Pranav B Prem

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that issuing a notice under Section 143(2) of the Income Tax Act before supplying the recorded reasons for reopening under Section 147 constitutes a fatal procedural lapse that vitiates the entire reassessment proceedings. The Bench comprising Yogesh Kumar U.S. (Judicial Member) and S. Rifaur Rahman (Accountant Member) delivered the ruling in two connected appeals for Assessment Years 2011–12 and 2012–13 filed by Diamond Realcon Pvt. Ltd., ultimately quashing the reassessment orders in both years.

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For AY 2011–12, the tribunal examined the validity of the notice issued under Section 148 dated 31 March 2018. The assessee contended that the notice was neither digitally nor manually signed by the Assessing Officer. The Tribunal reproduced the notice from the paper book and found that it indeed did not bear any signature, leading the Bench to declare the notice void ab initio. Relying on the Bombay High Court decision in Prakash Krishnavtar Bhardwaj v. ITO (451 ITR 27), the Tribunal held that a notice without signature does not confer jurisdiction on the AO to reopen the assessment. On this basis, the reassessment order passed under Section 147 read with Section 144 was annulled for lack of jurisdiction.

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Although the reassessment for AY 2011–12 was already quashed on jurisdictional grounds, the Tribunal examined the substantive additions to ensure complete adjudication. The Assessing Officer had added ₹2.75 crore as unexplained cash credits under Section 68 and ₹7.20 crore as unexplained investment under Section 69. The assessee demonstrated through confirmations, ITR acknowledgements, bank statements and audited financials of lenders that the loans were received through banking channels and were fully repaid within 60 days through bank transfers. The Tribunal observed that the AO failed to evaluate these documentary proofs and made additions merely on suspicion. Holding that the assessee had discharged the onus under Section 68, the Bench deleted the entire additions, noting that repayment of loans further strengthened the genuineness of the transactions.

For AY 2012–13, the Tribunal found another fundamental defect in the reassessment procedure. The assessee had requested the AO on 3 June 2019 to supply the reasons recorded for reopening. However, a notice under Section 143(2) was issued on 20 September 2019 before supplying the recorded reasons. Even assuming that the AO later supplied reasons along with a notice under Section 142(1), the Tribunal observed that “issuance of notice u/s 143(2) prior to supply of reasons recorded amounts to denial of the assessee's right to challenge the assumption of jurisdiction.” The Bench held that such a course of action violates mandatory procedural safeguards embedded in the Act and renders the entire reassessment invalid in law.

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Having found serious jurisdictional defects in both assessment years—an unsigned Section 148 notice and a Section 143(2) notice issued before supply of recorded reasons—the Tribunal concluded that the reassessment proceedings were non-est. As a result, the Tribunal set aside the orders of both the Assessing Officer and the Commissioner of Income Tax (Appeals), quashing the reassessments in totality.

Appearance

Counsel For Appellant: S. S. Nagar, CA

Counsel For Respondent: Suman Malik, CIT DR

Cause Title: M/s Diamond Realcon Private Limited Versus ACIT

Case No: ITA No. 1259/Del/2025 (A.Y. 2011-12)

Coram: Yogesh Kumar U.S. (Judicial Member), S. Rifaur Rahman (Accountant Member)