The Supreme Court has held that income tax reassessment proceedings cannot be sustained when the Assessing Officer fails to issue the mandatory notice under Section 143(2) of the Income Tax Act, 1961. The Court clarified that an assessee's participation in reassessment proceedings does not cure the complete absence of such a notice.
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva delivered the judgment on October 28, 2026, while dismissing appeals filed by the Revenue against orders that had set aside the reassessment proceedings.
Background
The appeals arose from reassessment proceedings involving Orissa Mining Corporation Ltd. and other assessees for different assessment years. The Income Tax Department had reopened previously completed assessments under Section 147 of the Income Tax Act and issued notices under Section 148.
The assessees either requested that their original income tax returns be treated as returns filed in response to the reassessment notices or relied on the returns already submitted. However, the Assessing Officer did not issue notices under Section 143(2), which require an assessee to attend proceedings or produce evidence supporting the return.
Although the assessees participated in the reassessment proceedings and received notices under Section 142(1), the Income Tax Appellate Tribunal set aside the reassessment orders. The High Court upheld those decisions, prompting the Revenue to approach the Supreme Court.
The central question was whether Section 292BB, which addresses defects in the service of notices when an assessee participates in proceedings, could protect the Revenue despite its failure to issue the required notice altogether.
The Court distinguished between an improperly served notice and a notice that was never issued. It explained:
"A notice under Section 143(2) of the Act is a sine qua non for a proceeding for reassessment under Section 147 of the Act. In the absence of a notice under Section 143(2) of the Act, no further proceedings can be undertaken by the Revenue."
The Bench further held that participation by an assessee does not automatically grant the Assessing Officer the legal authority to complete an assessment when a mandatory statutory requirement remains unfulfilled.
Addressing Section 292BB, the Court observed:
"Said deeming fiction cannot come into play where the Revenue has admittedly not even issued the notice. Where the Revenue itself contends that no notice was sent, as required under the Act, the provision of Section 292BB will have no applicability."
The Court also rejected the argument that a letter issued under Section 142(1), seeking information or explanations during reassessment, could substitute for the mandatory notice under Section 143(2).
It clarified that even when an assessee chooses to rely on an earlier return instead of filing a fresh one, the Revenue remains obligated to issue the prescribed notice.
The Supreme Court answered all three legal questions against the Revenue, holding that Section 292BB does not cure the complete absence of a Section 143(2) notice, reliance on an earlier return does not remove the notice requirement, and a Section 142(1) letter cannot replace it.
Finding no infirmity in the decisions of the Income Tax Appellate Tribunal as affirmed by the High Court, the Bench dismissed the Revenue's appeals.
