Calcutta High Court on Invalid Assessment Without Section 143(2) Notice: Scope of Section 292BB Examined

Background of the Dispute

The Calcutta High Court, in PCIT-2 Vs Cosmat Traders Pvt. Ltd. (Calcutta High Court), examined whether an assessment completed without issuance of a mandatory notice under Section 143(2) can be saved by invoking Section 292BB of the Income Tax Act 1961.

The Revenue’s appeal under Section 260A challenged the order dated 21st April 2021 of the Income Tax Appellate Tribunal, “B” Bench, Kolkata, in ITA No.457/Kol/2020 for Assessment Year 2012-13. The Tribunal had allowed the assessee’s appeal on the ground that absence of a valid Section 143(2) notice rendered the assessment void.

The High Court was called upon to decide:

  • Whether the Assessing Officer had valid jurisdiction to issue notice under Section 143(2)
  • Whether Section 292BB barred the assessee from challenging the validity/jurisdiction of the notice at the appellate stage, given that the assessee had participated in the proceedings
  • Whether the assessee was under a statutory obligation to ensure that its address was updated in the PAN database, and what effect this had on jurisdiction

Ultimately, the Court affirmed the ITAT’s view and dismissed the Revenue’s appeal and connected stay application.

Substantial Questions Raised by Revenue

The Revenue formulated three substantial questions of law in the appeal under Section 260A:

  1. Jurisdiction to issue Section 143(2) notice

    • Whether the Tribunal erred in law in holding that the Assessing Officer lacked jurisdiction to issue notice under Section 143(2) to the assessee, despite the Officer allegedly having full jurisdiction to do so.

  2. Effect of Section 292BB and assessee’s participation

    • Whether, in light of Section 292BB, the assessee could challenge jurisdiction at the appellate stage after having participated in the assessment proceedings without objection and having treated the Section 143(2) notice as valid before the lower authorities.

  3. Duty to update PAN address

    • Whether the Tribunal’s order was perverse for failing to consider that it was the assessee’s responsibility to apply for change of address in the PAN database and that non-compliance with this duty impacted the question of jurisdiction of the Assessing Officer.

The High Court analysed these questions with reference to binding precedents of the Supreme Court and earlier decisions of the Calcutta High Court.

Mandatory Nature of Notice under Section 143(2)

Reliance on Earlier Calcutta High Court Precedent

The Court placed considerable reliance on its earlier judgment in Principal Commissioner of Income Tax vs. Oberoi Hotels Pvt. Ltd. [2018] 409 ITR 132 (Cal). In that case, the Court had categorically held:

  • Issuance of notice under Section 143(2) is compulsory before completion of an assessment under Section 143(3).
  • Section 292BB does not operate to cure complete absence of a notice which the statute regards as mandatory.

This principle was treated as directly applicable to the dispute involving Cosmat Traders Pvt. Ltd.

Supreme Court’s Ruling in Hotel Blue Moon

The High Court further cited the landmark judgment of the Supreme Court in Assistant Commissioner of Income Tax & Anr. vs. Hotel Blue Moon [2010] 321 ITR 362 (SC). The Supreme Court had ruled that:

  • When an assessment is carried out under Section 143(3) read with Section 158BC,
  • A notice under Section 143(2) must be issued within the statutory time limit from the date of filing of the block return.
  • Failure to issue such a notice is not a mere procedural lapse and cannot be rectified by treating it as a curable irregularity.
  • Consequently, the requirement of a Section 143(2) notice cannot be waived or dispensed with.

The Calcutta High Court read this as confirmation that the absence of a Section 143(2) notice goes to the root of the jurisdiction of the Assessing Officer and vitiates the entire assessment.