Notice Under Section 143(2) Is Not Mandatory In Reassessment Proceedings As Section 147/148 Forms A Separate Code

By | August 19, 2026
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Notice Under Section 143(2) Is Not Mandatory In Reassessment Proceedings As Section 147/148 Forms A Separate Code

Issue

Whether non-issuance and non-service of a notice under Section 143(2) during reassessment proceedings under Sections 147/148 invalidates the reassessment order, or whether Section 147/148 acts as a separate code for assessing escaped income where a Section 143(2) notice is not mandatory.

Facts

  • Return & Reassessment Notice: The assessee filed its return of income for Assessment Year 2016-17 declaring a loss. The Assessing Officer (AO) initiated reassessment proceedings and issued a notice under Section 148 dated 29-03-2021, requiring the assessee to furnish its return within 30 days.
  • Delayed Return & Proceedings: The assessee filed its return in response to the Section 148 notice beyond the stipulated 30-day period.
  • Unexplained Cash Credit: During reassessment, the AO examined a loan transaction and found that the assessee failed to satisfactorily establish its genuineness. Consequently, the loan was treated as an unexplained cash credit under Section 68, and assessment was completed under Section 147 read with Sections 144 and 144B.
  • Assessee’s Participation: The assessee admitted receiving notices under Sections 143(2) and 142(1) requesting specific details/documents and actively participated in the assessment proceedings.
  • Legal Challenge: The assessee challenged the validity of the reassessment order before higher forums, alleging non-issuance/service of notice under Section 143(2) and non-disposal of objections.

Decision

  • Applicability of Section 143(2) in Reassessment: In favor of Revenue. Sections 147 and 148 form a standalone separate code for assessing income that has escaped assessment, based on reasons recorded and communicated by the AO to the assessee.
  • Validity of Reassessment Order: In favor of Revenue. It is not mandatory to issue a separate notice under Section 143(2) during proceedings under Sections 147/148. Consequently, the assessee’s grounds challenging the reassessment for want of a Section 143(2) notice and non-disposal of objections were rejected.

Key Takeaways

  • Section 147/148 as a Self-Contained Code: Reassessment proceedings operate under a distinct statutory scheme designed specifically to tax escaped income discovered prior to reopening the case.
  • Non-Mandatory Nature of Section 143(2): Procedural requirements under Section 143(2) do not act as a mandatory prerequisite to validate an assessment order passed under Section 147/148 when the AO has supplied reasons for reopening and the assessee has participated in the proceedings.
  • Effect of Assessee Participation: Participation in reassessment proceedings upon receipt of questionnaires and notices issued under Section 142(1)/143(2) reinforces that principles of natural justice were satisfied, barring technical challenges to jurisdictional notices.
IN THE ITAT KOLKATA BENCH ‘C’
Nisha Projects (P.) Ltd.
v.
Deputy Commissioner of Income-tax
George Mathan, Judicial Member
and Laxmi Prasad Sahu, Accountant Member
IT Appeal No.1189 (KOL) of 2026
[Assessment year 2016-17]
JULY  13, 2026
Aayush Gupta, FCA for the Appellant. Gayasuddin Ansari, CIT
ORDER
Laxmi Prasad Sahu, Accountant Member.- This Appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeal)-Kolkata [“the Ld. CIT(A)”, for short], dated 05.02.2026 with DIN & Order No. ITBA/APL/S/250/2025-26/1085647687(1) passed u/s 250 of the Income Tax Act, 1961 [“the Act”, for short] for the assessment year 2016-17 on the following Grounds of Appeal: –
“1. That the Hon’ble CIT(A) has erred in holding that the failure of the Ld AO to pass a separate speaking order, disposing the objections filed by the appellant against the initiation of reassessment proceedings was merely a “procedural irregularity”, without appreciating that such failure is contrary to the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC). The Ld. AO had erred in maintaining reticence on objections raised by the appellant company and abstaining from passing a speaking order disposing such objections in course of assessment proceedings.
2. That on the facts and in the circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the validity of the reassessment proceedings initiated by the Ld AO, despite the fact that the recorded reasons were furnished at the fag end of the limitation period and the Show Cause Notice was issued simultaneously, which clearly indicates a pre-determined mindset of the Ld AO.
3. That on the facts and circumstances of the case and in law, the Hon’ble CIT(A) erred in upholding the reassessment proceedings when the Ld. AO acted mechanically on the information received from DDIT(Investigation), Unit-4(2), Kolkata without independently verifying whether the said information comprised any tangible material having live nexus with the income alleged to have escaped assessment in the hands of the appellant.
4. That on the facts and in the circumstances of the case and in law, the appellant had furnished loan confirmation, PAN and other relevant details of the lender company, thereby duly discharging the initial onus cast upon the appellant U/s 68 of the Act. However, the Hon’ble CIT(A) and Ld. AO failed to appreciate that once the assessee furnishes the basic documentary evidences in support of the transaction, the onus shifts upon the Assessing Officer to make further enquiry and prove to the contrary.
5. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in not providing the appellant with the statements and material of the alleged entry operators on the basis of which the appellant was treated as a beneficiary, thereby depriving the appellant, an opportunity to cross-examine such persons and rebut the impugned material.
6. That on the facts and in circumstances of the case, the Hon’ble CIT(A) and Ld. AO has failed to appreciate that cross-examination is the sine qua nonon of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. The Ld. AO’s decision to not allow cross examination was in clear violation of principles of natural justice
7. That the appellant craves leave to add, alter, amend or withdraw any of the above grounds at or before the time of hearing.”
Later on, 02.07.2026, the assessee has also filed an additional Grounds of Appeal which are as under: –
“1. That, on the facts and in the circumstances of the case, the assessment frame u/s 147 of the I.T. Act, 1961 is without jurisdiction, invalid and liable to be quashed, as no notice u/s 143(2) was served to the appellant in accordance with the relevant provisions of law.
2. That the appellant craves to add, amend, alter or delete any or all of the above grounds of appeal.”
2. Briefly stated, facts of the case are that, the assessee has filed return of income for the assessment year 2016-17 on 13.09.2016 declaring loss of Rs.29,177/-. The case was reopened u/s 147, after taking administrative approval from the Addl. CIT, Range-7, Kolkata and notice u/s 148 of the Act was issued on 29.03.2021 and duly served upon the assessee. DIN & Notice No. ITBA/AST/S/148/2020-21/1031871555(1), in which it has been specifically stated that, the return has to be filed within 30 days from the date of receipt of the notice u/s 148 of the Act. However, the assessee filed return of income on 06.08.2021 in response to notice u/s 148 of the Act, declaring income as NIL and claiming loss of Rs.29,177/-. The Assessing Officer issued notice u/s 143(2) of the Act on 27.11.2022 and other statutory notices were issued to the assessee which were duly served upon the assessee. The assessee furnished details, after considering the submissions of the assessee which was submitted that assessee is a loss-making company and had obtained loan from Babylon Trading and Investment Private Limited of Rs.84,00,000/- and the said amount was paid to “OTREM ESTATES Pvt. Ltd.” on 06.04.2016. After considering the totality of the facts and circumstances of the case, the Assessing Officer treated as unexplained cash credit and applied Section 68 of the Act and total income of the assessee is assessed at Rs.84,00,000/-. An Assessment Order was passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act on 30.03.2022.
3. Aggrieved from the above order, assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) after considering the submissions of the assessee, dismissed the appeal of the assessee. The assessee filed appeal before the Ld. CIT(A) with complete statement of facts submitted in Form No.35 at Page No.56 to 59 which was separately attached and Grounds of Appeal. The Ld. CIT(A) after considering the entire submissions and documents before him, dismissed the appeal of the assessee.
4. Feeling aggrieved from the order of the Ld. CIT(A), assessee filed an appeal before this Tribunal with additional grounds noted (supra). In support of additional grounds raised by the assessee, the assessee has filed an affidavit dated 02.07.2026 stated as under: –
We noted from the additional ground filed by the assessee, the ground raised by the assessee is a legal ground, therefore we are taking up for adjudication.
The Learned Counsel for the assessee strongly supported the very purpose for taking up of scrutiny or completing the assessment u/s 147 r.w.s. 144 r.w.s. 144B of the Act, there is mandatory requirement to issue and served upon the assessee notice u/s 143(2) of the Act, which is not received by the assessee. The assessee checked its web portal and there is no any notice available, therefore, affidavit was filed. Once the Assessing Officer is not exercised his jurisdiction as per section 143(2), the entire assessment is bad in law and not sustainable in the eyes of law and relied on the Judgment of the Hon’ble Apex Court in the case of ACIT & Anrs. v. Hotel Blue Moon 321 ITR 362 (SC). He further submitted that the Assessing Officer during the course of reassessment proceedings did not dispose of the objections raised by the assessee with complete speaking order as held by the Hon’ble Apex Court in the case of GKN Driveshafts Ltd. v. ITO  [2003] 259 ITR 19 (SC). Therefore, the order is also not sustainable. He did not argue on the merits of the case.
The ld. Counsel for the assessee also relied on the following judgements:
• In ACIT v. Uday Bhawan Industries 
• In ITA No.154/Agra/2011, Judgment Order dated 15.03.2011 in the case of ACIT v. SHRI UDAI BHAGWAN INDUSTRIES  /[2013] 60 SOT 22 (Agra – Trib.) (URO).
• In the Judgment of the Hon’ble Apex Court in the case of PCIT v. Broadway Shoe Co. (  (Jammu & Kashmir)), the Jammu & Kashmir High Court, date of order 11.10.2018 in ITA No.10/2017.
5. On the other hand, the Ld. DR supported the order of the Assessing Officer and submitted that in the assessment order, the Assessing Officer has clearly mentioned that the notice u/s 143(2) of the Act after filing of the return was issued on 27.11.202. However, there is a typographical error in the year; it should have been 2021 whereas it has been mentioned as 202. Thereafter, another statutory notices were issued to the assessee. The assessee has participated in the entire proceedings and challenged the order passed before the Ld. CIT(A), where this issue was not raised. As per the assessment order, notices u/s 143(2) of the Act and u/s 142(1) of the Act were also issued and objected to for the reasons instituted in the rejoinder. The Learned Counsel stated that the Assessing Officer has mentioned in the assessment order that the notice was issued on 27.11.202, which does not make any difference, it clear that the notice was actually issued., or whether it appeared on the web portal or not is immaterial. In support of the non-issuance of the notice, the assessee has filed a fresh affidavit. The ld. DR also referred to section 292BB of the Act.
6. Considering the rival submissions and perusing the entire material available on record as well as the orders of the Authorities below, we noted that a notice u/s 148 of the Act dated 29.03.2021 was issued and served upon the assessee, and time was granted to file the return of income within 30 days from the date of receipt of the notice. But the assessee filed its return of income on 06.08.2021, after the validity time allowed by the Assessing Officer, and the assessee did not approach the Assessing Officer for granting more time to file the return of income. Therefore, the return filed by the assessee is treated as invalid return. On perusal of the ITR filed by the assessee, there is a NIL income declared by the assessee, claiming a loss of Rs.29,177/-. By way of additional grounds, the assessee claimed that the notice u/s 143(2) of the Act had not been issued and served upon the assessee, relying on the Judgment of the Hon’ble Apex Court in the case of Hotel Blue Moon (supra).
In the additional ground the assessee has challenged the validity of the assessment order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act for non-issuance and served of notice u/s 143(2) of the Act as stating that it is mandatory before taking up for the assessment proceedings, within the statutory time limit provided for the service of notice u/s 143(2) of the Act. The ld. Counsel has relied on the judgment of the Hon’ble Apex Court in the case of Hotel Blue Moon noted supra is not applicable, since this case was related to provision of section 158 BC(1)(a) first proviso, where there is specific provision is made.
Further on going through the statement of facts submitted by the assessee, in Form No.36, requisite pages at Paper Book Page No. 56-59, the assessee itself accepted that notices u/s 143(2) and 142(1) were issued requesting specific details and documents. However, the same fact is now controverted by the assessee by way of filing an affidavit. This is beyond our understanding. On the one hand, before the Ld. CIT(A) while filing the appeal, the assessee itself accepted that the notice u/s 143(2) was issued, which is emanating from the order of the Assessing Officer with a typing mistake in the year. The section 147/148 is a separate code for assessing the escaped income in favour of Revenue which are discovered by the AO/ Income Tax Department before reopening the case in the form of reasons recorded and reasons are supplied to the assessee, therefore it is not mandatory to issue notice u/s 143(2) of the Act in the proceedings u/s 147/148 of the Act. We are reproducing the section 143(2) of the Act. As under:-
“143(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 expedient74 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 serve74 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 six months from the end of the financial year in which the return is furnished.”
We also noted from the assessment order that the Ao has issued notice and assessee has participated in the assessment proceedings. In the statement of facts, the assessee itself accepted that notice u/s 143(2) was issued. The ld. DR has referred to section 292BB of the Act rightly. The case law relied by the ld. Counsel do not support the case of the assessee since the facts are different and not applicable.
Further the ld. Counsel also relied on the Judgment of Hon’ble Apex Court in the case of GKN Drivesoft noted (supra) is not applicable since the assessee did not file return within 30 days as time was granted in the notice u/s 148 of the Act. Therefore, the arguments made by the ld. Counsel on this point is also rejected.
Considering the totality of facts and circumstances of the case, the issues raised by the assessee are dismissed in above terms. The assessee did not argue on the merits of the case.
7. In the result, appeal of the assessee is dismissed.