Reassessment Without Section 143(2) Notice Lacks Jurisdiction, Cannot Be Sustained: ITAT Kolkata

On 16 June, the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that reassessment proceedings initiated without issuance of the mandatory notice under Section 143(2) of the Income Tax Act are void ab initio, as the requirement goes to the root of jurisdiction and cannot be treated as a curable procedural lapse.

Accountant Member Rajesh Kumar and Judicial Member Pradip Kumar Choubey set aside the reassessment against Star Tradecom Private Limited and quashed the consequential revisionary proceedings initiated by the Commissioner under Section 263. The Bench held:

“The issue of invalidity can be raised in the collateral proceedings by the assessee even though the order concerned passed by the authorities have not been challenged before the appellate authority”

The dispute arose for Assessment Year 2009–10, when Star Tradecom Private Limited filed its return declaring income of Rs. 714. The department processed the return under Section 143(1). It later reopened the assessment under Section 147 by issuing a notice under Section 148 on the ground that income had escaped assessment, and thereafter passed a reassessment order under Section 147 read with Section 143(3).

The Commissioner subsequently exercised revisionary jurisdiction under Section 263, holding that the Assessing Officer had failed to conduct adequate enquiry into share capital exceeding Rs. 5 crore introduced during the relevant year. It set aside the assessment and directed a fresh examination, after which the Assessing Officer made additions under Section 68 by treating the share capital as unexplained cash credits.

Before the Tribunal, Star Tradecom Private Limited challenged the reassessment itself and contended that the Assessing Officer never issued or served a notice under Section 143(2). It relied on information obtained under the Right to Information (RTI) Act, which showed that the department did not have records evidencing issuance of notice under Section 143(2).

The Revenue argued that the company participated in the proceedings and therefore could not question the validity of the reassessment at a later stage.

The Tribunal rejected this contention and held that the issuance of notice under Section 143(2) constitutes a mandatory jurisdictional requirement for framing an assessment under Section 143(3), including reassessment under Section 147. It found that the department failed to establish issuance of the notice and therefore treated the reassessment order as legally non-existent.

Relying on the Supreme Court judgment in ACIT v. Hotel Blue Moon and the Calcutta High Court decision in Principal Commissioner of Income-tax v. Oberoi Hotels (P.) Ltd., the Tribunal reiterated that the absence of notice under Section 143(2) cannot be cured and vitiates the entire assessment.

The Bench further held that once the foundational reassessment order fails, all consequential proceedings, including revision under Section 263, automatically collapse.

Accordingly, the ITAT quashed the revisionary proceedings and allowed the appeal.

For Appellant: Shri Sunil Surana, AR

For Respondent: Shri Md. Gayasuddin Ansari, DR