No Notice issued u/s 143(2) of Income Tax Act  by department before framing assessment order: Delhi HC dismisses Appeal [Read Order]

In a recent case, the Delhi High Court dismissed the revenue appeal, holding that the department framed the assessment order without issuing notice under Section 143(2) of the Income Tax Act. The appeal, filed by the Pr. Commissioner Of Income Tax against the ITAT order in favor of assessee Grand Express Developers Pvt. Ltd., challenged the CIT(A)’s decision to quash the assessment order due to the absence of notice under Section 143(2) before framing.

The respondent/assessee filed its original Return of Income for the relevant Assessment Year on 31.03.2014, declaring a loss of Rs. 2,682/-. A search and seizure operation under Section 132 in 2012, related to the respondent/assessee’s sister organization, revealed documents seized. After satisfaction under Section 153C, the respondent’s case was taken up for scrutiny, focusing on “unsecured loans” totaling Rs. 88,60,76,521/-.

During assessment proceedings, the respondent/assessee, through a notice under Section 142(1), provided details on “unsecured loans” from sister firms but only addresses for unrelated concerns. The AO increased the income by Rs. 7,38,80,000, citing unsatisfactory explanation for the specified credit source in the assessment order of March 30, 2015, issued under Section 143(3).

The respondent/assessee, appealing the order, argued the lack of notice under Section 143(2) before the limitation period’s expiration. The CIT(A) deleted the addition based on the factual finding of no notice under Section 143(2).

The appellant/revenue’s senior standing counsel, Ruchir Bhatia, contends that the absence of Section 143(2) notice doesn’t render the assessment order defective, relying on Section 292BB. This section deems notice valid if the assessee participated in the proceedings, as interpreted by the Supreme Court.

The court, considering both parties’ arguments, observed that no Section 143(2) notice was issued before framing the assessment order. It clarified that Section 292BB doesn’t guarantee a total lack of notice but addresses flaws in the notice-serving process, emphasizing the necessity of the department sending the notice for the section to be applicable.

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