Rishav Prakash Jain vs ITO

Introduction

In the realm of income tax litigation, procedural compliance often forms the bedrock of jurisdictional validity. The case of Rishav Prakash Jain vs. ITO (ITA No.2061/Del/2012), decided by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 18th February 2019, serves as a seminal authority on the mandatory nature of issuing a notice under Section 143(2) of the Income Tax Act, 1961 during reassessment proceedings. This case commentary delves into the Tribunal’s reasoning, which quashed the reassessment order for Assessment Year 2001-02 on the ground that the Assessing Officer (AO) failed to issue a Section 143(2) notice after the assessee filed a return in response to a Section 148 notice. The ruling reinforces the principle that jurisdictional requirements cannot be bypassed, even if the assessee participates in the proceedings. The decision also clarifies the limited scope of Section 292BB, which only cures defects in service, not the complete absence of issuance.

Facts of the Case

The assessee, Rishav Prakash Jain, filed his original return for Assessment Year 2001-02. Subsequently, the AO issued a notice under Section 148 of the Act on 28th March 2008, seeking to reassess the income. In response, the assessee, vide letter dated 9th May 2008, requested the AO to treat the original return already filed as the return filed in response to the Section 148 notice. It is an admitted fact, confirmed through an RTI application, that no notice under Section 143(2) was ever issued by the AO after the assessee’s response. Only notices under Section 142(1) were issued on 19th August 2008 and 24th November 2008. The AO proceeded to frame the reassessment order under Section 147/143(3) without complying with the mandatory requirement of issuing a Section 143(2) notice.

The assessee challenged the reassessment order before the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal on 19th March 2012. Before the ITAT, the assessee raised an additional ground challenging the validity of the reassessment proceedings for want of jurisdiction, arguing that the absence of a Section 143(2) notice rendered the entire assessment void. The Revenue objected to the admission of this additional ground, citing the assessee’s participation in the proceedings and the applicability of Section 292BB.

Reasoning of the ITAT

The ITAT, comprising Accountant Member Shri R.K. Panda and Judicial Member Ms. Suchitra Kamble, delivered a detailed order focusing on two core issues: (1) the admissibility of the additional ground, and (2) the jurisdictional impact of non-issuance of notice under Section 143(2).

Admissibility of Additional Ground: The Tribunal first addressed the Revenue’s objection that the assessee should not be permitted to raise the issue of non-issuance of Section 143(2) notice for the first time before the ITAT. Relying on the Supreme Court’s decision in NTPC Ltd. vs. CIT (229 ITR 383), the Tribunal held that the additional ground was purely a legal issue that went to the root of the matter and did not require any fresh investigation of facts. The Tribunal noted that the information regarding non-issuance of the notice was already on record through the RTI reply, and the issue was one of law. Therefore, the additional ground was admitted.

Mandatory Nature of Section 143(2) Notice: The Tribunal emphasized that the issuance of a notice under Section 143(2) after the filing of a return in response to a Section 148 notice is not a mere procedural formality but a jurisdictional requirement. The Tribunal referred to the Delhi High Court’s decision in PCIT vs. Silverline & Anr (2016) 383 ITR 455 (Del), which held that failure to issue a Section 143(2) notice prior to finalizing the reassessment order is fatal to the proceedings. The Tribunal distinguished the Revenue’s reliance on CIT vs. Madhya Bharat Energy Corporation Ltd. (2012) 337 ITR 389 (Del), noting that the Delhi High Court in Silverline had specifically considered and distinguished that decision. The Tribunal also cited PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 383 ITR 448 (Del), which held that non-issuance of notice under Section 143(2) subsequent to the assessee’s statement that the original return should be treated as a return pursuant to Section 148 notice is fatal to the reassessment.

Scope of Section 292BB: The Revenue argued that Section 292BB, which creates a presumption of valid service of notice if the assessee participates in the proceedings, should cure the defect. The Tribunal rejected this contention, relying on the Delhi High Court’s interpretation in Silverline. The Court had clarified that Section 292BB is a rule of evidence that only validates the service of a notice, not the issuance of a notice. If no notice was issued at all, the provision cannot be invoked to condone the jurisdictional failure. The Tribunal further noted that Section 292BB is prospective in application (from AY 2008-09 onwards) and would not apply to the present assessment year 2001-02.

Jurisdictional Defect: The Tribunal concluded that the requirement to issue a Section 143(2) notice is a condition precedent for the AO to assume jurisdiction to frame an assessment under Section 143(3) in reassessment proceedings. Since the AO failed to issue such a notice, the reassessment order was legally unsustainable. The Tribunal quashed the reassessment order, holding that the entire proceedings were void ab initio.

Conclusion

The ITAT’s decision in Rishav Prakash Jain vs. ITO is a landmark ruling that underscores the sanctity of procedural compliance in tax reassessments. By quashing the reassessment order for non-issuance of a Section 143(2) notice, the Tribunal has reinforced the principle that jurisdictional requirements cannot be waived or cured by subsequent participation of the assessee. The ruling provides clarity on the limited scope of Section 292BB, which only addresses defects in service, not the complete absence of issuance. This case serves as a crucial precedent for taxpayers challenging reassessment orders where procedural lapses have occurred. It also highlights the importance of raising jurisdictional issues at the earliest opportunity, even if they involve pure questions of law. The decision aligns with the Supreme Court’s view in NTPC Ltd. that legal grounds going to the root of the matter can be raised at any stage of appellate proceedings.

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