Facts of the Case

The assessee filed its return of income for Assessment Year 2007-08 declaring income of Rs. 36,609/-. Initially, the return was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny and the assessment was completed on 11.12.2009.

The Assessing Officer recorded that notice under Section 143(2) was issued on 15.09.2008 and later sent through speed post on 23.09.2008 at the address provided by the assessee. Since there was no appearance, notices under Section 142(1) along with questionnaire were issued on multiple occasions.

In absence of complete compliance, the Assessing Officer proceeded to complete the assessment and made additions on account of salary expenses, web designing expenses, share application money, and current liabilities, thereby assessing total income at Rs. 1,02,15,446/-.

The assessee challenged the assessment before the Commissioner of Income Tax (Appeals). While the objection regarding notice under Section 143(2) was rejected, the additions on merits were deleted. Thereafter, both parties approached the ITAT, where the Tribunal accepted the assessee’s contention regarding invalid issuance of notice under Section 143(2).

Issues Involved

  1. Whether notice under Section 143(2) was validly issued by the Assessing Officer?
  2. Whether absence of proper issuance of statutory notice vitiates the assessment proceedings?
  3. Whether the ITAT was justified in deleting the additions made by the Assessing Officer?

Petitioner’s Arguments (Revenue’s Contentions)

The Revenue contended that the ITAT erred in concluding that notice under Section 143(2) was not issued. It was argued that the notice had been issued at the notified address of the assessee and all necessary procedural attempts were made to secure compliance.

The Revenue further submitted that the assessee had participated in the proceedings at a later stage, and therefore, the assessment could not be invalidated merely on technical grounds.

Respondent’s Arguments (Assessee’s Contentions)

The assessee contended that there was no proper issuance of mandatory notice under Section 143(2), which is a jurisdictional requirement for framing scrutiny assessment.

It was argued that in absence of compliance with statutory mandate, the assessment proceedings were void ab initio and unsustainable in law.

The assessee also challenged the additions made on merits and defended the findings of the ITAT.

Court Findings / Order

The Delhi High Court upheld the findings of the ITAT and observed that the Tribunal had examined the assessment records and arrived at a factual finding that there was no proper issuance of notice under Section 143(2).

The Court relied upon the Supreme Court judgment in Additional Commissioner of Income Tax vs Hotel Blue Moon (2010) 321 ITR 362 (SC) and held that issuance of notice under Section 143(2) is mandatory and non-compliance with this requirement invalidates the assessment.

The Court further held that the findings on merits were concurrent findings of fact and no substantial question of law arose for consideration.

Accordingly, the appeals filed by the Revenue were dismissed.

Important Clarification

This judgment reiterates that mere assertion by the Assessing Officer regarding issuance of notice under Section 143(2) is insufficient unless supported by proper assessment records.

The decision reinforces that Section 143(2) notice is not a procedural formality but a jurisdictional requirement, and failure to establish valid issuance renders the entire scrutiny assessment invalid.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:7300-DB/SAS28112017ITA10632017.pdf

 

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