ITAT Delhi: Missing Section 143(2) Notice Invalidates Reassessment Even With Taxpayer Participation

The Story

The taxpayer filed the return the Assessing Officer asked for. He turned up. He answered the Department’s questions about ₹53.50 lakh of cash deposits. By any ordinary measure, he cooperated fully with the reassessment. The Income Tax Appellate Tribunal has now confirmed that none of that mattered, because of one document the Assessing Officer never sent.

The case concerned Assessment Year 2015-16. The Assessing Officer had information about cash deposits and issued a notice under Section 148 of the Income-tax Act, 1961 on 2 April 2022. The taxpayer filed a return in response on 30 April 2022. What should have followed, under the statute, was a notice under Section 143(2), the Department’s own trigger for actually scrutinising that return. It never came. The Assessing Officer proceeded anyway, passed an order on 24 March 2024 under Section 147 read with Section 144B, and added the full ₹53.50 lakh under Section 69A as unexplained money, even though the taxpayer maintained the actual cash deposited was only ₹28.30 lakh, fully explained.

Sidebar: the Department’s fallback argument is the kind that sounds reasonable until you follow it to its conclusion. It argued the taxpayer’s return was not properly e-verified, so it was not really a valid return at all, meaning the Assessing Officer could proceed under Section 144 (best-judgment assessment) instead, for which, the Department said, no Section 143(2) notice was needed. The Tribunal’s answer was blunt: the taxpayer did exactly what the Section 148 notice told him to do, file a return, and cannot be penalised for an alleged e-verification defect that was never his to control once he had complied with the Department’s own instruction.

The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, had rejected both this jurisdictional objection and a separate limitation challenge (that the Section 148 notice itself, dated 2 April 2022, missed the applicable six-year outer limit under the first proviso to Section 149). On appeal, the Tribunal, a Bench of Anubhav Sharma (Judicial Member) and Sanjay Awasthi (Accountant Member), went straight to the Section 143(2) point as decisive. It held that issuance of a Section 143(2) notice, once a return has been filed in response to a reassessment notice, is not a mere formality but an essential jurisdictional requirement for a valid assessment. Citing the Delhi High Court’s ruling in Shaily Juneja [476 ITR 665], the Tribunal confirmed that a taxpayer’s mere participation in proceedings cannot substitute for the notice itself. It then turned to Section 292BB, the provision the Department was implicitly leaning on, which bars a participating taxpayer from later objecting that a notice was not served, or served late, or served improperly. Relying on the Supreme Court’s ruling in CIT v. Laxman Das Khandelwal, the Tribunal drew the line precisely: Section 292BB cures defects in how a notice was served, but it cannot manufacture a notice that was never issued in the first place. Since the Assessing Officer never issued a Section 143(2) notice at all, not a defectively-served one, but a wholly absent one, Section 292BB had nothing to cure. The reassessment, and everything built on it, was quashed.

Why It Matters

Faceless assessment and reassessment workflows generate an enormous volume of procedural steps, and it is precisely in high-volume, semi-automated pipelines that a mandatory step like a Section 143(2) notice can quietly go missing. This ruling is a direct, current reminder that a taxpayer’s own good-faith cooperation, filing the return asked for, answering queries, participating throughout, provides no protection at all if the Department skips this one specific, non-discretionary step. For practitioners, checking for the Section 143(2) notice needs to be a standing item on every reassessment file review, not an afterthought raised only once other defences are exhausted.

Key Takeaways

• The Income Tax Appellate Tribunal, Delhi, quashed reassessment proceedings for AY 2015-16 (a ₹53.50 lakh Section 69A addition) because the Assessing Officer never issued a notice under Section 143(2) after the taxpayer filed a return in response to the Section 148 notice.
• Issuance of a Section 143(2) notice is an essential jurisdictional requirement, not a procedural formality, the taxpayer’s participation in the reassessment proceedings cannot substitute for it, per the Delhi High Court’s ruling in Shaily Juneja [476 ITR 665].
• Section 292BB, which bars objections about defective or late service of a notice once a taxpayer has participated in proceedings, applies only where a notice was actually issued, per the Supreme Court’s ruling in CIT v. Laxman Das Khandelwal, it cannot cure the complete absence of a required notice.
• The Department’s argument that an allegedly non-e-verified return justified proceeding under Section 144 (without a Section 143(2) notice) was rejected, a taxpayer who files a return as directed by an Assessing Officer’s own notice cannot be held responsible for a claimed e-verification defect never raised at the time.
• Once the reassessment’s jurisdictional basis fails, everything built on it (here, the entire ₹53.50 lakh addition) fails with it, the underlying factual dispute over the correct cash-deposit figure did not need to be separately decided.

Practical Implications

Firms reviewing any client’s reassessment file, particularly one processed through the National Faceless Assessment/Appeal Centre pipeline, should treat confirmation of a validly issued Section 143(2) notice as a standing, non-negotiable checklist item, independent of whatever else is being argued on the merits. Where a client filed a return in response to a Section 148 notice and no Section 143(2) notice followed, this ruling supports raising that omission as an independent, potentially case-ending jurisdictional ground, even where the client fully participated in the proceedings that followed. Firms should also be alert to the Department raising an e-verification or similar technical return-validity objection as a justification for skipping Section 143(2); this ruling gives a clear precedent for rejecting that argument where the taxpayer complied with the Assessing Officer’s own instructions.

Action Checklist

• Audit every open or recently concluded reassessment file for confirmation that a Section 143(2) notice was issued after any return was filed in response to a Section 148 notice.
• Where no Section 143(2) notice was issued, raise this as an independent jurisdictional ground before the appellate authority, regardless of the client’s own level of participation in the proceedings.
• If the Department invokes Section 292BB to argue that participation cured any notice defect, distinguish between “defective service of an issued notice” (curable) and “complete non-issuance” (not curable), citing CIT v. Laxman Das Khandelwal.
• Do not accept, without challenge, a Department claim that an allegedly invalid or non-e-verified return justifies bypassing Section 143(2), verify whether the taxpayer complied with the Assessing Officer’s own filing instruction, as that compliance was decisive here.
• Where a reassessment is quashed on this jurisdictional ground, confirm that any dependent additions or penalties are also treated as void, rather than separately re-litigated on their individual merits.

Relevant Sections, Rules and Notifications

• Section 143(2), Income-tax Act, 1961 (notice for scrutiny of a filed return, held an essential jurisdictional requirement)
• Section 148, Income-tax Act, 1961 (notice for reassessment)
• Section 149, first proviso, Income-tax Act, 1961, as substituted by the Finance Act, 2021 (limitation for reassessment notices; raised as a separate, undecided ground in this case)
• Section 69A, Income-tax Act, 1961 (unexplained money, basis of the addition)
• Section 144, Income-tax Act, 1961 (best-judgment assessment; the Department’s alternative basis, rejected)
• Section 144B, Income-tax Act, 1961 (faceless assessment procedure)
• Section 292BB, Income-tax Act, 1961 (cures defects in service of an issued notice; does not cure non-issuance)
• Shaily Juneja [476 ITR 665] (Delhi High Court, relied upon)
• Commissioner of Income Tax v. Laxman Das Khandelwal (Supreme Court, relied upon)

FAQs

Q: If a taxpayer fully participates in reassessment proceedings, filing a return, responding to queries, attending hearings, can the Department later be excused for never issuing a Section 143(2) notice?
A: No. Per this ruling, a Section 143(2) notice is an essential jurisdictional requirement, and a taxpayer’s participation cannot substitute for or cure its complete absence, even where cooperation was full and good-faith throughout.

Q: Does Section 292BB protect the Department in every situation where a taxpayer has participated in proceedings without objecting to a notice?
A: No. Section 292BB only cures defects in how an already-issued notice was served (timing, manner, or method of service). Per the Supreme Court’s ruling in CIT v. Laxman Das Khandelwal, applied here, it has no application where the required notice was never issued at all.

Q: Can the Department avoid issuing a Section 143(2) notice by claiming the taxpayer’s return was technically invalid (for example, not e-verified)?
A: Not automatically, and not on the facts of this case. The Tribunal held that a taxpayer who files a return as directed by the Assessing Officer’s own notice cannot be penalised for an alleged validity defect not raised at the time, the Assessing Officer remained obligated to follow the standard post-filing procedure, including issuing a Section 143(2) notice.

Prepared by Finoscape Editorial Team — hello@finoscape.com. This article is for general informational purposes and does not constitute legal or professional advice, and is based on professional-press reporting (JurisHour) of the Tribunal’s order, rather than a certified copy obtained directly from the Tribunal’s own record. The assessee’s name and the exact ITA number were not disclosed in the available reporting. Practitioners should independently verify the order before citing it in client advice or submissions. Reading time: 6 minutes.