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Judgment
PER C.N. PRASAD, J.M.
This appeal is filed by the assessee against the order of Ld. CIT(A)/NFAC, Delhi dated 26.06.2025 for the A.Y. 2017-18 in sustaining the addition made by the AO.
The assessee has raised the following concise grounds of appeal :-
“1.Initiating proceedings u/s 147/148 of the I.T. Act, 1961 without there being any reason to believe that income had escaped assessment;
2.passing the reassessment order u/s 147/148 of the Act treating the return of Income tax invalid and without Issuing statutory notice u/s 143(2) of the Act:
3.confirming the additions made to returned income in a sum of Rs. 1,02,84,232/- being the amount of cash deposited in bank by wrongly invoking section 68 of the Act:
4.The NFAC erred in deciding the appeal without providing the appellant video conferencing as prayed for during the course of appellate proceedings.”
The Ld. Counsel for the assessee at the outset referring to ground No.2 of grounds of appeal submitted that reassessment made u/s.147 of the Act is bad in law as the same was framed without issuing a mandatory notice u/s.143(2) of the Act.
On the other hand the Ld. DR supporting the order of the AO and also relying on the parawise reply to grounds of appeal submitted by the AO, stated that since the return was filed belatedly by the Assessee the said return was treated as invalid return and since it is an invalid return there is no requirement of issue of notice u/s.143(2) of the Act.
Heard rival submissions and perused the orders of the authorities below. It is observed that a notice u/s.148 of the Act dated 29.03.2021 was issued in the case of the assessee for the A.Y.2017-18 with a reason to believe that the income had escaped assessment within the meaning of the provisions of section 147 of the Act. In response to the said notice the assessee filed his return of income on 08.07.2021 declaring total income of Rs.4,67,461/-. The AO proceeded to complete the reassessment u/s.147 r.w.s 144B of the Act on 30.03.2022 by treating the said return of income filed by the assessee as invalid for the reason that the same was filed beyond the time specified in the notice issued u/s.148 of the Act and accordingly completed the assessment by making an addition of Rs.1,39,40,460/- in respect of certain cash deposits, rental income etc; which was sustained by the Ld. CIT(A).
The assessee contends that the reassessment framed is without issue of mandatory notice u/s. 143(2) of the Act and therefore, the reassessment bad in law. The Ld. DR furnished parawise reply to grounds of appeal of the assessee submitted by the AO as under :-
“The assessee contends that the assessment is illegal because no notice u/s 143(2) was issued. Since the return of income filed on 08.07.2021 was treated as invalid due to lack of verification and for being filed beyond the permitted timeframe, the legal requirement to issue 'notice us 143(2) which applies to valid returns. The AO' properly exercised jurisdiction by issuing a notice u/s 142(1) on 05:07 2021 to gather necessary details for the assessment.”
As could be seen from the above reply of the AO the return filed by the assessee in response to notice u/s.148 of the Act was treated as invalid as the same was filed belatedly and according to AO there is no requirement for issue of notice u/s.143(2) of the Act in case of belated returns and it is only required to issue a notice u/s.143(2) is case of valid returns.
The above contention of the revenue was not accepted by the Hon’ble Jurisdictional High Court in the case of PCIT Vs. Staunch Marketing Pvt. Ltd. (404 ITR 289) wherein the Hon’ble High Court held that once the return is filed notice u/s.143(2) of the Act to the assessee is mandatory prior to framing an assessment. Following this decision of the Hon’ble High Court the Coordinate Bench of the Delhi Tribunal in the case of Anil Aggarwal (HUF) Vs. ITO in ITA No.2594/Del/2024 dated 30.07.2025, on identical facts quashed the reassessment proceedings as no notice was issued u/s.143(2) of the Act prior framing the assessment holding as under :-
“4.Heard rival contentions. The additional ground raised by the assessee goes to the root of the very validity of the assessment framed by the Assessing Officer u/s 144B r.w.s. 147 of the Act and is a purely legal ground and thus the same is admitted for adjudication.
5.The Ld. Counsel for the assessee submitted that assessee has filed return on 28.10.2021 in response to notice issued u/s 148 dated 30.03.2021. However, the Assessing Officer did not issue notice u/s 143(2) of the Act. Ld. Counsel invited our attention to 21 to 22 of the PB which contains the notice issued u/s 148 dated 30.03.2021 and a copy of return filed on 28.10.2021 in response to the notice issued u/s 148 of the Act. Therefore, the Ld. Counsel submitted that non issuance of notice u/s 143(2) makes the impugned assessment order as bad in law. Reliance is placed on the following decisions in support of his contentions:
1.CIT vs. Laxman Das Khandewal 417 ITR 325 (SC);
2.Rajender Kumar Sehgal vs. ITO 414 ITR 286 (Del.);
3.PCIT vs. Paramount Biotech Industries Ltd. 398 ITR 701 (Del);
4.PCIT vs. Jai Shiv Shankar Trading P. Ltd. 388 ITR 448 (Del.);
5.CIT vs. Rajiv Sharma 336 ITR 678 (All.); 6. PCIT vs. Staunch Marketing Pvt. Ltd. 404 ITR 299 (Del).
6.On the other hand, the Ld. DR submitted that the assessee did not file return within the time specified in the notice issued u/s 148 of the Act and therefore the Assessing Officer treated the return as invalid return and since the return was treated as invalid the Assessing Officer need not issue notice u/s 143(2) before completion of assessment.
7.In rebuttal the Ld. Counsel for the assessee submitted that the Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) held that even in ex parte assessment when once return is filed by the assessee in response to notice issued u/s 148 of the Act issuance of notice u/s 143(2) is mandatory even though the assessee failed to furnish return u/s 139 of the Act. Ld. Counsel submits that the Hon’ble High Court held that once return is filed in response to notice u/s 148 of the Act even ex parte assessment cannot be made without issue of notice u/s 143(2) of the Act.
8.Heard rival contentions, perused the orders of the authorities below and the case laws relied on by the assessee. In this case, the assessee filed return on 28.10.2021 in response to notice issued u/s 148 of the Act dated 30.03.2021. The Assessing Officer completed the assessment on 30.03.2022 u/s 144 r.w.s. 147 of the Act determining the income of the assessee at Rs.84,32,240/-. While computing the income the Assessing Officer started with the income declared by the assessee in the return of income of Rs.69,040/- declared by the assessee in the return in response to notice issued u/s 148 of the Act, whereby the Assessing Officer acted upon the return filed by the assessee. The Assessing Officer before completion of assessment u/s 144B r.w.s. 147 of the Act appears to have not issued any mandatory notice u/s 143(2) of the Act. The Revenue also could not show that the Assessing Officer had issued any notice u/s 143(2) of the Act for the assessment year under consideration. Therefore, the question now to be adjudicated this appeal is whether the assessment framed u/s 14B r.w.s. 147 of the Act is a valid assessment in the absence of issue of notice u/s 143(2) of the Act.
9.The Hon’ble Jurisdictional High Court in the case of PCIT vs. Staunch Marketing Pvt. Ltd. (supra) considered almost an identical situation examined “whether the Tribunal fell into error in holding that the assessment for the concerned year was not effective because of lack of notice u/s 143(2) of the Income Tax Act in the given facts of the case” the Hon’ble Jurisdictional High Court decline to answer the question on an appeal filed by the Revenue. The Hon’ble High Court further affirming the order of the Tribunal held as under:
“14.In any event, factually the Assessee filed a return pursuant to notice issued u/s 148 of the Act, notwithstanding that it may not have filed a return in the first place u/s 139 of the Act for the assessment year in question. Once a return is filed notice u/s 143(2) of the Act to the assessee is mandatory prior to framing an assessment. The question of framing an assessment ex parte without even issuing a notice u/s 143(2) of the Act did not arise. The mandatory nature of that requirement is settled not only by the decision of the Supreme Court in the case of ACIT Vs. Hotel Blue Moon (supra) but also by a decision of this court in Commissioner of Income Tax-08 vs. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 388 ITR 448 Del.
15.For all the aforementioned reasons, the question framed does not arise in the present appeal and is declined to be answered. In any event, the court does not find any substantial question of law arise from the impugned order. The appeal is, accordingly, dismissed.”
10.In all the case laws relied on by the Ld. Counsel for the assessee which are referred to above, it was held that assessment/reassessment finalized without issue of notice u/s 143(2) of the Act is not a valid assessment/reassessment. Thus, respectfully following the above decisions, we hold that the assessment framed by the AO u/s 144B r.w.s. 147 of the Act for the AY 2016-17 without issue of notice u/s 143(2) is bad in law and void ab initio and consequently the same is hereby quashed.”
As could be observed from the above decision of the coordinate bench, the return filed by the assessee in that case was treated as invalid for the reason that the return was filed belatedly and without issuing notice u/s.143(2) of the Act reassessment was completed. The Tribunal following the decision of the Hon’ble Jurisdictional High Court in the case of PCIT Vs. Staunch Marketing Pvt. Ltd. (supra) wherein it was held that notwithstanding that the assessee may not have filed a return in first place u/s.139 of the Act, once a return is filed, notice u/s.143(2) of the Act to the assessee is mandatory prior to framing an assessment, the Tribunal quashed the reassessment framed u/s.144B r.w. 147 of the Act. The decision squarely applies to the facts of the assessee’s case. Thus, respectfully following the decision of the jurisdictional High Court and the coordinate Bench of the Tribunal we hold that the assessment framed u/s.147 r.w. 144B of the Act for the A.Y. 2017-18 is bad in law and void-ab-initio in the absence of issue of notice u/s.143(2) of the Act prior to completion of assessment and consequently the same is hereby quashed. Ground No.2 of grounds of appeal is allowed.
Since we have quashed the reassessment allowing ground No.2 of grounds of appeal of the assessee, other technical ground and ground on merits raised by the assessee need not be adjudicated at this stage as they become only academic in nature and they are left open.
In the result, the appeal of the assessee is partly allowed as indicated above.