Supreme Court: In a batch of appeals concerning the validity of reassessment proceedings initiated under Sections 147 and 148, Income-tax Act, 1961, in the absence of a notice under Section 143(2) of the Act, the Division Bench of Sanjay Kumar and Sanjeev Sachdeva*, JJ., held that issuance of a notice under Section 143(2) is mandatory and sine qua non for completing reassessment proceedings under Section 147. The Court observed that the omission to issue such notice is not a mere procedural irregularity capable of being cured and that mere participation of the assessee in the reassessment proceedings does not confer jurisdiction upon the assessing officer to frame an assessment under Section 143(3) read with Section 147 of the Act.
Rejecting the Revenue’s reliance on Section 292-BB of the Act, the Court clarified that the deeming fiction under the provision applies only where a notice has been issued but suffers from defects in service, and cannot cure the complete absence of a notice. The Court further held that where an assessee requests that the earlier return of income filed under Section 139 be treated as the return filed in response to a notice under Section 148, the Revenue is still obligated to issue a notice under Section 143(2). The Court also clarified that issuance of a letter under Section 142(1) during reassessment proceedings does not satisfy the mandatory requirement of a notice under Section 143(2). Accordingly, dismissing the Revenue’s appeals, the Court upheld the orders of the Income Tax Appellate Tribunal, as affirmed by the High Court, setting aside the reassessment orders for want of a mandatory notice under Section 143(2) of the Act.
Background
The present appeals arose out of different orders passed in favour of the assessees, namely, Orissa Mining Corporation Ltd. and BKM, involving Assessment Years 2008—09, 2010—11 and 2011—12 in the case of Orissa Mining Corporation Ltd., and Assessment Years 2009—10 and 2010—11 in the case of BKM. The assessees had filed their respective Returns of Income under Section 139, Income-tax Act, which were duly assessed and assessment orders were passed under Section 143(3) of the Act. Subsequently, the Revenue sought to reopen the assessments under Section 147 and issued notices under Section 148 of the Act. In response, Orissa Mining Corporation Ltd. requested that its original return of income filed under Section 139 be treated as the return filed in response to the notice under Section 148, whereas BKM refiled the same return of income.
Admittedly, no notice under Section 143(2) of the Act was issued to the assessees, although notices under Section 142(1) were issued seeking documents and stock information. The reassessment orders were challenged before the Commissioner of Income Tax (Appeals), wherein the contention regarding non-issuance of notice under Section 143(2) was rejected on the ground that the assessees had participated in the reassessment proceedings. However, the Income Tax Appellate Tribunal set aside the reassessment orders, holding that the proceedings stood vitiated for want of a mandatory notice under Section 143(2). The High Court affirmed the view taken by the Tribunal, prompting the Revenue to approach the Supreme Court.
Issues
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Whether Section 292-BB, Income-tax Act, 1961 precludes an assessee from raising an objection in any proceedings under the Act regarding non-service of a notice under Section 143(2) of the Act, if the assessee had appeared and cooperated during the reassessment proceedings and had not raised any objection with regard to non-issuance of a notice under Section 143(2) of the Act?
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Whether an assessee who requests that the earlier return of income filed under Section 139 of the Act be treated as the return of income filed in response to a notice under Section 148 of the Act is not required to be given a notice under Section 143(2) of the Act?
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Whether a letter given by the assessing officer during the course of reassessment proceedings, requiring the assessee to explain the grounds on which reassessment of income was proposed, would tantamount to sufficient compliance of the provision of Section 143(2) of the Act?
Analysis
The Court observed that Section 143(2) of the Act mandates service of notice upon the assessee, requiring him to attend the office of the assessing officer or produce evidence in support of the return of income. Relying upon its decision in CIT v. Hotel Blue Moon, (2010) 3 SCC 259, the Court reiterated that a notice under Section 143(2) is mandatory and sine qua non for proceedings for reassessment under Section 147 of the Act. The omission to issue such notice cannot be treated as a mere procedural irregularity which is curable, and in its absence, no further proceedings can be undertaken by the Revenue.
The Court rejected the Revenue’s reliance on Section 292-BB of the Act, observing that the provision creates a deeming fiction only in respect of service of a notice which has been issued but suffers from infirmities relating to non-service, improper service or delayed service. Such deeming fiction cannot come into play where the Revenue has admittedly not even issued the notice required under the Act. Relying upon CIT v. Laxman Das Khandelwal, (2021) 18 SCC 691, the Court reiterated that Section 292-BB does not save complete absence of notice and non-issuance of notice under Section 143(2). The Court further held that mere participation of the assessees in the reassessment proceedings does not confer jurisdiction upon the assessing officer to frame an assessment under Section 143(3), read with Section 147 of the Act, in the absence of a notice under Section 143(2).
The Court also clarified that an assessee, in response to a notice under Section 148, has the option either to file a fresh return of income or to state that the earlier return filed under Section 139 be treated as the Return filed in response to the notice. Where the assessee chooses to reiterate the earlier return, it is not necessary to refile a copy of the same. However, such reiteration does not absolve the Revenue of its obligation to issue a notice under Section 143(2), requiring the assessee to produce evidence in support of the return. Further, the Court held that a letter issued by the assessing officer under Section 142(1) during reassessment proceedings, seeking an explanation regarding the proposed reassessment of income, does not satisfy the mandatory requirement of issuing a notice under Section 143(2). A letter issued after commencement of the proceedings cannot cure the defect or validate what is non est.
Decision
Dismissing the appeals filed by the revenue, the Court held that Section 292-BB of the Act does not preclude an assessee from raising an objection regarding non-issuance of notice under Section 143(2), merely because the assessee had appeared and cooperated in the reassessment proceedings without raising such objection. The Court further held that the Revenue is not absolved of its obligation to issue a notice under Section 143(2), even where the assessee requests that the earlier return filed under Section 139 be treated as the return filed in response to a notice under Section 148. It was also held that mere issuance of a letter under Section 142(1), requiring the assessee to explain the grounds on which reassessment of income was proposed, does not amount to sufficient compliance with the mandatory obligation to serve a notice under Section 143(2). Accordingly, the Court found no infirmity in the orders passed by the Income Tax Appellate Tribunal, as affirmed by the High Court, and held that the reassessment proceedings stood vitiated for want of a mandatory notice under Section 143(2) of the Act.
[CIT v. Orissa Mining Corpn. Ltd., 2026 SCC OnLine SC 2268, decided on 28-10-2026]
*Judgment authored by: Justice Sanjeev Sachdeva
