Income Tax Return Filed in Response to S. 148 Notice Still Requires Section 143(2) Notice: ITAT Quashes Reassessment [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) quashed a reassessment order after finding that the Assessing Officer (AO) failed to issue notice under Section 143(2) of the Income Tax Act after the taxpayer filed a return in response to notice under Section 148.

Sanjay Kumar Badure filed the appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2016-17.

The Assessing Officer ( AO )received information that the taxpayer had made cash deposits of Rs. 54,01,200 in a bank account maintained with Renukamata Multistate Co-operative Urban Credit Society Limited. The AO initiated proceedings under Section 148A and issued notice under Section 148 on March 27, 2023.

The taxpayer filed his return on October 11, 2023 declaring nil income. The AO treated the cash deposits as unexplained money under Section 69A and completed reassessment under Section 147 read with Sections 144 and 144B. The income was determined at Rs. 54,01,000.

The assessee’s counsel argued that once the return was filed in response to Section 148 notice, the AO was required to issue notice under Section 143(2). The counsel argued that the reassessment order was invalid because this mandatory notice was not issued.

Also Read:WhatsApp Chats & Mobile Images Alone Cannot Justify Income Tax Additions Without Corroboration: ITAT [Read Order]

The revenue counsel argued that the taxpayer filed the return beyond the time allowed in the Section 148 notice. They submitted that the AO was right in treating the delayed return as non-est and completing reassessment.

The two-member bench comprising Ravish Sood (Judicial Member) and Madhusudan Sawdia (Accountant Member) observed that the issue was covered by the Hyderabad ITAT decision in Sanghi Textiles Private Limited v. ITO.

The tribunal observed that a return filed in response to Section 148 notice has to be treated as a return under Section 139 for assessment procedure. Once such return is filed, notice under Section 143(2) is mandatory.

The tribunal also rejected the Revenue’s reliance on the third proviso to Section 148. It observed that the proviso was inserted by the Finance Act, 2023 with effect from April 1, 2023 and did not apply to the taxpayer’s case.

The tribunal quashed the reassessment for want of valid assumption of jurisdiction. Since the reassessment itself was quashed, the addition under Section 69A was not examined on merits.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates