Facts of the Case

The assessee filed its return of income for Assessment Year 2008–09, which was initially accepted under Section 143(1). Thereafter, the Assessing Officer initiated reassessment proceedings under Section 148 on the ground of escaped income. However, the notice under Section 148 was admittedly never served upon the assessee.

Subsequently, notices under Sections 143(2) and 142(1) were issued. The assessee appeared through its Authorized Representative and informed the Assessing Officer that the original return filed earlier should be treated as the return in response to Section 148 proceedings.

The Assessing Officer completed reassessment and made an addition of ₹1 crore under Section 68 as unexplained cash credits. The assessee challenged the reassessment on the ground that no notice under Section 143(2) was issued after treating the original return as the return pursuant to Section 148. The Tribunal allowed the assessee’s appeal, following judicial precedents. The Revenue challenged the Tribunal’s order before the Delhi High Court.

Issues Involved

  1. Whether issuance of notice under Section 143(2) is mandatory after reassessment proceedings are initiated under Section 148?
  2. Whether failure to issue such notice invalidates the reassessment proceedings?
  3. Whether Section 292BB can cure the complete absence of issuance of notice under Section 143(2)?

Petitioner’s Arguments (Revenue)

  • The Revenue contended that non-issuance of notice under Section 143(2) should not invalidate reassessment proceedings.
  • It relied on earlier judgments to argue that the defect was procedural in nature.
  • It was argued that under Section 292BB, since the assessee participated in the proceedings without objection, it could not later challenge the reassessment on technical grounds.

Respondent’s Arguments (Assessee)

  • The assessee argued that issuance of notice under Section 143(2) after filing the return in response to Section 148 is mandatory and jurisdictional.
  • Absence of such notice goes to the root of the reassessment proceedings.
  • Section 292BB applies only to defects in service of notice and cannot cure total absence of notice.
  • Reliance was placed on the Supreme Court judgment in ACIT v. Hotel Blue Moon and other High Court precedents.

Court Findings / Order

The Delhi High Court upheld the ITAT’s order and dismissed the Revenue’s appeal. The Court held:

  • Notice under Section 143(2) is mandatory even in reassessment proceedings under Section 148.
  • Once the assessee states that the original return be treated as the return filed in response to Section 148, the Assessing Officer must issue a fresh notice under Section 143(2).
  • Failure to issue such notice is a jurisdictional defect and renders the reassessment invalid.
  • Section 292BB cannot cure complete failure to issue notice; it only cures defects in service of notice already issued.
  • Therefore, the reassessment order was unsustainable in law.

Important Clarification by the Court

The Court clearly distinguished between:

Failure to issue notice (jurisdictional defect – fatal)
and
Failure in service of notice (curable under Section 292BB).

This distinction was treated as fundamental in determining validity of reassessment proceedings.

Sections Involved

  • Section 143(1) – Processing of Return
  • Section 143(2) – Notice for Scrutiny Assessment
  • Section 142(1) – Inquiry Before Assessment
  • Section 148 – Reassessment / Income Escaping Assessment
  • Section 68 – Unexplained Cash Credits
  • Section 292BB – Deemed Service of Notice

Link to download the order -.https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:8689-DB/VIB14102015ITA5192015.pdf

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