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2025 (5) TMI 703 - AT - Income TaxValidity of assessment order passed u/s 144 - failure to issue a notice u/s 143(2) - non-compliance of filing of return of income - HELD THAT - As per the Paper Book placed before the Tribunal it is self-evident that the AO was repeatedly made aware of the filing of the return of income but however the AO proceeded on the premise that the assessee has not filed return of income for AY 2017-18 in question and based on such illusion AO also initiated penalty proceedings u/s 271F. Hence the contention of the assessee is that the AO failed to issue notice u/s 143(2) of the Act having regard to the wrong belief entertained by him that no return of income has been filed and proceeded to frame assessment u/s 144 without the aid of notice u/s 143(2) of the Act. As decided in the case of M/s. Dart Infrabuild (P) Ltd. 2023 (11) TMI 707 - DELHI HIGH COURT held that notice u/s 143(2) is a mandatory requirement regardless of whether the assessment has been framed u/s 144 of the Act and also regardless of the position that return of income has been filed belatedly but before completion of assessment. In the case of Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT has observed that failure to issue a notice u/s 143(2) rendered the assessment order void even if the assessee has participated in the assessment proceedings. Section 292BB of the Act does not save complete absence of notice. To invoke sec 292BB the notice must have been necessarily emanated from the Department. Appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of assessment framed under section 144 without notice under section 143(2) Relevant legal framework and precedents: Section 143(2) of the Income Tax Act mandates issuance of a notice to the assessee before making an assessment or reassessment, providing an opportunity to be heard. Section 144 allows the AO to make an assessment based on best judgment if the assessee fails to comply with statutory requirements. However, the procedural requirement of issuing notice under section 143(2) remains crucial for the validity of the assessment. Judicial precedents cited include a recent ruling of the Hon'ble Delhi High Court in Pr.CIT-1, Delhi vs M/s. Dart Infrabuild (P) Ltd. [2024], which held that issuance of notice under section 143(2) is mandatory even when assessment is framed under section 144, and irrespective of whether the return was belatedly filed before completion of assessment. Other supporting precedents are CIT vs Kalyan Samiti, Shaily Juneja vs ACIT, and Primary Real Estate Investments vs Dy CIT, all reinforcing the mandatory nature of section 143(2) notice for valid assessment. The Supreme Court's ruling in Laxman Das Khandelwal (2019) further clarifies that failure to issue notice under section 143(2) renders the assessment order void. Section 292BB, which seeks to validate defective service of notice, does not apply where there is a complete absence of notice. The notice must emanate from the Department for section 292BB to operate. Court's interpretation and reasoning: The Tribunal examined the facts and found that the AO proceeded to frame the assessment under section 144 without issuing a notice under section 143(2), despite the assessee having filed the return of income electronically and repeatedly intimating the AO of such filing. The AO's premise that no return was filed was based on an erroneous belief. The Tribunal emphasized that the procedural safeguard of issuing notice under section 143(2) is mandatory and non-negotiable. The absence of such notice vitiates the assessment order. The Tribunal relied heavily on the authoritative judicial pronouncements cited above to conclude that the assessment framed without notice under section 143(2) is bad in law and non-est. Key evidence and findings: The assessee produced acknowledgments from the Department's e-filing portal confirming filing of return on 15.10.2019, and proof of communication to the AO on 18.10.2019. Despite this, the AO issued a show cause notice alleging non-filing and proceeded to frame assessment under section 144. The paper book before the Tribunal demonstrated repeated intimation and filing of return, negating the AO's assumption of non-filing. This factual matrix supported the legal contention that the AO's action was based on an incorrect premise. Application of law to facts: Applying the settled law requiring mandatory issuance of notice under section 143(2), the Tribunal found that the AO's failure to issue such notice, despite knowledge of return filing, rendered the assessment order void. The procedural lapse could not be cured by section 292BB as there was no notice at all. Treatment of competing arguments: The Department's stance, implicit in the AO's actions, was that the assessment could be framed under section 144 without prior notice under section 143(2) due to non-filing of return. The Tribunal rejected this, holding that the AO's mistaken belief did not justify bypassing mandatory procedural safeguards. The Tribunal did not find any merit in the Department's approach and dismissed the penalty proceedings initiated on the same flawed premise. Conclusions: The assessment order dated 26.12.2019 framed under section 144 without issuing notice under section 143(2) is void and non-est. Consequently, all additions made pursuant to this order, including under section 69A read with section 115BBE, stand nullified. Issue 2: Validity of additions under section 69A r.w.s. 115BBE and penalty under section 271F Relevant legal framework and precedents: Section 69A deals with unexplained investments, and section 115BBE prescribes tax on income from undisclosed sources. Section 271F penalizes failure to file return within prescribed time. However, these provisions operate only if the underlying assessment process is valid. Court's interpretation and reasoning: Since the foundational assessment order was quashed for non-compliance with mandatory procedural requirements, the additions and penalty flowing from the same order cannot survive. The Tribunal held that these additions and penalties are a nullity in law and do not require separate adjudication. Key evidence and findings: The Tribunal noted that the additions under challenge were made solely on the basis of the assessment order found void. No independent or valid assessment process underpinned these additions. Application of law to facts: The procedural infirmity in framing the assessment order invalidates all consequential additions and penalties. The law does not permit sustaining such additions when the assessment itself is void. Treatment of competing arguments: The Department's reliance on the additions and penalty was dismissed as they were contingent on the flawed assessment order. No separate justification was provided for sustaining these charges independently. Conclusions: The additions under section 69A r.w.s. 115BBE and penalty under section 271F are quashed as they emanate from an invalid assessment order. 3. SIGNIFICANT HOLDINGS The Tribunal succinctly held: "The impugned assessment order passed without issuance of notice under section 143(2) of the Act is bad in law and thus quashed. This being so, the additions under challenge are a nullity in law and thus do not call for any adjudication
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