PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs KRYPTON DIAMONDS PVT. LTD.
- Court
- Gujarat High Court
C/TAXAP/651/2022 (GJHC240373222022) JUDGMENT DATED: 01/09/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 651 of 2022
With
R/TAX APPEAL NO. 652 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
================================================================
Approved for Reporting Yes No
Yes
================================================================
PRINCIPAL COMMISSIONER OF INCOME TAX 1
Versus
KRYPTON DIAMONDS PVT. LTD.
================================================================
Appearance:
KARAN G SANGHANI(7945) for the Appellant(s) No. 1
===============================================================
CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 01/09/2026
COMMON ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel
Mr.Karan G. Sanghani for the appellant.
2. By these Appeals under Sections 260A of
the Income Tax Act, 1961 (for short ‘the
Act’), the appellant has proposed the
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following substantial questions of law,
th
arising out of the common order dated 7
December, 2021 passed by the Income Tax
Appellate Tribunal (for short ‘the
Tribunal’), Surat Bench, Surat in ITA
Nos.311/SRT/2019 and 312/SRT/2019 for
Assessment Years 2012-13 and 2013-14
respectively :
“(i) Whether, on the facts and in the
circumstances of the case and in law, the
learned Tribunal has erred in holding that
the assessment order was invalid in
absence of valid notice u/s 143(2) of the
Act, ignoring the fact that notice u/s
143(2) of the Act was issued on 19.09.2018
after considering the request of the
assessee submitted vide letter dated
24.05.2018 requesting the AO to treat the
original return filed as return in
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response to notice u/s 148 of the Act.
(ii) Whether, on the facts and in the
circumstances of the case and in law, the
learned Tribunal was justified in not
appreciating the fact that the AO had
treated original return filed by the
assessee as return filed in response to
notice u/s 148 of the Act on the basis of
assessee's written request vide letter
dated 24.05.2018 and accordingly had
uploaded the same on 24.05.2018 on
ITD/ITBA to complete the on-going
assessment proceedings.
(iii) Whether, on the facts and in the
circumstances of the case and in law, the
learned has Tribunal erred in not
considering the fact that once notice u/s
143(2) was issued on 19.09.2018 and served
on the assessee, accepting the original
return filed as return in response to
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notice u/s 148 of the Act, there was no
requirement in law to issue a notice u/s
143(2), in response to the return of
income filed electronically at a later
dated i.e. on 28.09.2018.
3. As both the Appeals are arising from
the same issue, the same are heard
analogously and are being disposed of by
this Common Judgment. For sake of
convenience, Tax Appeal No.651 of 2022 is
treated as a lead matter.
4. The brief facts of the case are as
under :
4.1. The assessee filed the Return of
th
Income for Assessment Year 2013-14 on 28
September, 2013 declaring income of
Rs.30,44,890/-.
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4.2. The Assessing Officer issued a
th
notice under Section 148 of the Act on 30
March, 2018, considering the information
received from the DGIT (Investigation),
Mumbai that during the search and seizure
operation carried out by the Investigating
Wing, Mumbai, in case of Shri Rajendra Jain
Group, Shri Sanjay Choudhary Group and
rd
Dharmichand Jain Group on 3 October, 2013,
evidence was collected that the said
assessees, through benami concerns, run and
operated by them in the names of their
employees, provided accommodation entries
to various parties in respect of bogus
unsecured loans, bogus purchases and bogus
sales. The assessee was one of the
beneficiaries of such bogus transactions
carried out by the said assessees.
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4.3. In response to the notice, the
th
assessee filed a reply dated 24 May, 2018
contending that the Return of Income filed
originally, may be treated as return in
response to the notice under Section 148 of
the Act.
4.4. The Assessing Officer did not
th
accept the reply of the assessee dated 24
th
May, 2018 and by letter dated 20 August,
2018, called upon the assessee to file
Return of Income electronically. The
Assessing Officer, meanwhile, also issued
notice under Section 143(2) of the Act on
th
19 September, 2018, without waiting for
the assessee to file the Return of Income
in response to the notice under Section 148
of the Act.
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4.5. The assessee filed its Return of
th
Income on 28 September, 2018 in response
to the notice under Section 148 of the Act.
The assessee in its reply also contended
that the assessment proceedings, conducted
on the basis of the notice under Section
th
143(2) of the Act issued on 19 September,
2018, was prior to the filing of return by
th
the assessee on 28 September, 2018 and
therefore, the entire re-assessment
proceeding was void as per the settled
legal position.
4.6. The Tribunal, considering such
contention, allowed the Appeals filed by
the assessee, setting aside the re-
assessment proceedings by relying upon the
decision of this Court in case of PCIT
Versus Marck Biosciences Ltd. reported in
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(2019) 106 taxmann.com 399 (Gujarat)
wherein, it is held as under:
“ 9. In the light of the submissions
advanced by the learned advocates for the
respective parties the court is of the
view that the matter requires
consideration. Hence, Admit. The following
substantial question of law arises for
consideration:
Whether on the facts and in the
circumstances of the case the Income Tax
Appellate Tribunal was justified in
treating the assessment as invalid on the
ground that no notice under section 143(2)
of the Income Tax Act, 1961 had been
issued after the assessee filed the return
of income?
10. The facts are not in dispute. The
Assessing Officer initially issued notice
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under section 148 of the Act on
20.03.2009, seeking to reopen the
assessment of the respondent assessee for
assessment year 2005-06. Subsequently,
notices under section 148 of the Act came
to be issued to the assessee on
26.03.2009, 08.03.2010, 05.07.2010 and
lastly on 04.10.2010.
11. It may be noted that the Assessing
Officer recorded the reasons for reopening
the assessment only on 20.07.2010,
therefore, it is only the notice dated
04.10.2010, which can be said to have been
issued in accordance with the provisions
of section 148 of the Act, viz., after
recording of the reasons. It appears that
in response to the notice under section
148 of the Act, the respondent assessee,
by a letter dated 19.07.2010, had asked
the Assessing Officer to consider the
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earlier return of income filed by it as
the return filed in response to the
notice. After the assessee addressed the
above letter dated 19.07.2010 to the
Assessing Officer, no notice under section
143(2) of the Act was issued. The notice
under section 143(2) of the Act had been
issued to the assessee on 12.03.2010 only,
that is, prior to the communication dated
19.07.2010 of the assessee, informing the
Assessing Officer to treat the earlier
return filed by it as the return filed in
response to the notice under section 148
of the Act. Nonetheless, the assessment
proceedings proceeded further pursuant to
the notice under section 148 of the Act
and came to be concluded by an assessment
order dated 07.01.2011 made under section
143(3) read with section 147 of the Act.
12. The facts as emerging from the
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record show that it is an admitted
position that no notice under section
143(2) of the Act had been issued after
the assessee informed the Assessing
Officer to treat the earlier return of
income as the return filed in response to
the notice under section 148 of the Act.
In other words, no notice under section
143(2) of the Act was issued after the
filing of the return of income. The
question that, therefore, arises for
consideration is whether the assessment
order framed under section 143(3) read
with section 147 of the Act would be
rendered invalid in the absence of a
notice under section 143(2) of the Act?
13. For the purpose of better
understanding of the controversy in issue,
it may be germane to refer to the
provisions of sub-section (2) of section
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143 of the Act, which as it stood at the
relevant time when the notice under
section 148 of the Act was issued reads
thus:
"143. Assessment (1)
(2) Where a return has been furnished
under section 139, or in response to a
notice under sub-section (1) of section
142, the Assessing Officer shall,-
(i) where he has reason to believe that
any claim of loss, exemption,
deduction, allowance or relief made in
the return is inadmissible, serve on
the assessee a notice specifying
particulars of such claim of loss,
exemption, deduction, allowance or
relief and require him, on a date to be
specified therein to produce, or cause
to be produced, any evidence or
particulars specified therein or on
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which the assessee may rely, in support
of such claim:
Provided that no notice under this
clause shall be served on the assessee
on or after the Ist day of June, 2003;
(ii) notwithstanding anything contained
in clause (i), if he considers it
necessary or expedient to ensure that
the assessee has not under-stated the
income or has not computed excessive
loss or has not under-paid the tax in
any manner, serve on the assessee a
notice requiring him, on a date to be
specified therein, either to attend his
office or to produce, or cause to be
produced, any evidence on which the
assessee may rely in support of the
return:
Provided that no notice under clause
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(ii) shall be served on the assessee
after the expiry of six months from the
end of the financial year in which the
return is furnished.
14. On a plain reading of the above
provision, it is manifest that it
contemplates that when an assessee files a
return under section 143 of the Act, and
the Assessing Officer finds that any claim
as described therein is inadmissible, he
is required to serve a notice to the
assessee specifying particulars of such
claim and a date on which he should
produce or caused to be produced, any
evidence or particulars specified therein
on which the assessee may rely in support
of such claim.
15. Section 292BB of the Act reads thus;
"292BB. Where an assessee has appeared
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in any proceeding or co-operated in any
inquiry relating to an assessment or
re-assessment, it shall be deemed that
any notice under any provision of this
Act, which is required to be served
upon him, has been duly served upon him
in time in accordance with the
provisions of this Act and such
assessee shall be precluded from taking
any objection in any proceeding or
inquiry under this Act that the notice
was - not served upon him; or
not served upon him in time; or
served upon him in an improper manner:
Provided that nothing contained in this
section shall apply where the assessee
has raised such objection before the
completion of such assessment or
reassessment."
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16. From the language employed in section
292BB of the Act, it emerges that a notice
would be deemed to be valid in the three
circumstances provided therein, namely,
where the assessee has participated in the
proceedings it would not be permissible
for him to raise objection that (i) the
notice was not served upon him; or (ii)
was served upon him in time; or (iii) was
served upon him in an improper manner.
17. Thus, all the circumstances
contemplated under section 292BB of the
Act are in a case where a notice has been
issued, but has either not been served
upon the assessee or not served in time or
has been served in an improper manner. The
said provision clearly does not
contemplate a case where no notice has
been issued at all.
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18.The Supreme Court in case of Hotel Blue
Moon (supra) held thus:
'21. We may now revert back to Section
158-BC(b) which is the material
provision which requires our
consideration. Section 158-BC(b)
provides for enquiry and assessment.
The said provision reads that:
"158-BC. (b) the assessing officer
shall proceed to determine the
undisclosed income of the block period
in the manner laid down in section 158-
BB and the provisions of section 142,
sub-sections (2) and (3) of section
143, section 144 and section 145 shall,
so far as may be, apply;"
An analysis of this sub-section
indicates that, after the return is
filed, this clause enables the
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assessing officer to complete the
assessment by following the procedure
like issue of notice under sections
143(2)/142 and complete the assessment
under section 143(3). This section does
not provide for accepting the return as
provided under section 143(1)(a). The
assessing officer has to complete the
assessment under section 143(3) only.
In case of default in not filing the
return or not complying with the notice
under sections 143(2)/142, the
assessing officer is authorized to
complete the assessment ex parte under
section 144.
22. Clause (b) of section 158-BC by
referring to sections 143(2) and (3)
would appear to imply that the
provisions of section 143(1) are
excluded. But section 143(2) itself
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becomes necessary only where it
becomes necessary to check the return,
so that where block return conforms to
the undisclosed income inferred by the
authorities, there is no reason, why
the authorities should issue notice
under section 143(2). However, if an
assessment is to be completed under
section 143(3) read with section 158-
BC, notice under section 143(2) should
be issued within one year from the
date of filing of block return.
Omission on the part of the assessing
authority to issue notice under
section 143(2) cannot be a procedural
irregularity and the same is not
curable and, therefore, the
requirement of notice under section
143(2) cannot be dispensed with.'
19. Thus, the Court held that if an
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assessment has to be completed under
section 143(3) read with section 158BC of
the Act, then notice under section 143(2)
of the Act should be issued within a
period of one year from the date of filing
of block return. The Court held that
omission on the part of the Assessing
Officer to issue notice under section
143(2) of the Act cannot be said to be a
procedural irregularity and the same is
not curable, and therefore, the
requirement of notice under section 143(2)
of the Act cannot be dispensed with.
20. In the facts of the present case
also, if the contention of the appellant
were to be accepted, it would amount to
dispensing with the notice under section
143(2) of the Act in view of the fact that
it is an admitted position that no such
notice had been issued after the return of
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income was filed by the assessee. After
the filing of the return of income, unless
a notice under section 143(2) of the Act
is issued to the assessee, he would have
no means of knowing as to whether or not
the Assessing Officer has accepted the
return of income as filed by him. As held
by the Supreme Court in the above
decision, omission to issue a notice under
section 143(2) of the Act is not a
procedural irregularities and is not
curable. It is, therefore, mandatory to
issue notice under section 143(2) of the
Act.
21. At this juncture, reference may also
be made to the contents of the Central
Board of Direct Taxes Circular No.549
dated 31.10.1989, which finds reference in
the decision of this Court in case of Mahi
Valley Hotels & Resorts (supra), which has
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been reproduced in paragraph 8.5
hereinabove. A perusal of the above
circular indicates that if an assessee,
after furnishing the return of income,
does not receive a notice under section
143(2) of the Act from the Department
within the prescribed period, then he can
take it that the return filed by him has
become final and no scrutiny proceedings
could be started in respect of that
return. This is the kind of significance
that has been attached to a notice under
section 143(2) of the Act by the Central
Board of Direct Taxes itself.
22. Section 292BB of the Act provides for
a deeming provision that any notice under
any provision of the Act, which is
required to be served upon the assessee,
has been duly served upon him in time, in
accordance with the provisions of the Act.
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In the opinion of this Court, this section
would be applicable where a notice has, in
fact, been issued and a contention is
raised that such notice has not been
served upon the assessee or has not been
served in time or has not been served
properly, namely, where there is a defect
in the service of notice. This provision
does not apply to a case where no notice
has been issued at all. In the facts of
the present case, at the cost of
repetition, it may be stated that no
notice under section 143(2) of the Act has
been issued after the assessee had filed
its return of income and hence, section
292BB of the Act would not be attracted.
23. In the light of the above discussion,
this Court does not agree with the view
adopted by the Punjab and Haryana High
Court in case of Ram Narain Bansal
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(supra). Insofar as the decision of the
Madras High Court in case of Venkatesan
Raghuram Prasad (supra) is concerned, that
was a case where notice was in fact,
issued, but it was contended that such
notice was not served properly. Therefore,
the said case was a case of defective
service of notice, which would be squarely
covered by the provisions of section 292BB
of the Act. The said decision, therefore,
has no applicable to the facts of the
present case.
24. In the light of the fact that non-
issuance of a notice under section 143(2)
of the Act is not a procedural
irregularity, the same cannot be cured
under section 292BB of the Act and hence,
the assessment order passed without
issuance of notice under section 143(2) of
the Act, would be rendered invalid. The
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Tribunal as well as the Commissioner
(Appeals), therefore, did not commit any
error in holding that the notice issued
prior to the filing of the return of
income was invalid and that, in absence of
a valid notice under section 143(2) of the
Act, the assessment order was rendered
invalid. ”
5. In view of the above settled legal
position, the Tribunal held that the
issuance of notice under Section 143(2) of
the Act, prior to filing of Return of
Income, was invalid and in absence of valid
notice under Section 143(2) of the Act, the
Assessment Order is rendered invalid and
accordingly, the same was set aside.
6. In view of such findings of fact
recorded by the Tribunal and in view of the
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settled legal position that notice under
Section 143(2) of the Act was not issued by
the Assessing Officer after filing of
return by the assessee in response to the
notice under Section 148 of the Act and the
th
notice issued on 19 September, 2018, prior
to the filing of return by the assessee,
would be an invalid notice, resulting into
invalid re-assessment order , no question of
law can be said to have arisen from the
impugned order of the Tribunal.
7. The Appeals are accordingly, dismissed.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
PALAK
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