Is a Section 143(2) Notice Invalid If It Does Not Mention ‘Limited Scrutiny’ or ‘Complete Scrutiny’? ITAT Special Bench Says No

One of the most frequently raised legal challenges in income-tax assessments concerns the validity of a notice issued under Section 143(2). In recent years, taxpayers have argued that notices issued after the CBDT Instruction dated 23 June 2017 are invalid if they fail to specify whether the case has been selected for Limited Scrutiny, Complete Scrutiny, or Manual Scrutiny.

Conflicting decisions of various Benches of the Income Tax Appellate Tribunal (ITAT) led to considerable uncertainty on this issue.

The controversy has now been authoritatively resolved by the Special Bench of the ITAT, Bengaluru in MD Sons v. Income Tax Officer (ITA No. 1413/Bang/2025 and connected appeals, Order dated 13 July 2026).

The Special Bench has held that a notice under Section 143(2) does not become invalid merely because it does not specify the category of scrutiny prescribed under the CBDT Instruction dated 23.06.2017. Such omission is only a procedural defect, curable under Section 292B, and does not affect the jurisdiction of the Assessing Officer.

Given the large number of pending assessments and appeals involving challenges to the validity of scrutiny notices, this decision is likely to become a leading precedent across the country.

 

Why This Judgment Is Significant

The ruling is important because it settles a recurring procedural objection raised in assessment proceedings.

Many taxpayers had argued that if the scrutiny notice failed to expressly mention:

• Limited Scrutiny,

• Complete Scrutiny, or

•Manual Scrutiny,

the entire assessment was void for lack of jurisdiction.

The Special Bench has now rejected this argument and clarified the legal position.

 

Background of the Case

The assessee, a partnership firm engaged in the trading of cigarettes and food items, filed its return declaring a loss.

The return was processed under Section 143(1).

Subsequently:

•the case was selected for scrutiny through CASS;

•a notice under Section 143(2) was issued within the prescribed limitation period;

•the notice was served electronically;

•notices under Section 142(1) were issued and duly complied with;

•the assessment was ultimately completed under Section 143(3).

Before the Tribunal, the assessee raised an additional legal ground contending that the Section 143(2) notice was invalid because it failed to specify the scrutiny category as contemplated by the CBDT Instruction dated 23 June 2017.

Since different Tribunal Benches had taken conflicting views, the matter was referred to a Special Bench.

 

The Core Legal Issue

The principal question before the Special Bench was:

Does omission to mention the scrutiny category (Limited Scrutiny, Complete Scrutiny, or Manual Scrutiny) in a notice under Section 143(2) invalidate the entire assessment?

 

Assessee’s Arguments

The assessee contended that:

•the CBDT Instruction had prescribed a mandatory format for scrutiny notices;

•the scrutiny category determined the permissible scope of enquiry;

•therefore, mentioning the category was a jurisdictional requirement;

•failure to comply rendered the notice void;

•such a defect could not be cured either by Section 292B or by participation in the proceedings under Section 292BB.

 

Revenue’s Stand

The Revenue argued that:

•neither the Income-tax Act nor the Income-tax Rules prescribe any statutory format for a notice under Section 143(2);

•the CBDT Instruction is merely an internal administrative guideline;

•the essential statutory requirement is that the notice must be issued within the prescribed limitation period and call upon the assessee to substantiate the return;

•omission to mention the scrutiny category causes no prejudice and is, at best, a procedural defect cured by Section 292B.

The Revenue also relied on Bharat Bansal v. NFAC, where scrutiny classification was treated as an internal administrative matter.

 

Special Bench’s Decision

The Special Bench accepted the Revenue’s submissions.

The Tribunal held that the validity of a notice under Section 143(2) must be tested with reference to the provisions of the Income-tax Act—not administrative instructions.

The Act merely requires:

•issuance of a notice within the prescribed time;

•requiring the assessee to attend or produce evidence in support of the return.

Neither the Act nor the Rules require the notice to specify the category of scrutiny.

CBDT Instructions Cannot Override the Statute

One of the most significant observations of the Special Bench is that CBDT Instructions issued under Section 119 regulate departmental administration but cannot create additional jurisdictional conditions that are absent from the statute itself.

The expressions:

•Limited Scrutiny,

•Complete Scrutiny, and

•Manual Scrutiny,

are administrative classifications evolved for internal management of assessment proceedings.

They are not statutory requirements governing the validity of a notice under Section 143(2).

Section 292B Saves the Notice

The Tribunal further held that even if omission to mention the scrutiny category is regarded as a defect, it remains a procedural irregularity.

Section 292B expressly provides that a notice shall not become invalid merely because of any mistake, defect or omission, provided it substantially conforms to the intent and purpose of the Act.

Since the notice:

• was issued within limitation,
• informed the assessee that the return had been selected for scrutiny,
• and enabled effective participation,

its validity remained intact.

Jurisdiction vs. Procedure

Perhaps the most important contribution of this judgment is its clear distinction between:

Jurisdictional defects, which invalidate proceedings; and

Procedural defects, which can be cured under Section 292B.

The omission to specify the scrutiny category falls squarely in the latter category.

Wider Implications of the Judgment

The ratio of this Special Bench decision is likely to impact a large number of pending cases involving technical challenges to scrutiny notices.

The judgment reinforces several broader principles:

•administrative instructions cannot enlarge statutory jurisdiction;

•procedural lapses do not automatically invalidate assessment proceedings;

•Section 292B continues to protect notices suffering from curable defects;

•assessments should not be annulled merely because of technical omissions causing no prejudice.

Practical Guidance for Taxpayers and Professionals

While challenging the validity of a notice under Section 143(2), taxpayers should distinguish between:

substantive jurisdictional defects, such as limitation, absence of notice, or lack of authority; and

•procedural irregularities, such as formatting defects or omissions that do not prejudice the assessee.

After this Special Bench ruling, challenges based solely on the absence of the scrutiny classification in the notice are likely to face considerable difficulty.

Key Takeaways

•A Section 143(2) notice is not invalid merely because it does not mention “Limited Scrutiny”, “Complete Scrutiny”, or “Manual Scrutiny”.

•The Income-tax Act does not prescribe any statutory format requiring such disclosure.

•CBDT Instructions are administrative in nature and cannot create additional jurisdictional requirements.

•Omission to mention the scrutiny category is a procedural defect curable under Section 292B.

•A notice issued within limitation and otherwise complying with Section 143(2) remains legally valid.

Conclusion

The Special Bench decision in MD Sons v. Income Tax Officer brings much-needed clarity to one of the most litigated procedural issues under the Income-tax Act.

By holding that the validity of a Section 143(2) notice must be judged by the statute rather than by administrative formats, the Tribunal has reaffirmed a fundamental principle of tax jurisprudence: procedural irregularities should not defeat substantive proceedings unless the law itself treats them as jurisdictional defects.

The ruling is expected to guide assessing authorities, appellate forums, and taxpayers alike in distinguishing between curable procedural defects and fatal jurisdictional errors, thereby reducing avoidable litigation on technical grounds.

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The copy of the order is as under:

ITA No.1413-BANG-2025