Defective Section 143(2) Notice Format and Section 292B: ITAT Special Bench Settles the Law

1. Background of the Special Bench Reference

A Special Bench of the ITAT, Bengaluru, was constituted in the case of M D Sons Vs ITO to resolve conflicting decisions of different Tribunal Benches on the validity of notices issued under Section 143(2) after 23.06.2017 that did not follow the Central Board of Direct Taxes (CBDT) prescribed format.

The specific question referred to the Special Bench was:

“Whether notices issued u/s 143(2) of the Income Tax Act, 1961 on or after 23rd June 2017 which are not in the prescribed format as per CBDT Instruction/F No.225/157/2017/ITA.II), despite the provisions of section 292B of the Income Tax Act, renders the consequent assessment orders invalid?”

Core Facts of the Case

  • The assessee, a partnership firm engaged in trading cigarettes and food items, filed its return for A.Y. 2017-18 on 04.11.2017 declaring a loss of Rs.2,30,72,700/-.
  • The return was processed under Section 143(1). The case was selected for scrutiny through CASS (Computer Aided Scrutiny Selection).
  • A notice under Section 143(2) was issued on 21.09.2018 and served electronically.
  • Subsequent notices under Section 142(1) were issued and complied with; the assessee participated in the assessment throughout.
  • Assessment was completed under Section 143(3) on 28.12.2019 determining income at Rs.3,48,75,050/-.

Before the Tribunal, the assessee raised an additional legal ground: the notice under Section 143(2) was not in the format mandated by CBDT Instruction dated 23.06.2017 (F No.225/157/2017/ITA-II), and therefore the entire assessment was claimed to be void.

The assessee relied on multiple Tribunal decisions that had quashed assessments where Section 143(2) notices issued after 23.06.2017 did not conform to CBDT-prescribed formats, including:

  • Srimanta Kumar Shit Vs ACIT, ITA No.1911/Kol/2024
  • Tapas Kumar Das Vs ITO, ITA No.1660/Kol/2024
  • Sajal Biswas Vs ITO, ITA No.1244/Kol/2023
  • Hind Ceramics Pvt Ltd. Vs DCIT, ITA Nos.608 & 610/Kol/2024
  • Anita Garg Vs ITO, ITA No.4053/Del/2024
  • Allied Concepts India Pvt Ltd vs ITO, ITA No.2407/Del/2025

On the other hand, the Revenue relied heavily on a contrary view taken earlier by the Bangalore Bench in:

  • Shri Veeranna Murthy Raghavendra Dikshit, ITA No.1072/Bang/2024 (A.Y. 2017-18)

In that case, the Tribunal had held that deviation from CBDT format is only a procedural irregularity and is curable under Section 292B if the substance of the notice complies with the statute.

Because of these conflicting views, the matter was referred to a Special Bench by the Hon’ble President of the ITAT.

2. Assessee’s Principal Contentions

The assessee and interveners advanced elaborate arguments, largely structured around three pillars:

  1. Binding nature of CBDT instructions
  2. Jurisdictional character of Section 143(2) notices
  3. Limited scope of curing defects under Section 292B and Section 292BB

2.1 Role of CASS and Scrutiny Categories

  • With the advent of e-assessment and risk-based selection under CASS, CBDT has issued a series of instructions to regulate scrutiny — including Limited Scrutiny, Complete Scrutiny, and Manual Scrutiny.
  • CBDT instructions from 2014–2019 specify that:
    • Limited Scrutiny must be confined to issues flagged by the system.
    • Expansion to Complete Scrutiny is permitted only where conditions such as monetary thresholds and prior approval of Pr.CIT/CIT are satisfied.

According to the assessee, these instructions are not mere internal advisories but a legally structured framework meant to prevent “fishing and roving” enquiries.

2.2 CBDT-Prescribed Formats for Section 143(2) Notices

  • CBDT, in its Instruction dated 23.06.2017 (F No.225/157/2017/ITA-II), prescribed three distinct formats for notices under Section 143(2):

    • Limited Scrutiny (CASS)
    • Complete Scrutiny (CASS)
    • Compulsory Manual Scrutiny

  • The Instruction stated that notices “shall” be issued only in these formats, thereby making the format mandatory.

The assessee argued that non-conformity with these prescribed formats is not a trivial defect, but a failure to meet a jurisdictional requirement, because the notice no longer clearly discloses the scope of scrutiny.

2.3 Binding Effect of CBDT Instructions under Section 119

  • It was submitted that instructions issued under Section 119 are binding on all income-tax authorities, as recognised in judicial precedents such as:
    • UOI v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC)
    • UCO Bank v. CIT (SC)
  • Once CBDT prescribes a particular manner for issuance of a notice, the field officers are duty-bound to follow that procedure.

The assessee emphasized that while assessees may not invoke a beneficial circular to override the statute, they can rely on binding instructions that regulate departmental exercise of statutory powers.

2.4 Jurisdictional Nature of Section 143(2) Notices

  • A valid Section 143(2) notice within limitation is a condition precedent to a valid scrutiny assessment under Section 143(3).
  • The Supreme Court has repeatedly held that absence of a valid notice under Section 143(2) vitiates the entire assessment:
    • Hotel Blue Moon, (2010) 321 ITR 362 (SC)
    • Laxman Das Khandelwal, (2019) 417 ITR 325 (SC)

According to the assessee, once CBDT has prescribed a specific format under its statutory powers, any notice deviating from that format is an invalid notice and does not confer jurisdiction on the Assessing Officer.

2.5 Limits of Section 292B and Section 292BB

  • Section 292B can cure only those mistakes which are technical and where the notice is “in substance and effect in conformity with or according to the intent and purpose of the Act”.
  • It does not cure:
    • absence of a notice, or
    • notices suffering from fundamental jurisdictional defects.

Reliance was placed on:

  • Smt. Mahesh Kumari Batra v. JCIT, (2005) 95 ITD 152 (SB)
  • Maruti Suzuki India Ltd., (2019) 416 ITR 613 (SC)