Assessment Quashed: Non-Issuance of Notice u/s 143(2) Renders Order Invalid

Assessment Quashed: Non-Issuance of Notice u/s 143(2) Renders Order Invalid

Issue

Whether an assessment order passed under Section 144 (Best Judgment Assessment) without the issuance of a mandatory notice under Section 143(2) is legally valid, especially when the Assessing Officer (AO) explicitly admits to not issuing the notice due to the late filing of the return.

Facts

• Assessee: Tika Ram Educational Society, an educational society registered under Section 12AA.

• Assessment Year: 2015-16.

• Reopening: The case was reopened under Section 148 on the ground that the assessee was not eligible for exemption under Section 10(23C)(iiiab).

• Return Filing: The assessee filed the return of income in response to the notice, but there was a delay due to technical glitches on the income tax portal.

• AO’s Action: The AO completed the assessment under Section 144 (Best Judgment Assessment). Crucially, the AO recorded in the order that since the return was filed at the “fag end” of the proceedings, “the notice u/s 143(2) of the Act is not issued.”

• Addition: The AO assessed the income at Rs. 85,77,857/-, denying deductions under Section 10(23C) and Section 12A.

Decision

• The Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal and quashed the assessment order.

• Mandatory Requirement: Relying on the Supreme Court judgments in CIT vs. Laxman Das Khandelwal and ACIT vs. Hotel Blue Moon, the Tribunal held that the issuance of a notice under Section 143(2) is a mandatory jurisdictional requirement, not a procedural one.

• Fatal Defect: The complete absence of a Section 143(2) notice renders the assessment order non-est (legally non-existent) and void ab initio.

• Section 292BB Inapplicable: The curative provision of Section 292BB applies only to irregularities in service of notice, not to the complete absence of a notice. Since the AO admitted to not issuing the notice at all, this defect could not be cured.

• Outcome: The assessment order was declared invalid. Consequently, the additions made therein were deleted without going into the merits.

Key Takeaways

• No Notice, No Assessment: The issuance of a notice under Section 143(2) is the foundational step for scrutinizing a return. Without it, the AO lacks the jurisdiction to make an assessment under Section 143(3) or 144.

• AO’s Admission: An explicit admission by the AO in the assessment order that no notice was issued makes the case for quashing the order irrefutable.

• Supreme Court Precedent: The ruling reinforces the binding nature of the Supreme Court’s view that the omission of Section 143(2) notice is a fatal, incurable defect.

IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH, ‘B’, CHANDIGARH
Tika Ram Educational
Society,
CRZ Senior Secondary School,
West Ram Nagar, Sonepat
131001
Vs.
The DCIT/ ACIT,
C-2,Chandigarh