Invalidation of Assessment Proceedings Due to Service of Section 143(2) Notice Beyond Statutory Limitation Period

By | February 18, 2026
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Invalidation of Assessment Proceedings Due to Service of Section 143(2) Notice Beyond Statutory Limitation Period

1. The Core Dispute: Time-Barred Scrutiny Notice

The primary issue in this case was whether the Assessing Officer (AO) complied with the strict statutory timeline for serving a scrutiny notice under Section 143(2). For the relevant assessment year, the law mandated that such a notice must be served within a specific window to initiate valid assessment proceedings.

  • The Fact: The notice under Section 143(2) was admittedly served on the assessee beyond the period of 12 months from the end of the month in which the return was filed (as per the law applicable for AY 2001-02).

  • Revenue’s Stand: The department often argues that such delays are “procedural irregularities” that can be cured under Section 292B.

  • Assessee’s Stand: The assessee contended that the timely service of notice is a jurisdictional requirement. Failure to serve it within the deadline makes the entire assessment “void ab initio” (invalid from the start).

2. Legal Analysis: Mandatory vs. Directory Provisions

The court examined the language of Section 143(2) to determine if the timeline was a mere guideline or a strict legal command.

I. Jurisdictional Requirement

The court held that Section 143(2) is a mandatory provision. The service of a valid notice within the prescribed time limit is the very foundation of the AO’s jurisdiction to conduct a scrutiny assessment.

II. Root of the Matter

The court clarified that:

  • Service vs. Issuance: The law specifically uses the word “served”. Merely “issuing” or signing the notice within the deadline is insufficient if it reaches the taxpayer after the period has expired.

  • Vitiated Proceedings: Since the notice was served late, the AO never legally acquired the power to pass an assessment order. This “infirmity” is so fundamental that it goes to the root of the matter, and the subsequent assessment order is non-existent in the eyes of the law.

3. Final Ruling: Assessment Quashed

The court ruled that the statutory time limit must be strictly adhered to by the Revenue.

  • Verdict: Since the Section 143(2) notice was served beyond the statutory period, the entire assessment proceedings were vitiated and set aside.

  • Outcome: The tax demand raised under the scrutiny assessment was quashed because the initiation of the case was itself illegal.

Key Takeaways for Taxpayers

  • Check the Envelope/Timestamp: Always preserve the envelope or the digital “Acknowledgement of Receipt” for any notice. The date of service (when you received it) is often more legally significant than the date printed on the notice.

  • Limitation Awareness: Under current law (post-Finance Act 2021), the time limit for serving a notice under Section 143(2) is three months from the end of the financial year in which the return is furnished.

  • Section 292BB Limitation: Be careful—if you participate in the assessment proceedings without objecting to the late service of notice before the assessment is completed, you may be “deemed” to have waived your right to object under Section 292BB.

HIGH COURT OF TELANGANA
Anupama Chand
v.
Deputy Commissioner of Income-tax*
P. Sam Koshy and SUDDALA CHALAPATHI RAO, JJ.
ITT Appeal. Nos. 252 to 262 of 2008 and 136 to 140, 144 and 145 of 2010†
JANUARY  30, 2026
Avinash Desai, Learned Senior Counsel, M. Pranav, A.V.A. Siva Karthikeya, Learned counsels and A.V. Krishna Koundinya, Counsel for the Appellant. Ms. Bokaro Sapna Reddy, Learned Senior Standing Counsel for the Respondent.
JUDGMENT
Suddala Chalapathi Rao, J.- The present batch of (18) appeals is filed against the common order dt.15.02.2008 passed by the Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) in respective appeals.
2. The details of the eighteen (18) appeals, the orders impugned, the assessment years involved, names of the appellants and the respondents, for convenience, are reproduced hereunder:
Sl. No.ITTA. No.ITA No.Assessment YearAppellantRespondent
1252/2008IT(SS)A.No.160/Hyd/ 2003Block Period 1991-92 to 200101 & broken period from 01.04.2000 to 04.08.2000Anupama ChandDy. Commissioner of Income Tax, Central Circle-4, Hyderabad.
2253/2008IT(SS)A.No.169/Hyd/ 2003“Deep Chand“
3254/2008IT(SS)A.No.156/Hyd/ 2003“Moti Chand“
4255/2008IT(SS)A.No.162/Hyd/ 2003“Rajkumari Chand“
5256/2008IT(SS)A.No.153/Hyd/ 2003“Trilok Chand“
6257/2008IT(SS)A.No.158/Hyd/ 2003“Ranjana Chand“
7258/2008IT(SS)A.No.168/Hyd/ 2003“Jamuna Bai (Died) per Lrs. 2 to 6“
8259/2008IT(SS)A.No.157/Hyd/ 2003“Gopi Chand“
9260/2008IT(SS)A.No. 170/Hyd/2003“Ramesh Chand“
10261/2008IT(SS)A.No. 167/Hyd/2003“Jamuna Bai (Died) per Lrs. 2 to 5“
11262/2008IT(SS)A.No. 165/Hyd/2003“Anuradha Chand“
12136/2010IT(SS)A.No.151/Hyd/ 2003“Kishan Chand“
13137/2010IT(SS)A.No.154/Hyd/ 2003“Prem Chand“
14138/2010IT(SS)A.No.152/Hyd/ 2003“Karam Chand“
15139/2010IT(SS)A.No.166/Hyd/ 2003“Shantabai“
16140/2010IT(SS)A.No.163/Hyd/ 2003“Padmini Chand“
17144/2010IT(SS)A.No.155/Hyd/ 2003“Poonam Chand“
18145/2010IT(SS)A.No.159/Hyd/ 2003“Rajani Chand“

 

3. As all these eighteen appeals are similar in nature, arising out of identical factual circumstances and involving common questions of law emanating from eighteen separate assessment orders, which were carried in appeal before the Commissioner of Income Tax (Appeals) (for short ‘the CIT(A)’) and disposed of by separate orders, and since, notwithstanding minor variations in reasoning, the parties and the issues for consideration remained common and identical in all the cases, all the appeals have been heard analogously treating ITTA No.252 of 2008 as the lead case and are being disposed of by this common order.
Brief facts:
4. The brief facts of the case are that the appellants are individuals assessees deriving income from house property and such other sources of income. Further, on 04.08.2000, the Income Tax Department conducted search and seizure operations under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in the business premises of M/s Urvasi Enterprises (a partnership firm), M/s Urvasi Builders(an association of persons), M/s Sheeshamahal Enterprises Pvt. Ltd. (a company) and M/s The Commercial and Industrial Finance (P) Ltd. (a Company). Though no search warrant was issued and no search was conducted in the name of the respective appellants, however, the Assessing Officer initiated action on the appellants basing on the incriminating material alleged to have found in the search by issuing a notice under Section 158-BD of the Act on 19.12.2000 and assessed the undisclosed income pertaining to the block period of 10% years i.e., from 01.04.1992 to 04.08.2000 (the date of search).
5. Thus, the block period consisted of assessment period of 10 assessment years from 1991-92 to 2000-01 and also for the broken period from 01.04.2000 to 04.08.2000. Consequent upon search, the respective appellants filed return in the prescribed form in Form No.2B on 09.01.2001 for the block period admitting ‘NIL’ undisclosed income under Section 158-B(b) of the Act. The Assessing Authority after issuance of notice under Sections 143(2) and 142(1) of the Act, taking into account all the relevant evidence, determined the undisclosed income for the block period as Rs.1,11,120/- (minor variations of amounts in other appeals) under Section 158-BC(c) r/w Section 143(3) and determined tax thereupon including surcharge and the assessment orders in the respective batch of appeals passing orders under Section 158-BD r/w 158-BC on 31.12.2002.
6. Aggrieved thereupon, all the assessees have filed appeals before the CIT(A) and the all the said appeals were dismissed by the CIT(A) on 21.10.2003, but however, the CIT(A) enhanced the undisclosed income and directed the Assessing Authority to take the said undisclosed income and collect the tax thereupon. Subsequently, all the assessees challenged the said appellate orders passed by the CIT(A) before the learned ITAT.
7. The brief contentions of the assessee before the Tribunal were that the CIT(A) has no jurisdiction to enhance the assessed amount and issue notices under Section 143(2) of the Act, dt.29.01.2002, which were served upon the appellants on 04.02.2002, which was beyond the period of one year mandated under Section 143(2) of the Act from the last day of the month on which the return was filed by the assessee, as such the assessment orders passed by the assessing officer are vitiated and liable to be set aside. Apart from the said contention, such other grounds which were factual in nature were also urged before the learned ITAT and also the procedural lapses committed by the assessment officer.
8. Per contra, the case of the revenue/Income Tax Authorities before the learned ITAT was that though the notice under Section 143(2) was served on 04.02.2002, however, the notice was issued on 29.01.2002 i.e., even before the lapse of one year from the last day of month from the date of the return filed by the assessees, as such, it is contended that the said proceedings cannot be vitiated and mandate under Section 143(2) was followed as the notice was issued on 29.01.2002 and so far as other contention that the CIT(A) cannot enhance the assessment amounts, the revenue/Income Tax Authorities contended that the CIT(A) has only recalculated the tax thereupon and corrected the proper amounts, which do not come in the purview of enhancing the assessment value and contended that the procedure was properly followed and there was no impediment in the assessment order as confirmed by the CIT(A) and thus, the Revenue prayed to dismiss the appeals filed by the assessee as devoid of merits.
9. The learned ITAT, after hearing the appeals on factual issues and legal grounds along with the provisions of the Act, dismissed the said appeals by the common order, dt.15.02.2008, against which the present batch of appeals are filed before this Court.
10. Heard Sri Avinash Desai, learned Senior Counsel representing Sri M.Pranav, learned counsel for the appellants in ITTA.Nos.252 to 262 of 2008; Sri A.V.A. Siva Karthikeya, learned counsel for appellants for Sri A.V.Krishna Koundinya, (counsel on record) for the appellants in ITTA.Nos.136 to 140, 144 & 145 of 2010, and Ms.Bokaro Sapna Reddy, learned Senior Standing Counsel for Income Tax appearing for respondent in the appeals.
11. Though the appeals were admitted for determination of several substantial questions of law as raised in the grounds of respective appeals, upon considering the submissions made by the learned Senior Counsel Sri Avinash Desai and Sri A.V.A. Siva Karthikeya, learned counsel for the appellants, the substantial questions of law that arise for determination in this batch of appeals appear to be threefold and they are:
1.Whether the notice under Section 143(2) of the Act is to be served or issued within the prescribed period from the last day of month, on which the return is filed by the assessee?
2.Whether the notice under Section 158-BD of the Act should reflect the satisfaction on the part of the Assessing Officer?
3.Whether the proceedings would lapse, if the assessment orders are not passed within the period of two years from the initiation of the search?
Contentions of the Counsel for appellants:
12. With regard to the first ground, the learned Senior Counsel along with other counsel for the appellants contended that Section 143(2) of the Act mandates that the notice thereunder must be served on the assessee within a period of one year (12 months) from the last day of the said calendar month in which the return is filed. In the present case, the return of the assessees, admittedly was filed on 09.01.2001(in all appeals) and though the notice bears the date 29.01.2002, it was admittedly served only on 04.02.2002, which is contended to be served beyond the prescribed period u/s.143(2) of the Act, and therefore the entire assessment proceedings stand vitiated and the assessment orders are void and non est in the eye of law, warranting interference of this Court.
13. In support of the said contention, the learned Senior Counsel Sri Avinash Desai, placed reliance on the judgment of the Hon’ble Supreme Court in Asstt. CIT v. Hotel Blue Moon ITR 362 (SC)/(2010) 3 SCC 259, wherein it was held that for the purpose of determination of undisclosed income for a block period, issuance of notice under Section 143(2) within the prescribed time is mandatory. The Hon’ble Supreme Court further held that once a block return is filed and the Assessing Officer proceeds to scrutinize the same, the assessment can only be completed under Section 143(3) and omission to issue notice under Section 143(2) within the stipulated period is neither a procedural irregularity nor a curable defect, but goes to the root of the matter and thus, vitiates the entire proceedings.
14. Reliance was also made by the learned Senior Counsel on the decision of the Hon’ble Delhi High Court in CIT v. Bhan Textiles (P.) Ltd. [2006] 287 ITR 370/[2007] 208 CTR 253 (Delhi)/MANU/DE/9257/2006 wherein the distinction between ‘issuance’ and ‘service’ of notice was clearly emphasized, holding that it is not mere issuance but service of notice u/s.143(2) of the Act, upon the assessee within the prescribed period of one year from the date of filing of return by the assessee, and that issuance of notice alone cannot sustain the continuation of assessment proceedings by the notice under Section 143(2) of the Act, but it should be served within the stipulated time as per said provision of the Act.
15. Further reliance was also placed by the learned Senior Counsel on the judgment of the Division Bench of the Madras High Court in CIT v. M. Chellappan [2006] 281 ITR 444/[2005] 198 CTR 490 (Mad)/ MANU/TN/1404/2004, wherein it was held that notices issued under Section 143(2) beyond the period prescribed under the Act, along with the consequent assessment orders, are liable to be set aside. So, also, the decision of the Division Bench of the Delhi High Court in CIT v. Vardhman Estate (P.) Ltd [2006] 287 ITR 368 (Delhi)/MANU/DE/9256/2006 was relied upon by the learned Senior Counsel, wherein the Court categorically rejected the contention that the words “issued” and “served” are synonymous or interchangeable. It was held that the statutory requirement under Section 143(2) is that the notice must be served upon the assessee within the prescribed time and that mere issuance of notice would not validate proceedings, particularly under Section 158-BD of the Act.
16. On the basis of the above judgments, it was contended that the statutory expression “served” in Section 143(2) unequivocally requires actual service of notice upon the assessee within one year from the last day of the relevant month of filing return by the assessee. Since, in the present case, service of notice was affected on 04.02.2002, though issued on 29.01.2002, the proceedings suffer from a fatal legal infirmity and are therefore liable to be set aside.
17. Insofar as the second ground that, satisfaction on the part of the Assessing Officer should be reflected in the notice issued under Section 158-BD of the Act, learned Senior Counsel along with counsel for appellants in other appeals submitted that the statutory requirement of recording satisfaction under Section 158-BD of the Act has not been complied with in the present case, as the notice, dt.19.12.2000, does not disclose or record the requisite satisfaction of the Assessing Officer, which is a condition precedent for drawing proceedings under Section 158-BD of the Act.
18. In support of the said contention, the learned Senior Counsel so also the learned counsel appearing in other appeals placed reliance on the judgment of the Hon’ble Supreme Court in Manish Maheshwari v. Asstt. CIT ITR 341 (SC)/(2007) 3 SCC 794, wherein it was categorically held that the Assessing Officer must record his satisfaction before issuing notice under Section 158-BD and that such satisfaction must clearly indicate that the undisclosed income belongs to a person other than the one in respect of whom the search was conducted under Section 132 of the Act or requisition was made under Section 132-A of the Act.
19. Further reliance was placed on the decision of the Hon’ble Supreme Court in CIT v. Calcutta Knitwears  (Mag)/362 ITR 673 (SC)/(2014) 6 SCC 444 wherein it was held that for initiating proceedings under Section 158-BD of the Act, recording of a satisfaction note by the Assessing Officer that the undisclosed income belongs to any other person other than the person with respect to whom a search was made under Section 132 of the Act or a requisition of books was made under Section 132-A of the Act, is sine qua non, and that such satisfaction note must be prepared by the Assessing Officer before transmitting the records to the Assessing Officer having jurisdiction over the other person. The Hon’ble Supreme Court further held that the satisfaction note may be recorded at any one of the stages contemplated under the Act.
20. It was further contended that the aforesaid principle was also reiterated by the Division Bench of the Delhi High Court in New Delhi Auto Finance (P.) Ltd v. Jt.CIT ITR 83 (Delhi)/MANU/DE/0101/2008, wherein it was held that the very scheme of Section 158-BD mandates that the Assessing Officer must record his satisfaction regarding the existence of undisclosed income belonging to a person other than the searched person, and failure to record such satisfaction would vitiate the entire proceedings.
21. Further, replying upon the Central Board of Direct Taxes (CBDT) Circular vide No.24/2015, dt.31.12.2015, wherein the judgment of the Hon’ble Supreme Court in Calcutta Knitwears‘s case (supra) was referred and issued specific guidelines to the taxing authorities mandating strict compliance with the requirement of recording a satisfaction note prior to transfer of records to the Assessing Officer having jurisdiction over the other person under Section 158-BD of the Act, and the Hon’ble Supreme Court held that:
“the satisfaction note could be prepared at any of the following stages:
(a)At the time of or along with the initiation of proceedings against the searched person under Section 158-BC of the Act;
(b)Along with the assessment proceedings under Section 158-BC of the Act; and
(c)Immediately after the assessment proceedings are completed under Section 158-BC of the Act of the searched person.”
22. By relying on the said judgment, the learned counsel would contend that in the instant appeals, notice issued u/s.158-BD Act has not recorded the satisfaction note and thus, failed to comply with the mandatory requirement under Section 158-BD of the Act and therefore, the proceedings are vitiated and on this ground also the proceedings are liable to be set aside.
23. With respect to the third ground, it was submitted by the learned counsel appearing on behalf of the appellants that proceedings initiated under Section 158-BD of the Act are required to be completed within a period of two years from the date of search and admittedly, the search was conducted on 04.08.2000 and proceedings under Section 158-BD were issued on 31.12.2002 and that, in the present case, the assessments were concluded beyond the said statutory period, and on this ground also, the entire proceedings are vitiated and the impugned orders are liable to be set aside.
24. It was thus contended by the learned Senior Counsel along with the counsel appearing for the appellants, that for all the aforesaid reasons, the substantial questions of law arising for consideration before this Court demonstrate that the respondent/Revenue failed to follow the procedure mandated under Sections 143(2) and 158-BD of the Act and also failed to conclude the proceedings within the prescribed period of two years from the date of initiation of search, and thus, on all counts, it was prayed that the present appeals be allowed and the impugned orders be set aside.
Contentions of the Standing Counsel for Respondents/Revenue:
25. Per contra, Smt. B. Sapna Reddy, learned Senior Standing Counsel appearing for the respondent/Revenue, while addressing the first ground, submitted that the judgment of the Hon’ble Supreme Court in Hotel Blue Moon‘s case (supra) clearly lays down that where an assessment is required to be completed under Section 143(3) read with Section 158-BC of the Act, issuance of notice under Section 143(2) within one year from the date of filing of the block return is mandatory and omission to issue such notice is neither a procedural irregularity nor a curable defect. However, it was contended that in the present case, the statutory requirement has been duly complied with inasmuch as the block return was filed on 09.01.2001 and the notice under Section 143(2) of the Act was issued on 29.01.2002, well within one year from the end of the month in which the return was filed. Merely because the notice was served on 04.02.2002, beyond the prescribed period, would not vitiate the proceedings, as the law mandates issuance of notice within the prescribed time and not its service. Accordingly, it was contended that the notice issued is valid and the proceedings are properly drawn.
26. The learned Senior Standing Counsel further submitted that though Section 143(2) uses the expression “served”, it would only mean that the proceedings must be issued within the prescribed period of one year from the last day of the month in which the return was filed and not actual service thereof. Since the notice in the instant case was admittedly issued within the statutory period, the mandatory requirement stands satisfied and there is no procedural infirmity. Consequently, the first ground raised by the appellants was contended to be untenable and liable to be rejected
27. With regard to the second ground relating to the requirement of recording a satisfaction note under Section 158-BD of the Act prior to issuance of notice and so as to the 3rd ground that the proceedings have to be completed within two years from the date of search it was submitted that such contentions were neither urged before the CIT(Appeals) nor before the learned ITAT, nor was it raised in the grounds of appeal before this Court. In such circumstances, it was contended that a plea which was not raised before any of the authorities below, cannot be permitted to be agitated for the first time in a second appeal. It was further submitted that the said grounds are essentially factual in nature and ought to have been raised before the appropriate authorities for proper adjudication. As such, the said ground was contended to be unavailable at the stage of arguments and liable to be rejected.
Reply of the counsel for Appellants:
28. In reply to the objection raised by the learned Senior Standing Counsel as to the 2nd and 3rd grounds relating to recording of satisfaction and completion of proceedings within a period of two years from the date of conducting search, were not urged before the CIT(A) or the learned ITAT, it was contended on behalf of the appellants that the appellate jurisdiction under Section 260-A of the Act contemplates determination of any substantial question of law arising for consideration at any stage during the pendency of the appeal. It was further contended that such substantial questions of law are not restricted to those raised before the authorities below and may be agitated by the appellants at any stage of the appeal, and thus, it was contended that the objections raised by the learned Senior Standing Counsel are untenable and that the said point may also be considered and decided by this Court while adjudicating the substantial questions of law.
29. We have given earnest consideration to the submissions of the learned counsel appearing on either side and perused the material on record.
ANALYSIS AND FINDINGS OF THE COURT:
30. Before delving into the factual matrix of the case, this Court deems it appropriate to extract the relevant provisions of law applicable to the present case, which are set out as under:
“Section 143 – Assessment:
(1) XXXX
(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:
Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.
158BD. Undisclosed income of any other person – Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132-A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed [under section 158-BC] [Inserted by Act 20 of 2002, Section 67 (w.e.f. 1.6.2002).] against such other person and the provisions of this Chapter shall apply accordingly.”
31. In the factual matrix and statutory provisions above extracted, the admitted facts are that pursuant to the search conducted for the block assessment period from 01.04.1992 to 04.08.2000, the respective assessees filed their block returns on 09.01.2001. The notice under Section 143(2) of the Act was issued on 29.01.2002 and was admittedly served on the assessees on 04.02.2002. Evidently, Section 143(2) of the Act mandates that notice there under “shall be served” upon the assessee within 12 months. While the notice was issued within the stipulated period, service was affected beyond the prescribed limitation. The core controversy, therefore, is whether the statutory requirement under Section 143(2) stands fortified by mere issuance of notice or shall be served within the prescribed period is mandatory so as to sustain the validity of the proceedings.
32. Further, the learned counsel on either side placed strong reliance on the decision of the Hon’ble Supreme Court in Hotel Blue Moon‘s case (supra), wherein it was unequivocally held that issuance of notice under Section 143(2) is a mandatory requirement for completing assessment under Section 143(3) read with Section 158-BD of the Act and that failure to issue such notice is neither a procedural irregularity nor a curable defect. The Hon’ble Supreme Court further held that non-issuance of notice vitiates the entire assessment proceedings, particularly in cases involving search and determination of undisclosed income.
33. However, though the Hon’ble Supreme Court in Hotel Blue Moon‘s case (supra) used the expression “issued”, the statutory language of Section 143(2) expressly uses the term “served”. This distinction formed the central point of divergence between the rival submissions: while the learned Senior Standing Counsel contended that issuance of notice within the prescribed period is sufficient compliance, on the other hand, the learned Senior Counsel and other counsel appearing for the appellants asserted that the statute mandates actual service of notice upon the assessee within the stipulated period, meaning thereby, it should be received by the assessee before expiry of one year(12 months) from the last day of the month in which return was filed by the assessee.
34. In support of the appellants’ contention, reliance was placed on a catena of decisions of the Delhi High Court, including Bhan Textiles (P.) Ltd‘s case (supra), CIT v. Lunar Diamonds Ltd. ITR 1 (Delhi)/MANU/DE/0287/2005, and Tea Consultancy & Plantation Services (India) (P.) Ltd. v. Union of India  (Delhi) /MANU/DE/0280/2005.
35. In the said decisions, it has been consistently held that the expressions “issued” and “served” are neither synonymous nor interchangeable and that issuance and service of notice constitute two distinct and independent statutory acts. The Courts have categorically held that Section 143(2) leaves no scope for ambiguity and mandates that notice must be served upon the assessee within the prescribed period, and that mere issuance of notice is insufficient to sustain the proceedings.
36. The said principle stands further fortified by the judgment of the Madras High Court in M. Chellappan‘s case (supra), wherein notices issued beyond the period prescribed under Section 143(2) were held to vitiate the assessments and were accordingly set aside.
37. Similarly, the Delhi High Court in CIT v. Inderpal Malhotra (Delhi)/MANU/DE/9504/2007, following its earlier decision in Vardhman Estate (P.) Ltd.’s case (supra), rejected the contention of the Revenue that notice sent through registered post on 30.10.2002, is within the limitation period and would amount to deemed service. The Court held that service must be affected within the statutory period and that dispatch by post on the last day of limitation, without any real possibility of service within time, would not satisfy the mandate of Section 143(2). The plea that the words “issued” and “served” are synonymous was expressly negatived.
38. In view of the aforesaid authoritative judicial pronouncements, the basic contention of the learned Senior Standing Counsel that issuance of notice on 29.01.2002 within the limitation period is sufficient, notwithstanding the fact that service was affected on 04.02.2002, is untenable and unacceptable for the simple reason that the provision under section 143(2) unequivocally mandates service of notice upon the assessee within one year from the last day of the month in which the return is filed.
39. The expression “served” necessarily refers to the date on which the assessee actually receives the notice, and mere issuance of notice within the prescribed period without actual service, does not make the proceedings proper. The Hon’ble Supreme Court in the case of Hotel Blue Moon‘s case(supra) used the word “issued”, which while reiterating the requirement of the proceedings to be drawn consequent upon search mandates issuance of notice u/s.143(2) of the Act in general form, but the Hon’ble Apex Court has not interpreted the said provision and held that that issuance of notice under Section 143(2) is mandatory in strict sensu lato, failing which the proceedings drawn would be vitiated for such non-compliance, and also in the various judicial precedents referred in the foremost paras, it has been categorically held that notice u/s.143(2) should be served on the assessee within the prescribed period.
40. Apart from the above, if the contention of the learned Senior Standing Counsel that issuance of notice alone within the limitation period is sufficient compliance with the provision under Section 143(2), without actual service of the same, is accepted, there is every possibility that issuance of notice can also be antedated, thereby defeating the legislative intent behind such enactment to avoid such arbitrary action on the part of the authorities, as the drafters of the statute have clearly intended to see that the notice u/s.143(2) of the Act must not only be issued but also duly served upon the assessee.
41. In the instant case, since the notice under Section 143(2) was admittedly served beyond the statutory period, the infirmity goes to the root of the matter. Such non-compliance is neither procedural in nature nor curable, and consequently, the entire proceedings stand vitiated and are liable to be set aside. Accordingly, the substantial question of law No.1 is answered in favour of the appellants/assessees and against the respondent/Revenue
42. As the core issue in the batch of appeals relating to noncompliance with the mandatory requirement under Section 143(2) of the Act has been answered in favour of the appellants, this Court does not deem it necessary to adjudicate upon the remaining substantial questions of law. Also, the issue as to whether additional grounds not urged before the authorities below may be raised at the stage of hearing, is left open to be considered in an appropriate case.
43. In view of the above findings, we are of the considered view, that the entire proceedings in the batch of appeals are liable to be set aside, being vitiated by the provisions of the Act.
44. Accordingly, all these Income Tax Appeals are allowed and the impugned orders passed by the learned Income Tax Appellate Tribunal(ITAT) and the Commissioner of Income Tax (Appeals) are hereby set aside. Consequently, the respective assessment orders passed by the Assessing Officer, are hereby quashed. There shall be no order as to costs.
45. As a sequel, miscellaneous petitions pending, if any, shall stand closed.