The court says reassessment orders are invalid if the Income Tax Department never issued a Section 143(2) notice, even if taxpayers took part in the proceedings.
The Supreme Court has reinforced a long-standing procedural safeguard in tax litigation, ruling that the Income Tax Department cannot complete reassessment proceedings unless it first serves the mandatory notice under Section 143(2) of the Income Tax Act, 1961. In doing so, the court drew a clear line between a notice that is imperfectly served and one that was never issued at all, saying the latter defect cannot be cured by the taxpayer’s participation in the proceedings.
According to the judgment, delivered by Justice Sanjay Kumar and Justice Sanjeev Sachdeva, the requirement sits at the heart of the reassessment process. The court said an Assessing Officer cannot move to an assessment under Section 143(3), read with Section 147, without issuing the Section 143(2) notice. It added that cooperation from the taxpayer does not create jurisdiction where the statutory notice is missing. The bench also made clear that Section 292BB, which can bar certain objections about service, does not rescue the department when no notice was issued in the first place.
The case arose from reassessment proceedings involving Odisha Mining Corporation and another taxpayer for different assessment years. The original assessments had already been completed before the department reopened the matters under Section 147 and issued notices under Section 148. However, no Section 143(2) notices followed. The taxpayers challenged the reassessments, but the Commissioner of Income Tax (Appeals) rejected their objections on the ground that they had taken part in the process. The Income Tax Appellate Tribunal later set aside the reassessment orders, and the High Court upheld that view.
The Supreme Court also rejected the argument that a taxpayer’s request to treat an earlier return filed under Section 139 as the return in response to a reopening notice could replace the need for a Section 143(2) notice. Nor, the court said, could a notice under Section 142(1) take its place. The ruling leaves intact the distinction the court had drawn in an earlier 2019 decision in Commissioner of Income Tax v Laxman Das Khandelwal, which likewise held that Section 292BB can cure some defects in service, but not the complete absence of a statutory notice. The department’s appeals were dismissed.
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