A notice under Section 143(2) issued before filing the reassessment return is invalid and incurable.

Krypton Diamonds Pvt. Ltd. filed its return of income for Assessment Year 2013–14 on 28 September 2013, declaring income of ₹30,44,890.

Following information concerning alleged accommodation entries arising from a search conducted in the Rajendra Jain, Sanjay Choudhary and Dharmichand Jain groups, the Assessing Officer issued a notice under Section 148 of the Income Tax Act, 1961 on 30 March 2018.

The assessee replied on 24 May 2018 requesting that its original return be treated as the return filed in response to the Section 148 notice.

The Assessing Officer rejected that request and directed the assessee to file an electronic return. Before the assessee filed the electronic return, the Assessing Officer issued a notice under Section 143(2) on 19 September 2018.

The assessee thereafter filed its return electronically on 28 September 2018 in response to the Section 148 notice and challenged the validity of the earlier Section 143(2) notice.

The Tribunal held that the notice issued before the filing of the return was invalid and set aside the reassessment proceedings, relying principally on PCIT v. Marck Biosciences Ltd.

The Revenue appealed under Section 260A of the Act.

Whether a notice under Section 143(2) issued before the assessee filed a return in response to a notice under Section 148 is a valid notice for the purpose of completing reassessment under Sections 147 and 143(3)?

Whether the assessee’s request to treat its original return as the return filed in response to the Section 148 notice enabled the Assessing Officer to rely on the Section 143(2) notice issued on 19 September 2018?

Whether, after the assessee subsequently filed an electronic return on 28 September 2018, a fresh notice under Section 143(2) was required, and whether Section 292BB could cure the absence of such notice?

Section 143(2) of the Income Tax Act requires the Assessing Officer to issue a notice after a return has been furnished where scrutiny is proposed; in reassessment proceedings, the requirement applies to the return filed in response to the notice under Section 148.

The Supreme Court’s decision in Hotel Blue Moon establishes that issuance of a valid notice under Section 143(2) is mandatory for completing an assessment under Section 143(3), and omission to issue such notice is not a curable procedural irregularity.

In PCIT v. Marck Biosciences Ltd., the Gujarat High Court held that a notice under Section 143(2) issued before the filing of the return is invalid and that an assessment made without a valid post-return notice is liable to be annulled.

Section 292BB cures defects relating to service, timing or manner of service where a notice has in fact been issued, but it does not cure the complete absence of a mandatory notice.

The Court held that the relevant return for Section 143(2) purposes was the return filed in response to the Section 148 notice. The notice dated 19 September 2018 preceded the assessee’s electronic return dated 28 September 2018 and therefore could not constitute a valid notice issued after the filing of that return.

Treating the earlier notice as sufficient would effectively dispense with the mandatory statutory requirement of issuing a Section 143(2) notice after the return was furnished.

The assessee’s earlier request to treat the original return as the return filed in response to Section 148 did not alter the legal position, particularly because the Assessing Officer did not accept that request and directed the assessee to file an electronic return.

Since no fresh Section 143(2) notice was issued after the electronic return, the reassessment was invalid.

Section 292BB was inapplicable because the defect was not defective service or delayed service of an issued notice, but the absence of a valid post-return notice altogether.

In the absence of a valid notice issued after the filing of the return, the reassessment order was rendered invalid, and Section 292BB could not cure the defect.

The Court found no substantial question of law arising from the Tribunal’s order and dismissed Tax Appeal Nos. 651 and 652 of 2022.