The ITAT Delhi has reaffirmed a foundational principle of tax procedure: an assessment under Section 143(3) of the Income Tax Act, 1961, is void if the mandatory notice under Section 143(2) is not duly served. This judgment underscores that procedural compliance is not a technicality but a jurisdictional precondition for valid assessment.
Background & Facts
The Dispute
The dispute arose from the assessment of the deceased assessee, Satyinder Kumar, for Assessment Year 2017-18. The Assessing Officer (AO) made an addition of Rs. 1,33,12,520 under Section 68, alleging unexplained cash credits. The AO relied on the claim that a notice under Section 143(2) was issued on 24.09.2018 via the ITBA portal and was deemed served. The assessee did not respond to the notice, leading to the completion of the assessment on 25.12.2019.
Key Facts
- The assessee filed his ITR on 27.10.2017 declaring income of Rs. 6,49,117
- The case was selected for scrutiny under CASS due to "Large Cash Deposits during the year"
- The notice under Section 143(2) was issued on 24.09.2018 through the ITBA portal
- The notice status on ITBA showed "Bounced" on 24.09.2018
- No physical or electronic proof of successful delivery to the assessee’s registered email or address was established
- The assessee passed away during the pendency of proceedings; his legal heir, Ms. Kavita Pushkarna, represented him before the authorities
- The AO proceeded to complete the assessment under Section 143(3) despite non-service of the notice
Procedural History
- 27.10.2017: Assessee filed ITR for A.Y. 2017-18
- 24.09.2018: Notice under Section 143(2) issued via ITBA portal; status marked "Bounced"
- 11.10.2019: Notice under Section 142(1) sent via email; not sent
- 22.10.2019: Letter notice delivered
- 08.11.2019: Second notice under Section 142(1) bounced; Show Cause Notice (SCN) also bounced
- 06.12.2019: SCN delivered
- 25.12.2019: Assessment order passed under Section 143(3)
- 04.07.2025: Ld. CIT(A) quashed the assessment order, holding that non-service of Section 143(2) notice rendered it void
- 18.03.2026: Hearing before ITAT Delhi
- 25.03.2026: ITAT dismissed the Revenue’s appeal
Relief Sought
The Revenue sought to set aside the order of the Ld. CIT(A) dated 04.07.2025 and restore the assessment order dated 25.12.2019, arguing that the notice was issued and the assessee’s failure to raise non-service as a ground before the CIT(A) was fatal to the challenge.
The Legal Issue
The central question was whether an assessment order under Section 143(3) of the Income Tax Act, 1961, remains valid if the mandatory notice under Section 143(2) is not duly served on the assessee, and whether the failure to raise non-service as a ground before the CIT(A) can cure this jurisdictional defect.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the notice under Section 143(2) was issued through the ITBA portal and reflected on the e-filing portal, thereby satisfying the requirement of issuance. It argued that the assessee did not raise non-service of notice as a ground before the Ld. CIT(A), and therefore, the CIT(A) erred in entertaining the issue suo motu. The Revenue relied on the Supreme Court’s decision in ACIT v. Hotel Blue Moon to argue that issuance, not service, was sufficient, and that the Punjab and Haryana High Court’s reliance on that case was misplaced.
For the Respondent (Assessee)
No representative appeared for the assessee. However, the Ld. CIT(A) had relied on the record showing that the notice was bounced and no proof of actual delivery existed. The legal heir had submitted documentary evidence from the ITBA portal confirming the bounced status, which the CIT(A) accepted as conclusive.
The Court's Analysis
The Tribunal meticulously examined the ITBA portal records and found that the notice under Section 143(2) was marked as "Bounced" on 24.09.2018. The CIT(A) had tabulated the delivery status of all notices, and the Section 143(2) notice was the only one critical to initiating a valid scrutiny assessment. The Tribunal noted that the Revenue did not dispute the portal data but sought to rely on the mere issuance of the notice.
"Where Assessing Officer passed an assessment order under section 143(3) making addition to assessee's income and it was apparent from observations in assessment that notice under section 143(2) was not issued/served before stipulated date, impugned assessment order was to be set aside."
The Tribunal affirmed the CIT(A)’s reliance on Aggarwal Engineering Co. v. ACIT and the Supreme Court’s decision in ACIT v. Hotel Blue Moon, clarifying that the latter case did not hold that issuance alone suffices. The Supreme Court had held that service is mandatory, and failure to serve renders the assessment void ab initio.
The Tribunal rejected the Revenue’s argument that non-service was not raised as a ground before the CIT(A). It held that jurisdictional defects - such as non-service of a mandatory statutory notice - are not subject to waiver or estoppel. Even if not pleaded, a court or tribunal must examine whether the authority had jurisdiction to act. The Tribunal emphasized that the absence of service of notice under Section 143(2) is a jurisdictional flaw that invalidates the entire assessment.
The Verdict
The appeal was dismissed. The ITAT Delhi upheld the order of the Ld. CIT(A) dated 04.07.2025, quashing the assessment order dated 25.12.2019. The Tribunal held that the assessment under Section 143(3) was void ab initio due to non-service of the mandatory notice under Section 143(2). No monetary relief was directed as the assessment was set aside entirely, and the matter stands to be reopened only if a fresh notice is properly served.
What This Means For Similar Cases
Service Is Non-Negotiable
- Practitioners must verify the delivery status of all notices on the e-filing portal before concluding that service is complete
- A bounced notice, even if issued electronically, renders the assessment void
- Relying on "system-generated" delivery logs without proof of actual receipt is legally untenable
Jurisdictional Defects Cannot Be Waived
- Courts and tribunals are duty-bound to examine jurisdictional defects even if not raised by the assessee
- The failure to raise non-service as a ground before the CIT(A) does not cure the illegality of the assessment
- This principle applies to all statutory notices under the Income Tax Act, including Section 142(1) and SCN
Procedural Compliance Trumps Substantive Outcomes
- The quantum of addition under Section 68 is irrelevant if the assessment process is procedurally invalid
- Revenue authorities must prioritize compliance over convenience
- Future assessments must include printed or digitally signed proof of delivery, not merely portal status
