Introduction
The Income Tax Appellate Tribunal (ITAT), Agra Bench, in Shri Rajvir Singh v. DCIT (ITA No.598/AGR/2025, Assessment Year 2016-17), delivered a significant ruling on the mandatory nature of issuing notice under Section 143(2) of the Income Tax Act, 1961, in reassessment proceedings. The Tribunal quashed the assessment order framed under Section 147/144B on the sole ground that the Assessing Officer (AO) failed to serve a statutory notice under Section 143(2) after the assessee filed a return in response to a notice under Section 148. By relying on the Supreme Court’s decision in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) and a coordinate Bench order in the assessee’s wife’s case, Prem Lata Verma (ITA No.441/Agr/2025), the ITAT held that such omission is not a curable procedural irregularity but renders the entire reassessment proceedings null and void. This case commentary analyses the facts, legal reasoning, and implications of the order, which underscores the critical importance of adhering to procedural safeguards in income tax reassessments.
Facts of the Case
The appellant, Shri Rajvir Singh, filed his original return of income under Section 139 of the Act for Assessment Year 2016-17 on 14 January 2017. Subsequently, the AO issued a notice under Section 148 to reopen the assessment under Section 147. In response, the assessee, vide letter dated 17 March 2022, specifically requested the AO to treat his earlier Section 139 return as the return filed in response to the Section 148 notice. Despite this clear request, the AO proceeded to complete the assessment under Section 147 read with Section 144B on 29 February 2022 without issuing any notice under Section 143(2). The assessee challenged the assessment before the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi, which confirmed the order on 15 September 2025. Aggrieved, the assessee appealed to the ITAT, Agra Bench, raising an additional ground of appeal – a purely legal issue – that the non-issuance of notice under Section 143(2) vitiated the entire proceedings. The ITAT condoned a 40-day delay in filing the appeal, finding reasonable cause, and admitted the additional ground under Rule 11 of the Income Tax (Appellate Tribunal) Rules, citing the Supreme Court judgment in NTPC Ltd. v. CIT (1998) 229 ITR 383 (SC), as it went to the root of the matter and required no fresh facts.
Legal Reasoning and Analysis
The core of the Tribunal’s reasoning centres on the mandatory character of Section 143(2) when a return is furnished under Section 139 or in response to a notice under Section 148. The ITAT meticulously examined the legal framework and the binding precedent set by the Supreme Court in Hotel Blue Moon.
1. Admission of Additional Ground and Applicable Precedent
The Tribunal first addressed the admissibility of the additional ground. Since the issue was purely legal – challenging the jurisdiction of the AO for failing to issue a mandatory notice – and did not require examination of new facts, it was admitted following the principle in NTPC Ltd. v. CIT. Both the assessee’s counsel and the Revenue’s Senior DR agreed that the ground was legal, and the ITAT accordingly proceeded to hear it on merits.
2. Reliance on Coordinate Bench Decision in Prem Lata Verma
The assessee argued that his case was squarely covered by the ITAT Agra Bench’s order in his wife’s case, Prem Lata Verma (ITA No.441/Agr/2025, dated 15 January 2026). The Tribunal extracted the relevant portion of that order to highlight the identical legal question: whether reassessment proceedings are bad in law for non-issuance of notice under Section 143(2) when the assessee has filed a return under Section 139 and later requested it to be treated as a return in response to Section 148. In Prem Lata Verma, the coordinate Bench had noted that the assessee filed a return under Section 139 on 14 January 2017 and, through a written request on 17 March 2022, asked the AO to treat that as the return in response to the Section 148 notice. Despite this, the AO completed the assessment under Section 147/144 without issuing the Section 143(2) notice.
3. The Mandate of Section 143(2) and the Hotel Blue Moon Principle
The ITAT in the present case reproduced Section 143(2) verbatim, emphasizing that the provision obligates the AO to serve a notice if he considers it necessary or expedient to ensure that the assessee has not understated income or underpaid tax. The Tribunal then turned to the Supreme Court’s ruling in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC), as applied in Prem Lata Verma. In Hotel Blue Moon, the apex court held that the requirement of issuing notice under Section 143(2) within the prescribed time is not a mere procedural irregularity; it is a fundamental step in the assessment process. Omission to issue such notice is incurable and renders the assessment order void.
The Supreme Court in Hotel Blue Moon (para 15) stated: “…if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.”
Applying this principle, the ITAT in Prem Lata Verma had categorically held that the non-issuance of notice under Section 143(2) – especially when the assessee had filed a Section 139 return and explicitly requested it to be treated as a Section 148 return – is fatal to the reassessment proceedings. The present Bench adopted that reasoning as binding.
4. Application to the Present Case
The Tribunal observed that the facts in Shri Rajvir Singh’s case were identical. The assessee had filed his Section 139 return on 14 January 2017. In response to the Section 148 notice, he filed a letter on 17 March 2022 requesting the AO to treat that return as the return filed under Section 148. The AO, however, did not issue any notice under Section 143(2). Following the precedent in Prem Lata Verma and the Supreme Court’s dictum, the ITAT held that this omission vitiates the entire assessment order passed under Section 147/144B. The Revenue’s reliance on the findings of lower authorities was rejected because the legal defect went to the root of jurisdiction.
5. Effect on Other Grounds and Conclusion on Merits
Since the assessment order was quashed on a legal ground, the ITAT explicitly left all other grounds related to merits open, stating they had become academic. The order noted that no observations were made on the factual merits of the additions or disallowances.
The reasoning underscores a key principle in Indian tax law: the validity of a reassessment is contingent upon strict compliance with procedural requirements. The service of notice under Section 143(2) is not a discretionary step; it is a mandatory prerequisite when the AO intends to scrutinize the income, and failure to do so cannot be cured by subsequent proceedings or by confirming the order at the appellate stage.
Conclusion
The ITAT Agra Bench allowed the appeal of Shri Rajvir Singh, quashing the assessment order framed under Section 147/144B for Assessment Year 2016-17 solely on the ground of non-issuance of notice under Section 143(2). The Tribunal followed the binding authority of the Supreme Court in Hotel Blue Moon and the coordinate Bench decision in Prem Lata Verma. This ruling reinforces that in reassessment proceedings, if the assessee files a return (either originally under Section 139 or in response to Section 148), the Assessing Officer is duty-bound to issue a notice under Section 143(2) before completing the assessment under Section 143(3) read with Section 144. Omission of that notice is not a curable defect; it strikes at the very jurisdiction of the Assessing Officer. The decision serves as a crucial reminder for tax authorities to adhere meticulously to statutory procedures to ensure the validity of reassessment orders.
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