New Delhi, October 29: The Supreme Court has held that income tax reassessment proceedings are invalid when the Assessing Officer fails to issue the mandatory notice under Section 143(2) of the Income Tax Act, 1961, even if the taxpayer participated in the proceedings without objecting to the omission, Live Law reported. A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva dismissed a batch of appeals filed by the Revenue.
Source: Live Law — Income Tax Reassessment Invalid Without Mandatory Notice, Supreme Court
"The Assessing Officer cannot undertake the proceedings of reassessment under Section 143(3), read with Section 147 of the Act, unless a notice under Section 143(2) of the Act has been issued to the Assessee. Mere participation of the Assessee in the assessment proceedings, in the absence of a notice under Section 143(2) of the Act, does not confer jurisdiction on the Assessing Officer to frame an assessment under Section 143(3) of the Act," the court held, as quoted by Live Law.
How the cases reached the Supreme Court
The ruling arose from reassessment proceedings involving Orissa Mining Corporation Ltd, for assessment years 2008-09, 2010-11 and 2011-12, and taxpayer Bijoy Kishore Mohanty, for assessment years 2009-10 and 2010-11, Juris Hour reported. In each case the original returns, filed under Section 139, had been assessed under Section 143(3); the department later reopened the assessments under Section 147 and issued notices under Section 148. Orissa Mining Corporation asked that its original return be treated as the return filed in response to the Section 148 notice, while Mohanty refiled his earlier return — but admittedly no Section 143(2) notice was ever issued, and the reassessments proceeded on Section 142(1) notices seeking documents and information.
The taxpayers challenged the reassessment orders before the Commissioner of Income Tax (Appeals), who rejected their objection on the ground that they had participated in the proceedings. The Income Tax Appellate Tribunal set aside the reassessments, and the High Court upheld the Tribunal's decisions. The Revenue then appealed to the Supreme Court, arguing that Section 292BB protected the proceedings against the objection.
What the court clarified
The court held that Section 292BB addresses defects in the service of a notice in certain circumstances and cannot cure the complete absence of a notice, Law Trend reported. It also clarified that a taxpayer asking the department to treat an earlier return filed under Section 139 as the return in response to a Section 148 notice does not dispense with the requirement to issue a Section 143(2) notice, and that a letter or notice under Section 142(1) cannot substitute for the mandatory notice. The department's appeals were accordingly dismissed.
The judgment draws a clear line for every reopened assessment in India: participation in the proceedings does not give the Assessing Officer jurisdiction he never acquired. Where no Section 143(2) notice was issued, the reassessment itself is invalid — a ground taxpayers and their advisers can raise even if it was not objected to during the proceedings.