Facts of the Case

The present appeal pertains to Assessment Year 2013–14, wherein the Revenue challenged the order passed by the Income Tax Appellate Tribunal (ITAT), which upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)].

The assessee, Grand Express Developers Pvt. Ltd., had filed its return declaring a nominal loss. Subsequently, a search and seizure operation under Section 132 of the Income-tax Act, 1961 was conducted on its sister concern, during which certain documents relating to the assessee were found. Based on this, proceedings under Section 153C were initiated.

During assessment proceedings, the Assessing Officer (AO) examined unsecured loans received by the assessee and made an addition of ₹7.38 crores under Section 143(3), alleging failure to satisfactorily explain certain credits.

However, it was undisputed that no notice under Section 143(2) was issued within the prescribed limitation period before completion of assessment.

Issues Involved

  1. Whether the absence of issuance of notice under Section 143(2) renders the assessment order invalid?
  2. Whether participation of the assessee in assessment proceedings cures such defect under Section 292BB of the Income-tax Act, 1961?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the assessment order should not be invalidated merely due to non-issuance of notice under Section 143(2).
  • It relied on Section 292BB, arguing that since the assessee participated in the assessment proceedings, it is precluded from raising objections regarding non-service of notice.
  • It was asserted that procedural defects should not nullify substantive assessment proceedings.

Respondent’s Arguments (Assessee)

  • The assessee argued that issuance of notice under Section 143(2) is a mandatory jurisdictional requirement.
  • It emphasized that failure to issue such notice within the limitation period renders the entire assessment void.
  • It further contended that Section 292BB cannot cure a situation where no notice was issued at all, as opposed to defective service.

Court Findings / Order

The Delhi High Court upheld the findings of the CIT(A) and ITAT and dismissed the Revenue’s appeal, holding that:

  • It was a concurrent finding of fact that no notice under Section 143(2) was issued.
  • Section 292BB applies only to defects in service of notice, not to cases of complete absence of notice.
  • The issue is settled by the Supreme Court in CIT vs Laxman Das Khandelwal (2019), which clearly distinguishes between absence of notice and defective service.
  • Since issuance of notice under Section 143(2) is a condition precedent, failure to issue it renders the assessment invalid.

Accordingly, the Court held that no substantial question of law arises, and the appeal was dismissed.

Important Clarification

  • Section 292BB does NOT cure complete absence of notice.
  • Participation by the assessee cannot validate an assessment where a mandatory notice under Section 143(2) was never issued.
  • Jurisdictional defects cannot be rectified by deeming provisions.

Sections Involved

  • Section 143(2) – Mandatory notice for scrutiny assessment
  • Section 143(3) – Assessment order
  • Section 153C – Assessment of income of other person
  • Section 132 – Search and seizure
  • Section 292BB – Deemed validity of notice

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60806112023ITA6092023_123026.pdf

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