2025 (4) TMI 1668 - AT - Income Tax

Validity of notice issued u/s.143(2) - notice not in the prescribed format - HELD THAT - A perusal of the facts of the present case clearly shows that the notice u/s.143(2) is admittedly not in the format as provided under the note on e-assessment proceeding. In these circumstances notice issued u/s.143(2) in the case of the assessee is held to be invalid and the same stands set aside. As the notice u/s. 143(2) has been set aside the consequential assessment is also void and stands quashed.

Summary

ISSUES:

Whether the notice issued under section 143(2) of the Income Tax Act, 1961, that does not conform to the prescribed formats as per CBDT communication dated 23.06.2017, is valid.Whether non-compliance with the CBDT's internal communication regarding the format of notices under section 143(2) renders the assessment order invalid and liable to be quashed.Whether the CBDT communication dated 23.06.2017 is a binding instruction/circular or merely an internal communication without legal effect.Whether procedural irregularities or non-compliance with prescribed notice formats can invalidate assessment proceedings ab initio.Whether delay in filing appeal can be condoned based on reasonable cause.

RULINGS / HOLDINGS:

The notice issued under section 143(2) of the Act, which is not in the prescribed format as provided in the CBDT communication dated 23.06.2017, is an invalid notice and all subsequent proceedings thereto would be invalid and void ab initio.Non-compliance with the CBDT's prescribed formats for scrutiny notices under section 143(2) renders the notice and the consequential assessment order liable to be quashed.The CBDT communication dated 23.06.2017 is an internal communication to the Department and not a formal instruction or circular; however, the Tribunal has held that the instructions issued by the CBDT under section 119 of the Act are binding and failure to follow them renders proceedings invalid.Procedural irregularities such as non-compliance with prescribed formats or failure to provide opportunity of cross-examination are generally procedural lapses; however, in the instant case, the invalidity of the notice format has been held to vitiate the entire assessment.Delay in filing the appeal was condoned on the basis of reasonable cause presented in the condonation petition.

RATIONALE:

The legal framework applied includes section 143(2) and section 250 of the Income Tax Act, 1961, and CBDT's communication F. No. 225/157/2017/ITA-II dated 23.06.2017 prescribing revised formats for scrutiny notices under section 143(2).The Tribunal relied on coordinate bench decisions which held that the CBDT's instructions/circulars issued under section 119 of the Act are binding on income tax authorities, and failure to comply with such instructions renders notices and consequent proceedings invalid.The Tribunal distinguished between formal instructions/circulars and internal communications of the CBDT, noting that the communication dated 23.06.2017 is an internal communication, but nonetheless emphasized the binding nature of CBDT instructions under section 119.Precedents from coordinate benches and the Supreme Court were considered, including rulings that procedural irregularities generally do not invalidate assessments but that failure to issue valid statutory notices can render proceedings void ab initio.The Tribunal referred to section 292BB of the Act, which deems notices valid where the assessee has participated in proceedings, but clarified that this does not cure a complete absence or invalidity of notice.High Court and Supreme Court precedents were cited to emphasize that jurisdictional and procedural provisions related to notices are primarily for administrative convenience and do not confer substantive jurisdiction, yet compliance with prescribed procedures is mandatory for validity.