Non-Issuance of Income Tax Notice u/s 143(2) cannot be Cured u/s 292BB: ITAT [Read Order]

The Visakhapatnam Bench of the Income Tax Appellate Tribunal (ITAT) examined whether an assessment finalized under Section 144 of the Income Tax Act, 1961 (Act), without issuance of a mandatory notice under Section 143(2) of the Act, can be upheld or subsequently cured under Section 292BB of the Act, 1961.

The appeal was filed by KVRECPL-Irpinfratech (Joint Venture), a partnership firm engaged in the construction business, against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre,[CIT(A)] for Assessment Year 2017-18. The firm had not filed its return of income within the prescribed time but subsequently filed it belatedly in response to a notice issued under Section 142(1) of the Act.

The Assessing Officer, however, ignored the return and proceeded to frame a best judgment assessment under Section 144, estimating income at ₹5.88 crore on the basis of cash deposits and related documents.

The appellant was represented by Chartered Accountant-MV Prasad, who argued that once a return of income had been filed in response to a notice under Section 142(1), even if belated, the Assessing Officer is legally bound to issue a notice under Section 143(2) before finalizing the assessment.

The assessee further contended that the absence of such a notice rendered the proceedings void ab initio since jurisdiction to scrutinize the return could not be assumed without it.

The revenue was represented by Departmental Representative-Dr. Satyasai Rath, who submitted that the return was not placed on record and hence could not be considered. Concerning the CIT(A), he argued that the matter had rightly been remitted back to the file of the Assessing Officer for fresh adjudication, subsequently the assessment order should not be quashed outright.

The Tribunal Bench comprising Judicial Member Ravish Sood and Accountant Member S. Balakrishnan held that once the assessee had filed a return of income in response to a notice under Section 142(1), the Assessing Officer cannot disregard it.

The tribunal expounded on section 234A of the Act, stating if the return of income is furnished after the due date specified in the notice under section 142(1) of the Act, it does not render the return of income invalid, however, will be subject to interest under section 234A of the Act.

The Bench ruled that a notice under Section 143(2) was a jurisdictional requirement and its absence invalidated the order passed under Section 144. The Tribunal further clarified that failure to issue such a notice is not a curable defect under Section 292BB, which only condones defects in service and not complete absence of notice.

Accordingly, the Tribunal quashed the assessment order and allowed the appeal.

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