. M/s Hotel Blue Moon [(2010) 321 ITR 362 (SC)]

• The Supreme Court held that failure to issue a notice under Section 143(2) is a jurisdictional defect, rendering the entire assessment void ab initio.

3. Tribunal’s Decision:
• Since the AO did not issue a notice under Section 143(2) before finalizing the reassessment, the entire reassessment order was held to be invalid and quashed

The Copy Of the order is as under:

1739957404-6bsgfd-1-TO