The Income Tax Appellate Tribunal, Kolkata, has held that the issuance of a notice under Section 143(2) of the Income Tax Act is mandatory before framing a reassessment order, and its non-issuance renders the entire proceeding null and void. This decision clarifies that Section 292BB cannot cure the absence of a notice, only defective service.
Background & Facts
The Dispute
The assessee, STAR TRADECOM PRIVATE LIMITED, filed its return of income for Assessment Year 2009-10 on 11.07.2009, declaring a total income of ₹714. The return was processed under Section 143(1). Subsequently, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 on 16.12.2010, alleging that income of ₹26,870 under miscellaneous expenses had escaped assessment. An assessment order was passed on 17.03.2011 under Section 147 read with Section 143(3), increasing the total income to ₹50,480.
Key Facts
- The assessee filed its return on 11.07.2009 declaring income of ₹714
- Reassessment notice under Section 148 was issued on 16.12.2010
- Assessment order dated 17.03.2011 was passed without any notice under Section 143(2)
- The Commissioner of Income Tax (CIT) invoked revisionary powers under Section 263 on 05.03.2013, setting aside the assessment on grounds of inadequate inquiry into share capital of ₹5,07,00,000
- Notices under Section 142(1) dated 10.02.2014 and summons under Section 131 dated 12.03.2014 were unserved
- The share application money was added under Section 68 as unexplained income
- The assessee filed an RTI application seeking confirmation of issuance of notice under Section 143(2); the AO replied that no such notice was available in records
Procedural History
- 11.07.2009: Return filed declaring income of ₹714
- 16.12.2010: Notice under Section 148 issued for reassessment
- 17.03.2011: Assessment order passed under Section 147/143(3) without Section 143(2) notice
- 05.03.2013: Order under Section 263 passed by CIT setting aside the assessment
- 10.02.2014: Notice under Section 142(1) issued and unserved
- 12.03.2014: Summons under Section 131 issued and unserved
- 23.12.2022: Order of National Faceless Appeal Centre (CIT(A)) upholding the Section 263 order
- 09.06.2026: Hearing before ITAT Kolkata
- 16.06.2026: Judgment pronounced
The Parties' Positions
For the Assessee
The assessee contended that the assessment order dated 17.03.2011 was null and void because no notice under Section 143(2) was ever issued. It relied on ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC), which held that non-issuance of Section 143(2) notice is not a procedural irregularity but a jurisdictional defect. The assessee argued that since the original assessment was invalid, the revisionary proceedings under Section 263 were also invalid.
For the Revenue
The Revenue contended that the assessee had participated in the reassessment proceedings and therefore, under Section 292BB, any objection to non-service of notice was waived. It argued that the notice under Section 148 was sufficient to put the assessee on notice and that Section 143(2) notice was merely procedural.
Relief Sought
The assessee sought quashing of the Section 263 order dated 05.03.2013, on the ground that it was based on a null and void assessment order. It further sought restoration of the original return filed on 11.07.2009.
The Legal Issue
The central question was whether the failure to issue a notice under Section 143(2) of the Income Tax Act during reassessment proceedings renders the subsequent assessment order null and void, and whether Section 292BB can cure such a fundamental defect where no notice was issued at all.
Arguments Presented
For the Appellant
The assessee relied on the Supreme Court’s decision in ACIT v. Hotel Blue Moon (2010) 321 ITR 362, which held that Section 143(2) notice is mandatory when the AO intends to make an assessment at variance with the return filed. The Tribunal was also referred to Jute Corporation of India Ltd. v. CIT (187 ITR 688) and National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383, which permit raising legal issues for the first time before appellate authorities. The assessee emphasized that Section 292BB only cures defects in service, not non-issuance, and that the RTI reply confirmed the absence of any notice.
For the Respondent
The Revenue argued that the assessee had participated in the proceedings and therefore, under Section 292BB, it was estopped from raising the objection. It contended that the notice under Section 148 was sufficient to initiate the process and that the omission of Section 143(2) notice was a technicality that should not invalidate the entire assessment. It cited Areva T & D India Ltd. v. Asstt. CIT [2007] 294 ITR 233 to support its position.
The Court's Analysis
The Tribunal undertook a detailed analysis of the statutory framework under Sections 147, 143(2), 148, 153(2), and 292BB. It held that the Supreme Court in Hotel Blue Moon had unequivocally stated that the issuance of a notice under Section 143(2) is not a mere procedural requirement but a mandatory precondition for any assessment made at variance with the return. The Court observed:
"Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with."
The Tribunal rejected the Revenue’s reliance on Section 292BB, holding that the provision only applies where a notice has been issued but not properly served. Where no notice is issued at all, Section 292BB has no application. The Tribunal further noted that the AO’s own RTI reply confirmed the non-existence of the notice, making the assessment order a nullity.
The Tribunal also held that the revisionary jurisdiction under Section 263 cannot be invoked on the basis of a null and void assessment. It cited Keshab Narayan Banerjee v. CIT [1999] 238 ITR 694 (Cal) and Classic Flour & Food Processing Pvt. Ltd. v. CIT to affirm that a party may challenge the validity of an assessment in collateral proceedings.
The Tribunal explicitly overruled the Calcutta High Court’s decision in Humboldt Wedag India (P.) Ltd. as per incuriam for failing to consider Hotel Blue Moon.
The Verdict
The appeal of the assessee was allowed. The Tribunal set aside the order dated 05.03.2013 passed under Section 263, holding that it was based on a null and void assessment order. The reassessment order dated 17.03.2011 was declared void ab initio. The original return filed on 11.07.2009 declaring income of ₹714 stands restored. No costs were awarded.
What This Means For Similar Cases
Non-Issuance of Section 143(2) Notice Vitiates Reassessment
- Practitioners must now treat non-issuance of Section 143(2) notice as a jurisdictional defect, not a procedural lapse
- Any reassessment order passed without such notice is void and cannot be cured by subsequent compliance
- RTI responses confirming non-issuance are admissible evidence to establish jurisdictional invalidity
Section 292BB Does Not Apply to Non-Issuance
- Section 292BB only cures defects in service, timing, or manner of notice - not absence of notice
- If the notice was never issued, the assessee is not estopped from challenging the assessment even after participation
- Revenue cannot invoke Section 292BB to validate proceedings where the statutory pre-condition was never fulfilled
Collateral Challenge to Invalid Assessments Permitted
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Assessees may challenge the validity of an assessment order in proceedings under Section 263, Section 147, or even in writ petitions
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The doctrine of res judicata does not apply to nullities
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Orders passed under Section 263 based on invalid assessments are themselves invalid
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Always verify whether a Section 143(2) notice was issued before concluding that an assessment is valid
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In revisionary proceedings, challenge the foundation of the original assessment if no Section 143(2) notice exists
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File RTI applications early to secure documentary proof of non-issuance
