The Supreme Court has ruled that the issuance of a notice under Section 143(2) of the Income-tax Act, 1961, is a mandatory and sine qua non requirement for the valid completion of reassessment proceedings under Section 147. A Division Bench comprising Justice Sanjay Kumar and Justice Sanjeev Sachdeva dismissed a batch of appeals filed by the Revenue, upholding the concurrent findings of the Income Tax Appellate Tribunal and the High Court that set aside reassessment orders for the failure to issue the statutory notice.
Factual Background
The appeals originated from orders favouring two assessees, Orissa Mining Corporation Ltd. and BKM, pertaining to assessment years between 2008–09 and 2011–12. Both assessees had filed returns of income under Section 139, which were assessed under Section 143(3). Subsequently, the Revenue reopened the assessments by issuing notices under Section 148.
In response, Orissa Mining Corporation requested that its original return filed under Section 139 be treated as the return filed in response to the Section 148 notice, while BKM re-filed the same return. Admittedly, no notice under Section 143(2) was issued to either assessee, although notices under Section 142(1) were issued seeking documents and stock information. The reassessment orders were ultimately passed under Section 143(3) read with Section 147.
Core Issues Before the Court
The Court framed three substantial questions of law for determination:
Whether Section 292-BB precludes an assessee from objecting to the non-service of a Section 143(2) notice if the assessee appeared, cooperated, and did not raise an objection during the proceedings.
Whether an assessee requesting that a Section 139 return be treated as a Section 148 return dispenses with the requirement of a Section 143(2) notice.
Whether a letter issued under Section 142(1) during reassessment proceedings constitutes sufficient compliance with Section 143(2).
Supreme Court's Reasoning
The Court observed that Section 143(2) mandates service of a notice upon the assessee requiring attendance or production of evidence in support of the return. Relying on the precedent in CIT v. Hotel Blue Moon, (2010) 3 SCC 259, the Bench reiterated that a notice under Section 143(2) is mandatory and sine qua non for reassessment proceedings under Section 147. The omission to issue such notice cannot be treated as a mere procedural irregularity capable of being cured.
Addressing the Revenue's reliance on Section 292-BB, the Court clarified that the deeming fiction contained in the provision applies only where a notice has been issued but suffers from defects in service. It cannot be invoked to cure the complete absence of a notice. The Court held that mere participation by the assessee in the reassessment proceedings does not confer jurisdiction upon the Assessing Officer to frame an assessment under Section 143(3) read with Section 147.
On the second issue, the Court ruled that even if an assessee requests that the earlier return under Section 139 be treated as the return in response to a Section 148 notice, the Revenue remains obligated to issue a notice under Section 143(2). The statutory requirement stands independent of the mode of filing the return.
Regarding the third issue, the Court clarified that the issuance of a letter under Section 142(1) during reassessment proceedings does not satisfy the mandatory requirement of a notice under Section 143(2). The two provisions serve distinct purposes; a Section 142(1) notice is for inquiry before assessment, whereas Section 143(2) is a jurisdictional prerequisite for the assessment itself.
Comparative Analysis: Section 292-BB Scope
Aspect | Revenue's Contention | Supreme Court Holding |
|---|---|---|
Applicability of Section 292-BB | Cures non-issuance of Section 143(2) notice if assessee participated | Applies only to defective service of an issued notice; cannot cure total absence |
Nature of Defect | Procedural irregularity | Jurisdictional defect; sine qua non for reassessment |
Effect of Participation | Waives objection to notice | Does not confer jurisdiction on Assessing Officer |
Section 142(1) vs Section 143(2) | Section 142(1) letter suffices as compliance | Distinct purposes; Section 142(1) cannot substitute Section 143(2) |
Does Section 292-BB cure the complete absence of a Section 143(2) notice in reassessment proceedings?
No. The Supreme Court held that Section 292-BB applies only where a notice under Section 143(2) has been issued but suffers from a defect in service. It does not validate proceedings where the notice was never issued at all. The requirement is jurisdictional and mandatory.
Disposition
Accordingly, the Supreme Court dismissed the Revenue's appeals. The orders of the Income Tax Appellate Tribunal, as affirmed by the High Court, setting aside the reassessment orders for want of a mandatory notice under Section 143(2), were upheld. The decision reinforces that statutory jurisdictional requirements in tax reassessment proceedings cannot be circumvented by deeming provisions or the conduct of the assessee.