In a recent ruling, the Delhi High Court dismissed the Revenue’s appeal ruling that non-issuance of notice under Section 143(2) is a fatal procedural lapse that cannot be validated under Section 292BB of the Income Tax Act, 1961
The issue arose from Oracle Systems Corporation (assessee) reassessment orders for the Assessment Years (AYs) 1997-98, 1998-99, 1999-2000, and 2000-01. The reassessment was initiated by allegations of unreported royalty income on global deals utilized in India which the revenue claimed was taxable under Section 9(1)(vii) of the Income Tax Act.
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The issue was presented before the Delhi Bench of the ITAT which quashed the reassessment proceedings citing a failure to issue a valid notice under Section 143(2). The tribunal observed that no evidence was presented by the revenue to show that a valid notice under Section 143(2) had been issued and served on the assessee.
Aggrieved, the Revenue challenged a common order dated 26.09.2022 passed by the Income Tax Appellate Tribunal ( ITAT ). The revenue questioned the validity of reassessment notices under Section 148 of the Income Tax Act and others.
The revenue counsel relied on Section 292BB of the Income Tax Act which allows certain procedural lapses valid if the assessee participates in proceedings.
The bench comprising Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed that issuing a notice under Section 143(2) of the Income Tax Act is a statutory requirement failure which makes the entire reassessment invalid.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The court referenced its prior decisions in the case of Pr. Commissioner of Income Tax v. Silver Line (2016) which held that omission to issue a notice under Section 143(2) is fatal to reassessment proceedings.
The court explained that Section 292BB cannot cure the defect of non-issuance of notice under Section 143(2) if no notice was issued in the first place. The court rejected the revenue’s argument. The Court dismissed all appeals filed by the revenue.
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