ITAT Bengaluru Special Bench: Omission of Scrutiny Category in Section 143(2) Notice Does Not Invalidate Assessment Proceedings

Overview of the Ruling

The ITAT Bengaluru Special Bench has delivered a significant ruling in MD Sons v. Income Tax Officer, settling a long-standing controversy across multiple Tribunal Benches regarding the validity of notices issued under Section 143(2) that do not specify the category of scrutiny as mandated by the CBDT Instruction dated 23.06.2017. The Special Bench ruled in favour of the Revenue, holding that the absence of scrutiny category specification in such a notice constitutes a procedural irregularity at most — one that is curable under Section 292B of the Income Tax Act, 1961 — and does not render the consequent assessment proceedings void.

This ruling carries considerable practical significance for both assessees and departmental officers, as it directly addresses the interplay between statutory requirements and administrative instructions in the context of assessment jurisdiction.

Background and Context

Why Was a Special Bench Constituted?

The Special Bench was constituted specifically to resolve a conflict that had emerged among various Benches of the Income Tax Appellate Tribunal on a singular question: whether a notice issued under Section 143(2) on or after 23.06.2017, which did not conform to the format prescribed by the CBDT Instruction dated 23.06.2017 — specifically by failing to indicate whether the scrutiny was Limited, Complete, or Manual — rendered the entire assessment void for want of jurisdiction.

Different Benches had taken divergent positions on this issue, creating uncertainty in the adjudication of similar matters across the country. The reference to the Special Bench was therefore made to bring uniformity and finality to the legal position.

Facts of the Case

The assessee in the connected matter was a partnership firm engaged in the business of trading cigarettes and food items. The firm had filed its return of income declaring a loss, which was duly processed under Section 143(1). The case was subsequently selected for scrutiny through the Computer Assisted Scrutiny Selection (CASS) mechanism, following which a notice under Section 143(2) was issued within the prescribed limitation period and served electronically upon the assessee.

Notices under Section 142(1) were also issued thereafter. The assessee furnished the required information and participated in the proceedings. The assessment was ultimately completed under Section 143(3).

Before the Tribunal, the assessee raised an additional legal ground contending that the notice issued under Section 143(2) was legally invalid because it did not conform to the format prescribed by the CBDT Instruction dated 23.06.2017 — particularly in that it did not indicate whether the scrutiny was Limited Scrutiny, Complete Scrutiny, or Manual Scrutiny. Given the conflict among various Tribunal Benches on this precise issue, the matter was referred to the Special Bench.

Arguments Presented Before the Special Bench

Assessee's Contentions

The assessee advanced the following arguments in support of its position: