Scrutiny Notice under section 143(2)

Sub section (2) of Section 143 provides that where a return has been furnished under section 139, or in response to a notice 142(1), the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient:

v  to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either:

(a)    to attend the office of the Assessing Officer or

(b)   to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

Text of Section 143(2)

^[1][(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority 71, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

PROVIDED that no notice under this sub-section shall be served on the assessee after the expiry of ^[2][three] months from the end of the financial year in which the return is furnished.]

 

KEY NOTE

1.   Substituted by the Finance Act, 2016, with effect from 01.06.2016.

2.   Substituted for the words “six” by the Finance Act, 2021, with effect from 01.04.2021.

 

Text of Rule 12E

^[1][Prescribed authority under sub-section (2) of section 143

12E. The prescribed authority under sub-section (2) of section 143 shall be an income-tax authority not below the rank of an Income-tax Officer who has been authorised by the Central Board of Direct Taxes to act as income-tax authority for the purposes of sub-section (2) of section 143].

 

KEY NOTE

1.   Inserted by the Income-tax (Fifth Amendment) Rule, 2014, vide Notification No. 105 of 2016, dated 16.11.2016, with effect from 16.11.2016.

 

Time limit for issuance of notice under section 143(2)

The notice under Section 143(2) can be issued after an income tax return has been filed but within a period of three months from the end of the financial year in which the return was filed.

For example, say, Mr ‘A’ filed his returns on 31.07. 2022 for the financial year 2021-22. The assessing officer can issue a notice under Section 143(2) only within 30 June 2023. This is because he can only issue the notice within a period of 3 months from the end of the financial year 2021-22, the financial year in which Mr ‘A’ filed the returns.

Consequences of not complying with the notice issued under section 143(2)

(i)       Penalty for failure to comply with notice issued under section 143(2) [Section 272A(1)(d)]

If the taxpayer fails to comply with notice issued to him under section 143(2), then as per section 272A he shall be liable for a penalty of Rs. 10,000 for each failure.

(ii)     Assessing Officer will complete the assessment under section 144 (Total income shall be calculated by Assessing Officer to the best of his judgment and determine the tax payable by the assessee on the basis of such judgement

CBDT notifies Prescribed Income-tax Authority’ under Section 143(2) for Returns

Notification No. 25/2021-Income-tax. Dated 31.03.2021

S.O. 1437(E). - In exercise of powers conferred under sub-section (2) of section 143 of Income-tax Act, 1961 (43 of 1961) (the Act) read with Rule 12E of the Income-tax Rules, 1962, the Central Board of Direct Taxes hereby authorises the Assistant Commissioner of Income-tax/Deputy Commissioner of Income-tax (NaFAC) having her / his headquarters at Delhi, to act as the ‘Prescribed Income-tax Authority’ for the purpose of sub-section (2) of section 143 of the Act, in respect of returns furnished under section 139 or in response to a notice issued under sub-section (1) of section 142 of the said Act, or sub-section (1) of section 148 of the Act, for the purpose of issuance of notice under sub-section (2) of section 143 of the said Act.

2. This notification shall come into force from the 1^st day of April, 2021.

 ACIT (e-Verification), Delhi designated as authority under section 143(2) r.w. Rule 12E

[Notification No. 65/2019- Income Tax, Dated 13.09.2019]

CBDT notifies Assistant Commissioner of Income-tax (e-Verification), Delhi, to act as prescribed Income-tax Authority for the purpose of Section 143(2) of Income Tax Act, 1961  read with rule 12E of the Income-tax Rules, 1962 vide Notification No. 65/2019- Income Tax dated 13.09.2019.

Notification No. 65/2019- Income Tax Income Tax, Dated 13.09.2019

S.O. 3279(E). - In pursuance of the powers conferred by sub-section (1) and (2) of section 120 and sub-section (2) of Section 143 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as said Act), read with rule 12E of the Income-tax Rules, 1962, the Central Board of Direct Taxes hereby authorises that the Assistant Commissioner of Income-tax (e-Verification), having headquarter at Delhi, to act as prescribed Income-tax Authority for the purpose of sub-section (2) of section 143 of the said Act, in respect of returns furnished under section 139 or in response to a notice under sub-section (1) of section 142 of the said Act during the financial year commencing on 1st day of April, 2018 for the purposes of issuance of notice under sub-section (2) of section 143 of the said Act.

2. This notification shall come into force from the date of its publication in the Official Gazette.

Revised format of Issue of notices under section 143(2) of Income-tax Act, 1961

CBDT F. No. 225/157/2017/ITA.II, dated 23.06.2017

Subject: – Issue of notices under section 143(2) of Income-tax Act, 1961 in revised format - Regarding

With reference to the above, I am directed to state that Central Board of Direct Taxes has decided to modify format of notice(s) issued under section 143(2] of the Income-tax Act which intimate the concerned assesse about selection of his/her case for scrutiny. This has become necessary in view of Board’s decision to utilise ‘E-Proceeding‘ facility for electronic conduct of assessment proceedings in a widespread manner from this financial year.

2. The three formats of notice(s) are: Limited Scrutiny (Computer Aided Scrutiny Selection} Complete Scrutiny (Computer Aided Scrutiny Selection) Compulsory Manual Scrutiny The revised format of 143(2) notice(s) with a note on benefits & Procedures of’ E-Proceeding’ facility are enclosed for information of the field authorities.

3. I am further directed to state that all scrutiny notices under section 143(2) of the Act, shall henceforth, be issued in these revised formats only. The Systems Directorate is effecting necessary changes in the 1TBA module in this regard.

4. The above may be brought to the notice of all for necessary compliance.

Limited Scrutiny (Computer Aided Scrutiny Selection)

Notice under Section 143(2) of the Income-tax Act. 1961

PAN No: ……………………… Dated: ………………………

To

Sir/Madam

This is for your kind information that the return of income for Assessment Year ………………………filed vide ack. no ………………………on………………………has been selected for Scrutiny. Following issue(s) have been identified for examination:

2. In view of the above, I would like to give you an opportunity to produce any evidence/information which you feel is necessary in support of the said return of income on or before ………………………

3. The above mentioned evidence/information is to be furnished online electronically in ‘E-Proceeding’ facility through your account in e-Filing website of Income-tax Department. Further proceedings shall also be conducted electronically (*). A brief note on salient features of ‘E-Proceeding’ is enclosed.

4. In case you do not wish to produce any evidence/information, as mentioned in para 2, you are requested to intimate the same electronically on or before

5. Specific questionnaires/requisition of information or documents would be sent subsequently, if required. 6. Para(s) (2) to (4) are applicable if you have an account in e-Filing website of Income-tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). (*) Subject to exceptions as per the enclosed note

Yours faithfully,

Seal                                                                                (Name of the Assessing Officer) (Designation)

(Telephone No./Fax No.)

(E-mail ID)

Complete Scrutiny (Computer Aided Scrutiny Selection)

Notice under Section 143(2) of the Income-tax Act, 1961

PAN No: ………………………

Dated: ………………………

To Sir/Madam

Dated:

This is for your kind information that the return of income for Assessment Year ………………………filed vide ack. no on has been selected for Complete Scrutiny.

2. In view of the above, I would like to give you an opportunity to produce any evidence/information which you feel is necessary in support of the said return of income on or before

3. The above mentioned evidence/information is to be furnished online electronically in ‘E-Proceeding’ facility through your account in e-Filing website of Income-tax Department. Further proceedings shall also be conducted electronically (*). A brief note on salient features of ‘E-Proceeding’ is enclosed.

4. In case you do not wish to produce any evidence/information, as mentioned in para 2, you are requested to intimate the same electronically on or before

5. Specific questionnaires/requisition of information or documents would be sent subsequently, if required.

6. Para(s) (2) to (4) are applicable if you have an account in e-Filing website of Income-tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). (*) Subject to exceptions as per the enclosed note

Yours faithfully,

Seal                                                                                                         (Name of the Assessing Officer)

(Designation)

(Telephone No./Fax No.) (E-mail ID)

 

Compulsory Manual Selection

Notice under Section 143(2) of the Income-tax Act, 1961

PAN No:

Dated:

PAN No: ……………………… Dated: ………………………

To Sir/Madam

This is for your kind information that the return of income for Assessment Year ………………………filed vide ack. no ………………………on ……………………………………………… has been selected for Scrutiny on the basis of parameter at Para 1(………………………) of Manual Compulsory Guidelines of CBDT issued vide Instruction No ………………………dated………………………

2. In view of the above, I would like to give you an opportunity to produce any evidence/information which you feel is necessary in support of the said return of income on or before

3. The above mentioned evidence/information is to be furnished online electronically in ‘E- Proceeding’ facility through your account in e-Filing website of Income-tax Department. Further proceedings shall also be conducted electronically  (*). A brief note on salient features of ‘E- Proceeding’ is enclosed.

4. In case you do not wish to produce any evidence/information, as mentioned in para 2, you are requested to intimate the same electronically on or before

5. Specific questionnaires/requisition of information or documents would be sent subsequently, if required.

6. Para(s) (2) to (4) are applicable if you have an account in e-Filing website of Income-tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available).

7. In cases where order has to be passed under section 153A/153C of the Income-tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually.

(*) Subject to exceptions as per the enclosed note

Yours faithfully,

Seal

(Name of the Assessing Officer)

(Designation)

(Telephone No./Fax No.) (E-mail ID)

 

CBDT Letter F. No. 225/157/2017/ITA.II], Dated 23.06.2017

Subject :  Section 143 of the income-tax act, 1961 - assessment - general - issue of notices under

                 section 143(2) in revised format

 

With reference to the above, I am directed to state that Central Board of Direct Taxes has decided to modify format of notice(s) issued under section143(2) of the Income-tax Act which intimate the concerned assessee about selection of his/her case for scrutiny. This has become necessary in view of Board's decision to utilise ‘E-Proceeding’ facility for electronic conduct of assessment proceedings in a widespread manner from this financial year (Annex).

2. The three formats of notice(s) are:

♦     Limited Scrutiny (Computer Aided Scrutiny Selection) (Annex-I).

♦     Complete Scrutiny (Computer Aided Scrutiny Selection) (Annex-II)

♦     Compulsory Manual Scrutiny (Annex-III)

The revised format of 143(2) notice(s) with a note on benefits & Procedures of ‘E-Proceeding’ facility are enclosed for information of the field authorities.

3. I am further directed to state that all scrutiny notices under section 143(2) of the Act, shall henceforth, be issued in these revised formats only. The Systems Directorate is effecting necessary changes in the ITBA module in this regard.

4. The above may be brought to the notice of all for necessary compliance.

CBDT Letter F. No. DIT(S)-2/CASS/2016-17, Dated 28.09.2016

Subject : Section 143, read with section 139A, of the income-tax act, 1961 - Assessment –

                Generation of scrutiny notices under section 143(2) for pan selected in cass-2016 well  

                before time barring date

 

Kindly refer to letter No. F. No. System/ITBA/lnstruction/Assessment/2015-16, dated 15.03.2016, F. No. System/ITBA/lnstruction/Assessment/CASS Cycle 2/2016-17, dated 25.07.2016 and F. No. DGIT(S)-2/ADG(S)-2/CASS 2016-17/93, dated 16.09.2016 requiring Assessing officers to generate scrutiny notices under section 143(2) for PANs selected in cycle 1, cycle 2 and cycle 3 of CASS-2016.

2. It is seen that till 27.09.2016, notices have not been issued in 991 cases.

3. These 991 cases include 80 cases which are lying with inactive codes.

4. It is requested that PANs available in the inactive code list, where AO is marked as Old/Defunct, may please be migrated to their correct jurisdiction on priority basis by the CIT(CO) or by the higher authority(Range and above whosoever is Active for that old/defunct AO, so that notices under section143(2) for scrutiny can be issued on time. Also, in cases where no employee number is attached with an AO code a review of AO on priority basis may be undertaken by respective RCC.

5. An Assessing officer wise summary and list of such cases as mentioned in para 2 is available in ITAXNET [Path: Resources → Downloads → Systems → Generation of scrutiny notices under section143(2) required]

6. In view of the above, you are requested to make arrangements for issue of notice under section 143(2) well before the time barring date i.e. 30.09.2016.

CBDT Instruction No. 8 of 2016 [F. No. 142/8/2016-TPL] Dated 15.09.2016

Subject :   Income Declaration Scheme, 2016 - Where time for issuance of a notice under section 143(2)/153A/153C pursuant to search, seizure or survey operation, as the case may be, for relevant assessment year(s) has not expired shall not be eligible to avail said scheme

The Income Declaration Scheme, 2016 (the Scheme) has come into effect from 1st June, 2016 and is open for declarations upto 30.09.2016. Vide Circular No.16 of 2016 dated 20.05.2016; it was clarified that a person will not be eligible to file declaration under the Scheme for the assessment year(s) in respect of which a notice under section 142(1)/143(2)/148/153A/153C has been served upon him on or before 31.05.2016. It was also clarified that where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act, in a previous year then the person shall not be eligible under the Scheme if the time for issuance of a notice under section 143(2)/153A/153C for the relevant assessment year has not expired.

2. In relation to the above, queries have been received from field formation and other stakeholders as to whether a declaration under the Scheme can be filed for an assessment year for which the proceedings under section 142(1)/143(2)/148/153A/153C were pending as on 31.05.2016 but the said proceedings have been completed.

3. In this context, it is clarified that a declaration under the Scheme can be filed in respect of the assessment year for which notice under section 142(1)/143(2)/148/153A/153C has been served on or before 31.05.2016 but the proceedings have been completed and the period of filing declaration under the Scheme has not expired. However, the declarant shall not be entitled to file the declaration in respect of the income which is the subject matter of the assessment order. It is reiterated that the cases where the time for issuance of a notice under section 143(2)/153A/153C pursuant to search, seizure or survey operation, as the case may be, for the relevant assessment year(s) has not expired shall not be eligible to avail the Scheme.

4. This instruction may be brought to the notice of all the officers concerned and other stakeholders.

 

 

CBDT Letter F. No. 225/162/2016/ITA.II], Dated 11.07.2016

Subject : Section 143 of the Income-Tax Act, 1961 - Assessment - General - Issue of Notices under Section 143(2) in Revised Format

With reference to the above, I am directed to state that Central Board of Direct Taxes, with approval of the Revenue Secretary, has decided to modify notice under section 143(2) of the Income-tax Act. Henceforth, there shall be three formats of the said notice namely:

♦   Limited Scrutiny    - Annex A

♦   Complete Scrutiny - Annex B

♦   Manual Scrutiny     - Annex C

2. The revised format of 143(2) notice(s) are enclosed (without annexure on benefits of email based assessment) for kind information of the field authorities.

3. I am further directed to state that all scrutiny notices, shall henceforth, be issued in these revised formats. The Systems Directorate is effecting necessary changes in the ITD module in this regard.

4. The above may be brought to the notice of all for necessary compliance.

ANNEX A

Limited Scrutiny

Notice under section 143(2) of the Income-tax Act, 1961

PAN: . . . . . . . . .

Dated :. . . . . .

To

Sir/Madam

This is for your kind information that the return of income for Assessment Year . . . . . . . . . . . . . filed vide . . . . . . . . . on ........... has been selected for Scrutiny. Following issues have been identified for examination:

2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on .......... (date) in the office of the undersigned.

3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.

4. Specific questionnaire/show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.

5. (#) The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the above mentioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.

Yours faithfully,

Seal

(Name of the Assessing Officer)

(Designation)

(Telephone No./Fax No.)

(E-mail id.)

ANNEX B

Complete Scrutiny

Notice under section 143(2) of the Income-tax Act, 1961

PAN: . . . . . . . . .

Dated :. . . . . .

To

Sir/Madam

This is for your kind information that the return of income for Assessment Year . . . . . . . . . filed vide . . . . . . . on . . . . . . . . has been selected for Complete Scrutiny.

2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on ........... (date) in the office of the undersigned.

3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.

4. Specific questionnaire/show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.

5. (#) The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the abovementioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.

Yours faithfully,

Seal

(Name of the Assessing Officer)

(Designation)

(Telephone No./Fax No.)

(E-mail id.)

ANNEX C

Manual Selection

Notice under section 143(2) of the Income-tax Act, 1961

PAN: . . . . . . . . .

Dated :. . . . . .

To

Sir/Madam

This is for your kind information that the return of income for Assessment Year . . . . . . . . . . . . . .filed vide . . . . . . . . . . . on . . . . . . . . . . . has been selected for Scrutiny on the basis of parameter at Para 1(. . . . . . . . . . . . . ) of the Manual Compulsory Guidelines of CBDT issued vide Instruction No. . . . . . . . . . . . . . . dated . . . . . . . . . . .

2. In view of the above, we would like to give you an opportunity to produce, or cause to be produced, any evidence which you feel is necessary in support of the said return of income on ............ (date) in the office of the undersigned.

3. Sending a communication to the undersigned in this regard shall also be treated as sufficient compliance in case no evidence is sought to be produced as required in Para 2 above.

4. Specific questionnaire/show-cause notice shall be sent giving you another opportunity in case any adverse view is contemplated.

5. (#) The assessment proceeding in your case is proposed to be conducted through email based communication. The email provided in the said return of income shall be used for communication for this purpose. In case you wish to communicate through any other alternate email, the same may kindly be informed. A brief note regarding benefits of this facility and procedure is enclosed overleaf. In case you do not wish to participate in this taxpayer friendly initiative, you may convey your refusal to the undersigned by the abovementioned date. In case, you wish to opt out from this scheme at any subsequent stage due to any technical difficulties faced by you, the same can be done with prior intimation to the undersigned.

Yours faithfully,

Seal

(Name of the Assessing Officer)

(Designation)

(Telephone No./Fax No.)

(E-mail id.)

 

CBDT Letter F. No. DIT(S)-2/CASS/2014-15/16205, Dated 28.09.2015

 

Subject : Section143 of the income-tax Act, 1961 - Assessment - General - Generation of Scrutiny notices under section 143(2) (Time Barring Matter)

 

Kindly refer to letter no. F. No. DIT(S)-2/CASS/2014-15/16153 dated 24.09.2015, AST Instruction no. 137 dated 28.09.2015 and AST Instruction no. 138 dated 18.09.2015 requiring Assessing officers to generate scrutiny notices under section 143(2) for PANs selected in cycle 1 and cycle 2 of CASS-2015.

 

2. It is seen that till 28-09-2015, notices have not been issued in 1,604 cases.

 

3. These 1604 cases include 331 cases which are lying with inactive codes. With reference cases with inactive codes, a letter no. DIT(S)-2/CASS/2014-15/16205 dated 23.09.2015 has been communicated to field through ITAXNET.

 

4. An Assessing officer wise summary and list of such cases as mentioned in para 2 is available in ITAXNET. [Path: Resources → Downloads → Systems → Generation of scrutiny notices u/s 143(2) required]

 

5. In view of the above, you are requested to make arrangements for issue of notice u/s 143(2) well before the time barring date i.e. 30.09.2015.

 

CBDT Letter F. No. DIT(S)-2/CASS/2014-15/16205, Dated 24.09.2015

 

Subject : Section143 of the income-tax act, 1961 - Assessment - General - Generation of scrutiny notices under Section 143(2) for pan selected in cass - 2015

 

Kindly refer to letter F. No.-DIT(S)-2/CASS/2014-15/16153 dated 17.09.2015, AST. Instruction No. 137 dated 28.08.2015 and AST Instruction No. 138 dated 18.09.2015 requiring Assessing officers to generate scrutiny notices under section 143(2) for PANs selected in cycle 1 and cycle 2 of CASS-2015.

2. It is seen that till 23.09.2015, notices u/s 143(2) have not been issued in 3,663 cases. The Pr. CCIT wise breakup of 3663 cases in which notices have not been issued is as following:

 

Ahmedabad	155	Bhubaneshwar	55	Bangalore	294	Bhopal	93	Chandigarh	191
Chennai	200	Delhi	353	Guwahati	98	Hyderabad	431	Kanpur	78
Kolkata	330	Kochi	128	Mumbai	463	Nagpur	37	Patna	172
Pune	288	Jaipur	140	Lucknow	157

 

3. These 3663 cases include 458 cases which are lying with inactive codes. With reference to 458 cases which are lying with inactive codes, a letter no DIT(S)-2/CASS/2014-15/16205, dated 23.09.2015 has been communicated to field through ITAXNET.

 

4. An Assessing Officer wise summary of pending notices and list of such cases as mention in para 1 is available on ITAXNET. [Path: Resources -> Download -> Systems-> Generation of scrutiny notices u/s 143(2) required]

 

5. As you are aware the validity of most of Remote Security Authentication (RSA) tokens will expire on 27th September, 2015 (Refer letter F. No. ADG(S)-IV/2015-16, dated 21.08.2015 issued by ADG(S)-4 in respect of 'Replacement of RSA Tokens'), therefore you are requested to make arrangements for issue of scrutiny notices under section 143(2) well before the time barring date i.e. 30.09.2015.

 

CBDT Instruction No. 1/2015 [F. NO. 225/319/2014-ITAT.II], Dated 13.01.2015

 

Subject : Section 143 of the Income-tax Act, 1961 - Assessment - General - Clarification as to whether provision of section 143(1D) permits processing of returns having a refund claim, where notice under section 143(2) has been issued

 Sub-section (1D) of section 143 of the Income-tax Act, 1961 (‘Act’) provides that where a notice has been issued to a taxpayer under sub-section (2) of section 143 of the Act, it shall not be necessary to process the return in such a case.

2. Some doubts have been expressed, in view of the words "shall not be necessary" used in the said sub-section, as to whether this provision permits processing of returns having a refund claim, where notice under section 143(2) of the Act has been issued.

3. The matter has been examined by the Board. Sub-section (1D) of section 143 of the Act was introduced by the Finance Act, 2012 with effect from 01.07.2012. The purpose of introduction of this sub-section has been stated in the Explanatory Note to the Finance Act as under:

 

“Under the existing provisions, every return of income is to be processed under sub-section (1) of section 143 and refund, if any, due is to be issued to the taxpayer. Some returns of income are also selected for scrutiny which may lead to raising a demand for taxes although refunds may have been issued earlier at the time of processing.

 

It is therefore proposed to amend the provisions of the Income-tax Act to provide that processing of return will not be necessary in a case where notice under sub-section (2) of section143 has already been issued for scrutiny of the return.”

Thus, in cases where an unprocessed return is selected for scrutiny, the legislative intent is to prevent the issue of refund after processing as scrutiny proceedings may result in demand for taxes on finalisation of the assessment subsequently.

4. Considering the unambiguous language of the relevant provision and the intention of law as discussed above, the Central Board of Direct Taxes, in exercise of the powers conferred on it under section 119 of the Act hereby clarifies that the processing of a return cannot be undertaken after notice has been issued under sub-section (2) of section 143 of the Act. It shall, however, be desirable that scrutiny assessments in such cases are completed expeditiously.

5. This may be brought to the notice of all concerned for strict compliance.

Failure of Assessing Officer in issuing notice within period of limitation under section 143(2) which is a notice giving jurisdiction to Assessing Officer to frame assessment cannot be condoned by referring to section 292BB

In the instant case, financial year has come to an end on 31.03.2013. Six months time would lapse on 30.09.2013. Notice was issued on 31.10.2013. It is clear from various judgments that the notice issued within the period of limitation, if found not served on the assessee within the stipulated period, i.e., defective service of notice cannot invalidate the assessment, or in other words, the existence of the notice well within the period of limitation prescribed under the provision is sine qua non for invoking section 292BB.

This view is further fortified by the instructions issued by the CBDT in Circular No. 1/2009 dated 27.03.2009 wherein, it has been observed that notices under sub-section (2) of section 143 though issued by registered post within the period of limitation, the same have been held invalid on the ground that the assessee had received the notice after the limitation date. In order to address these issues and to reduce litigation, a new section, viz., section 292BB has been inserted and the provision of section 143(2) has been amended.

The parameters set out in section 292BB are that the notice was:

(a)     not served upon assessee; or

(b)     not served in time; or

(c)     served upon assessee in an improper manner.

Thus, what is significant is service of notice. It is obvious that the issuance of notice is a pre-condition to cure the defects in service of notice.

In the light of judgment of the Supreme Court in the case of CIT v. Lakshman Das Khandelwal (2019) 417 ITR 325 : 266 Taxman 171 : 108 taxmann.com 183 (SC), it is clear that the infirmities in the manner of service of notice alone would be amenable to under section 292BB, but not the complete absence of notice itself; Notice issued beyond the period of limitation partakes the character of absence of notice itself in the eye of law and as such, section 292BB would not save such a notice de hors the limitation prescribed.

The Tribunal has rightly observed that the foundation process of reassessment is under section 148, but such jurisdiction is subject to further compliance as being stipulated in the statute itself and, thus, quashed the assessment being invalid. It is well-settled legal principle that issuance of notice beyond period of limitation or absence of notice goes to the root of the matter and is jurisdiction aspect, not a procedural irregularity and same is not curable.

In this instant case, the failure of the Assessing Officer in issuing the notice within the period of limitation under section 143(2), which is a notice giving jurisdiction to the Assessing Officer to frame assessment cannot be condoned by referring to section 292BB. Infirmities in manner of service of notice alone would be amenable to under section 292BB, but not complete absence of notice itself; notice issued beyond period of limitation partakes character of absence of notice itself in eye of law and as such, section 292BB would not save such a notice de hors limitation prescribed. Therefore, failure of Assessing Officer in issuing notice within period of limitation under section 143(2) which is a notice giving jurisdiction to Assessing Officer to frame assessment could not be condoned by referring to section 292BB and consequently Assessing Officer could not assume jurisdiction to frame assessment. We find no ground to interfere with the impugned order of the Tribunal. In the result, the appeal stands dismissed. [In favour of assessee] (Related Assessment year : 2012-13) - [PCIT(Central) v. Cherian Abraham (2022) 137 taxmann.com 73 (Karn.)

Case of assessee was transferred from ITO, Ward-3 to ITO, Ward-4 and impugned order under section143(3) was passed by ITO, Ward-4 without issuing notice under section143(2) and only in pursuance with notice issued by ITO, Ward-3, who had no jurisdiction over assessee at relevant time, said impugned order would be null and void

Case of assessee was transferred from jurisdiction of ITO, Ward-3 to ITO, Ward-4 - ITO, Ward-4 who had jurisdiction over assessee during relevant assessment year framed scrutiny assessment under section 143(3). It was noted that impugned order was passed only in pursuance to notice under section 143(2) which was issued by ITO, Ward-3 who had no jurisdiction over assessee at relevant time. Since no notice was issued under section 143(2) by ITO, Ward-4, assessment order passed by him would be without any jurisdiction and would be null and void. [In favour of assessee] (Related Assessment year : 2007-08)  - [PCIT v. Nopany & Sons (2022) 136 taxmann.com 414 (Cal.)]

SLP dismissed against High Court ruling that date of filing of original return under section 139(1) has to be considered for purpose of computing period of limitation under sub-section (2) of section 143 and not date on which defects actually came to be removed under section 139(9)

Assessee filed its return of income under section 139(1) on 10.09.2016. Since return was defective, assessee was called upon to remove such defects, which came to be removed on 07.07.2017, that was, within time allowed by Assessing Officer. Thereafter, impugned notice under section 143(2) came to be issued on 09.08.2018, informing petitioner that return of income filed by it on 07.07.2017 had been selected for scrutiny. Assessee assailed impugned notice by submitting that notice was barred by limitation as same had been issued beyond permissible time limit, as provided under section 143(2). High Court by impugned order held that section 139(9) does not require an assessee to file a fresh return of income, but requires assessee to remove defects in original return of income filed by him within time provided therein and date of filing of original return has to be considered for purpose of computing period of limitation under sub-section (2) of section 143 and not date on which defects actually came to be removed. SLP against said impugned order was to be dismissed. [In favour of assessee] (Related Assessment year : 2016-17) – [DCIT v. Kunal Structure (India) (P) Ltd. (2021) 277 Taxman 401 : 123 taxmann.com 392 (SC)]

Time-barred notice under section 143(2) akin to absence of notice, incurable under section 292BB

Karnataka High Court rules that issuance of notice beyond limitation period or absence of notice is a matter of jurisdiction not just procedural irregularity, thus not curable by resorting to Section 292BB; Assessee-Individual was subjected to search proceedings and subjected to assessment for Assessment year 2012-13 under section 143(3) r.w.s. 153C whereby an addition of Rs. 11.79 Cr was made towards unexplained loan advanced by Assessee; CIT(A) dismissed Assessee’s appeal while the ITAT allowed it, quashing the orders of the lower authorities by holding that notice under section 143(2) was issued beyond prescribed time-limit and thus, there was no jurisdiction to frame assessment; On appeal before the High Court, Revenue submitted that Assessee had not objected to the jurisdiction in its reply to notice under section 142(1) and cooperated with assessment proceedings and that limitation period should have been calculated from date of filing of Assessee’s reply, i.e. 08.10.2013; Revenue submitted that the delay in issuance of notice under section 143(2) was curable under section 292BB; Assessee submitted that the notice under section 143(2) was issued beyond stipulated time-limit and Assessee’s reply did not extend limitation period; Assessee argued that plea of Section 292BB was not raised before ITAT and that it dealt with the service of notice in existence and not with a non-existent notice, also referred to CBDT Circular dated 27.03.2009 to contend that there was difference in issue and service of notice and Section 292BB deals with service of notice issued well within period of limitation to cure defects but does not apply when notice was not issued within limitation prescribed; High Court finds the notice to be issued after the lapse of six months from the end of the financial year in which return was filed and observes that rulings relied upon by the Revenue depict that existence of notice well within the period of limitation is a sine qua non for invoking Section 292BB which also gets support from CBDT Circular No. 1/2009; High Court refers to the Supreme Court ruling in CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) wherein it was held that infirmities in manner of service of notice alone would be amenable under section 292BB but not complete absence of notice; High Court observes notice issued beyond limitation period partakes character of absence of notice and holds Section 292BB would not save such a notice and remarks that issuance of notice beyond limitation period or absence of notice is a matter of jurisdiction not just procedural irregularity and is incurable; High Court thus holds that Revenue’s failure to issue notice within limitation under section 143(2) cannot be condoned by reference to Section 292BB. (Related Assessment year : 2012-13) – [PCIT(C) v. Cherian Abraham – Date of Judgement : 05.10.2021 (Karn.)]

No section 143(2) notice requirement if no valid filed return filed by Assessee

In the present case, the assessee did not file the original return of income as well as also not filed return of income in response to the notice under section 147 of the Act within the time allowed by the Assessing Officer of 30 days. Thus the issue is whether in case the return filed by the assessee as late as in the month of September, 2017 can be treated as valid return or not. The answer is clearly ‘No’ as even after 30 days any return of income filed by the assessee would not have been taken cognizance by the Assessing Officer. There is no requirement of the law that if the return is filed any time before Assessing Officer under section 148 read with 143 (3) of the Act, the Assessing Officer should have been issued notice under section 143(2). The question will arise then that if the assessee was issued a notice u/s 148 of the Act and he does not file any return of income till the date of framing of the assessment order or also filed a return before passing of the assessment order under section 143(2) of the Act, then what is the stand Revenue should take? In such case, it is not at all possible that the assessee can contest that notice under section 143(2) should have been issued, in all such cases where reassessment is required to be made. The onus of filing of return of income on the assessee is a responsibility which is cast upon him to be fulfilled by him, if he fails to take benefit of any of the provisions of law the assessee cannot plea that he will not comply with the law and not follow time limit before the Assessing Officer and the Assessing Officer he is duty bound to follow the law even in belated compliance by the assessee. (Related Assessment Year : 2010-11) – [Rakesh Aggarwal v. ITO - Date of Judgement : 15.12.2020 (ITAT Delhi)]

Failure to issue a notice under section 143(2) renders the assessment order void even if the assessee has participated in the proceedings – Deeming fiction does not operate to save complete absence of notice

For section 292BB to apply, section 143(2) notice must have emanated from department and it is only infirmities in manner of service of notice that section seeks to cure and it is not intended to cure complete absence of notice itself

A search and seizure operation was conducted at premises of the Assessee who was carrying on brokerage business. He submitted his return and assessment was completed under section 143(3) making addition on account of unexplained cash. On Appeal, the CIT(A) deleted the addition. The Department filed an appeal to the Tribunal. The Assessee filed cross objections challenging the jurisdiction of the Assessing Officer on the ground that notice under section 143(2) had not been issued. The Tribunal vide impugned order upheld the cross-objection and quashed the entire reassessment proceedings on the finding that the same stood vitiated as the Assessment Officer lacked jurisdiction in absence of notice under Section 143 (2) of the Act of 1961 by holding that the Assessing Officer had no valid jurisdiction to pass the assessment order and the very foundation of the assessment proceedings is bad in law. Hence, these proceedings culminating in the assessment order, as well as the impugned order stand quashed. Nothing else remains to be adjudicated. In consequence, the revenue’s appeal is dismissed. This view was upheld by the High Court.

Held : A close look at section 292BB shows that if the assessee has participated in the proceedings, it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to section 292BB, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said section. The scope of section 292BB is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee and section does not save complete absence of notice and, thus, for section 292BB to apply, the notice must have emanated from the department and it is only the infirmities in the manner of service of notice that the section seeks to cure and it is not intended to cure complete absence of notice itself. Since the facts on record are clear that no notice under section 143(2) was ever issued by the department, the findings rendered by the High Court and the Tribunal and the conclusion arrived at were correct. There is no reason to take a different view in the matter. Consequently, Appeal fails and is dismissed. [In favour of assessee] (Related Assessment year : 2010-11) – [CIT v. Lakshman Das Khandelwal (2019) 417 ITR 325 : 266 Taxman 171 : 108 taxmann.com 183 (SC)]

Mere mentioning of new address in the return of income is not enough - If change of address is not specifically intimated to the Assessing Officer, he is justified in sending the notice at the address mentioned in PAN database - If the notice is sent within the period prescribed in section 143(2), actual service of the notice upon the assessee is immaterial - CIT(A) is directed to decide the appeal on merits

The assessee participated in the assessment proceedings. However, the assessee challenged the notice under sections 143(2) and 142(1) of the Act on the ground that the said notrices were not served upon the assessee as the assessee company never received those notices and subsequent notices served and received by the compoany were beyond the period of limitation prescribed under proviso to Section 143 of the Act. The Assessing Officer has not accepted the contention of the assessee. On appeal the CIT(A) held that the order is bad in law, however the appeal was not decided on merits as regards the merits of the addition. Order of CIT(A) is affirmed by the Tribuanl and High Court. On appeal by the revenue   allowing the appeal o the Court held that, mere mentioning of new address in the return of income is not enough. If change of address is not specifically intimated to the Assessing Officer, he is justified in sending the notice at the address mentioned in PAN database. If the notice is sent within the period prescribed in Section 143(2), actual service of the notice upon the assessee is immaterial. Order of High Court and Tribunal is set aside and CIT(A) is directed to decide the appeal on merits on other grounds. (Related Assessment year 2006-07) – [PCIT v. I-Ven Interactive Ltd. (2019) 418 ITR 662 : 311 CTR 165 : 267 Taxman 471 : 182 DTR 473 (SC)]

Service of scrutiny notice on authorized representative of assessee on ground of non-availability of assessee is deemed service of notice on assessee and sufficient compliance of requirement of section 143(2)

Non-availability of assessee to receive scrutiny notice sent by registered post as many as on two occasions and service of notice on authorized representative of assessee whom assessee now disown, is sufficient to draw an inference of deemed service of notice on assessee and sufficient compliance of requirement of section 143(2). 

Assessee to receive the notice sent by registered post as many as on two occasions and service of notice on 19th October, 2006 on the authorized representative of the respondent Assessee whom the respondent Assessee now disowns, in our considered view, is sufficient to draw an inference of deemed service of notice on the respondent. Assessee and sufficient compliance of the requirement of Section 143(2) of the Income Tax Act, 1961.

On the aforesaid view that we have taken we are of the opinion that the High Court that what is required to be satisfied by the Revenue is service of notice and not mere issuance thereof was not right in coming to the impugned conclusion in the facts of the instant matter. We, accordingly, allow this appeal and set aside the order of the High Court. [In favour of revenue] - [ITO, Etawah v. Dharam Narain (2018) 253 Taxman 479 : 90 taxmann.com 325 (SC)]

 

Notice under section 143(2) having been served upon assessee on very next working day due date being Sunday, was valid

Assessment (Notice under section 143(2)) - High Court by impugned order held that since notice under section143(2) had been served upon assessee on very next working day as due date being Sunday, there was sufficient compliance of first proviso to section 143(2) and notice was valid. Special Leave Petition filed by assessee against impugned order was to be dismissed. [In favour of revenue] (Related Assessment year : 2010-11) - [Gujarat State Plastic Manuf. Association v. Deputy Director of Income-tax, Ahmedabad (2014) 227 Taxman 380 : 51 taxmann.com 372 (SC)]

Notice under section 143(2) is mandatory, and in absence of such service, Assessing Officer cannot proceed to make an inquiry on return filed in compliance with notice issued under section 148

Notice under section 143(2) is mandatory and in absence of such service, Assessing Officer cannot proceed to make an inquiry on return filed in compliance with notice issued under section 148. [In favour of assessee] (Related Assessment years : 2005-06 and 2006-07) – [ACIT, Panaji v. Geno Pharmaceuticals Ltd. (2013) 214 Taxman 83 : 32 taxmann.com 162 (Bom.)]

 

For determination of undisclosed income for a block period under provisions of section 158BC, provisions of section 142 and sub-sections (2) and (3) of section143 are applicable and no assessment can be made without issuing notice under section143(2) - Therefore, where Assessing Officer, for any reason, repudiates return filed by assessee in response to notice under section 158BC(a), he must necessarily issue a notice under section 143(2) within time prescribed in proviso to section 143(2)

The appellate Tribunal held that non-issue of a notice under section 143(2) is only a procedural irregularity and the same is curable. On appeal, the High Court, disagreeing with the Tribunal, held that the provisions of section 142 and sub-sections (2) and (3) of section 143 would have mandatory application in a case where the Assessing Officer in repudiation of return filed in response to a notice issued under section 158BC(a) proceeds to make an inquiry.

Section 158BC(b) provides for an enquiry and assessment. The said provision reads “the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of sections 143, 144 and 145 shall, so far as may be, apply”. An analysis of this sub-section indicates that after the return is filed, this clause enables the Assessing Officer to complete the assessment by following the procedures like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The Assessing Officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under section 143(2)/142, the Assessing Officer is authorized to complete the assessment ex parte under section 144. Clause (b) of section 158BC, by referring to sections 143(2) and (3) would appear to imply that the provisions of section 143(1) are excluded but section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason why the authorities should issue a notice under section 143(2). However, if an assessment is to be completed under section 143(3), read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of a notice under section 143(2) cannot be dispensed with. The other important feature that is required to be noticed is that the section 158BC(b) specifically refers to some of the provisions of the Act which are required to be followed by the Assessing Officer while completing the block assessment under Chapter XIV-B. This legislation is by incorporation. This section even speaks of sub-sections which are to be followed by the Assessing Officer. Had the intention of the Legislature been to exclude the provisions of Chapter XIV, the Legislature would have or could have indicated that also. A reading of the provision would clearly indicate that if the Assessing Officer, for any reason repudiates the return filed by the assessee in response to notice under section 158BC(a), he must necessarily issue notice under section 143(2) within the time prescribed in the proviso to section 143(2). Where the Legislature intended to exclude certain provisions from the ambit of section 158BC(b), it has done so specifically. Thus, when section 158BC(b) specifically refers to applicability of the provision, proviso thereto cannot be excluded. The clarification given by the CBDT in its circular No. 717, dated 14.08.1995, has a binding effect on the department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-section (2) of section143. Accordingly, even for the purpose of Chapter XIV-B, for the determination of undisclosed income for a block period under the provisions of section 158BC, the provisions of section 142 and sub-sections (2) and (3) of section 143 are applicable and no assessment can be made without issuing a notice under section 143(2).

Section 158BH provides for application of the other provisions of the Act. It reads : “Save as otherwise provided in this Chapter, all the other provisions of this Act shall apply to assessment made under this Chapter”. This is an enabling provision, which makes all the provisions of the Act, save as otherwise provided, applicable for proceedings for block assessment. The provisions which are specifically included are those which are available in Chapter XIV-B of the Act, which includes section 142 and sub-sections (2) and (3) of section 143. On a consideration of the provisions of Chapter XIV-B of the Act, we are in agreement with the reasoning and the conclusion reached by the High Court. - [ACIT v. Hotel Blue Moon (2010) 321 ITR 362 : 188 Taxman 113 (SC)]