ITAT: Assessment Without Sec. 143(2) Notice Is Invalid and Can’t Be Rectified by Section 292BB

The Visakhapatnam Bench of the Income Tax Appellate Tribunal (ITAT) reviewed the validity of an assessment conducted under Section 144 of the Income Tax Act, 1961.

The focus of the examination was whether this assessment could be upheld or rectified at a later stage despite the absence of a required notice under Section 143(2) of the Act. Additionally, the tribunal considered the implications of Section 292BB of the Act, 1961, in this context.

KVRECPL-Irpinfratech, a joint venture and partnership firm operating in the construction sector, has filed an appeal against the order issued by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre (CIT(A)) concerning the Assessment Year 2017-18. The firm did not submit its return of income within the stipulated timeframe; however, it later filed the return, albeit belatedly, in response to a notice served under Section 142(1) of the Income Tax Act.

But the Assessing officer has overlooked the return and proceeded to frame an effective ruling assessment u/s 144, approximating the income at Rs 5.88 crore on the basis of cash deposits and related documents.

In the case at hand, the appellant was represented by Chartered Accountant MV Prasad. He presented the argument that when a return of income is filed—regardless of its timeliness—in response to a notice under Section 142(1), the Assessing Officer (AO) is required by law to issue a notice under Section 143(2) before finalising the assessment. This highlights the procedural obligations of the Assessing Officer in the income assessment process.

Also, the taxpayer claims that the absence of these notices generated the proceedings void ab initio, as jurisdiction to scrutinise the return cannot be assumed without it.

Departmental Representative-Dr. Satyasai Rath represented the revenue who filed that the return was not placed on record and thus cannot be regarded. He claimed that, related to the CIT(A), the case has been remitted back to the file of the assessing officer for fresh adjudication; thereafter, the assessment order must not be quashed.

The assessing officer cannot disregard the income return if it is furnished by the taxpayer in answer to the notice u/s 142(1), the Tribunal Bench comprising Judicial Member Ravish Sood and Accountant Member S. Balakrishnan ruled.

The tribunal explained section 234A of the Act, citing that if the income return is provided post-deadline mentioned in the notice u/s 142(1) of the Act, it does not render the income return invalid, but the same shall be within the interest u/s 234A of the Act.

The Bench determined that issuing a notice under Section 143(2) is a critical jurisdictional requirement. The absence of this notice renders any order made under Section 144 invalid. Additionally, the Tribunal emphasised that failing to issue this notice constitutes a defect that cannot be remedied under Section 292BB, as this section only addresses issues related to the service of notice but not the total lack of it.

As per that, the tribunal quashed the order of assessment and permitted the appeal.