Facts of the Case

The Revenue filed an appeal under Section 260A challenging the Income Tax Appellate Tribunal’s order relating to Assessment Year 2003-04. The Assessing Officer had initiated reassessment proceedings by issuing notice under Section 148 requiring the assessee to file return of income.

The assessee participated in the proceedings and filed its return in response to the notice. However, the Assessing Officer proceeded to complete the assessment without issuing notice under Section 143(2).

Before the CIT(A), the assessee challenged the additions, and partial relief was granted. Thereafter, before the ITAT, the assessee filed cross-objections specifically challenging the validity of assessment on the ground of non-issuance of notice under Section 143(2).

The ITAT accepted the assessee’s cross-objections and declared the assessment order null and void. The Revenue appealed before the High Court but failed to challenge the specific ITAT finding that had invalidated the assessment order.

 Issues Involved

  1. Whether issuance of notice under Section 143(2) is mandatory after filing of return pursuant to notice under Section 148?
  2. Whether assessment completed without issuing notice under Section 143(2) is legally sustainable?
  3. Whether Revenue can maintain appeal against additions when the assessment itself has already been declared void and such finding has attained finality?

 Petitioner’s Arguments (Revenue’s Contentions)

  • The Revenue argued that the ITAT erred in holding the assessment invalid for want of notice under Section 143(2).
  • It was submitted that the appeal should be considered against the entire ITAT order, including the acceptance of the assessee’s cross-objections.
  • Revenue sought adjudication on deletion of additions made by the Assessing Officer.

 Respondent’s Arguments (Assessee’s Contentions)

  • The assessee contended that once return was filed in response to notice under Section 148, issuance of notice under Section 143(2) became mandatory.
  • In absence of such statutory notice, the entire assessment proceedings were void ab initio.
  • Since ITAT had already allowed cross-objections and Revenue did not challenge that part, the issue attained finality.

 Court Findings / Court Order

The Delhi High Court dismissed the Revenue’s appeal and held:

  • Once the assessee files return pursuant to notice under Section 148, issuance of notice under Section 143(2) is mandatory before framing assessment.
  • Assessment framed without such statutory notice is invalid in law.
  • Since the Revenue failed to challenge the ITAT’s order allowing assessee’s cross-objections, that finding became final and binding.
  • Consequently, nothing survived in Revenue’s appeal regarding additions because the assessment itself had already been annulled.

Accordingly, the appeal was dismissed.

 Important Clarification

This judgment clarifies that:

  • Filing of return in response to Section 148 notice triggers mandatory compliance under Section 143(2).
  • Non-issuance of Section 143(2) notice is not a procedural irregularity but a jurisdictional defect.
  • Revenue must specifically challenge adverse findings in appellate proceedings; otherwise, such findings attain finality.

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:8724-DB/SMD28042017ITA9352015_124730.pdf_

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