DHIRENDRA CHANDRA BISWAS,JIRAT V. ACIT, CIRCLE 24(1), HOOGHLY

ITA 1722/KOL/2025

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The case involves Dhirendra Chandra Biswas, a distributor under the Public Distribution System in West Bengal, who appealed against the order of the National Faceless Appeal Centre, Delhi, which upheld an assessment order passed by the Assistant Commissioner of Income Tax, Circle 24(1), Hooghly. The assessment was based on a notice under section 143(2) of the Income-tax Act, 1961, which was later challenged for not adhering to the prescribed CBDT instructions. The Tribunal's decision was influenced by a precedent set in the case of Shib Nath Ghosh Vs. ITO, which underscored the binding nature of CBDT instructions on tax authorities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783737 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 30-07-2025
• Other Referred Cases: Shib Nath Ghosh Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANAS MONDAL
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Invalid notice; Bad and doubtful debts; Corroborative evidences
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.1722/KOL/2025 (Assessment Year: 2017-18) Dhirendra Chandra Biswas C/o S.N. Ghosh & Associates, Advocates 2, Garstin Place, 2 nd Floor, Suite No.203, Off hare Street, Kolkata-700001, West Bengal Vs. ACIT, Circle 24(1), Hooghly Aaykar Bhawan Poorva, Hooghly, Khadina More, G.T. Road, 3 rd floor, P.O. Chinsurah, P.S. Chinsurah, Dist. Hooghly, West Bengal-712101 (Appellant) (Respondent) PAN No. ADXPB9389D Assessee by : Shri Somnath Ghosh, AR Revenue by : Shri Manas Mondal, DR Date of hearing: 15.10.2025 Date of pronouncement: 04.11.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 23.07.2025 for the AY 2017-18. 02. The issue raised in ground no.2 is against the order of the ld. CIT (A) upholding the assessment order u/s 143(3) of the Income-tax Act, 1961 (the Act) which is passed consequent to invalid notice issued u/s 143(2) of the Act which is not in accordance with instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017, issued by the CBDT. The assessee has raised ground no. 2, which reads as under:- Printed from counselvise.com Page | 2 ITA No. “2. For that the Ld. Commissioner of Income-tax (Appeals)_NFAC acted unlawfully in upholding the impugned assessment order framed u/s 143(3) of the Act by the Ld. Assistant Commissioner of Income tax, Circle 24(1) Hooghly basing on an invalid notice issued u/s 143(2) of the Act in contravention to the CBDT Instruction F. No. 225/157/2017/ITA-II Dated 23.06.2017 and the spacious action on that account is absolutely arbitrary, unwarranted, and perverse.\" 03. The brief facts of the case are that the assessee is a distributor under Public Distribution System working under the department of Food & Supplies, Government of West Bengal. The assessee filed its return of income u/s 139(1) of the Act on 02.11.2017, declaring total income at ₹10,44,240/-. Subsequently, the case of the assessee was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS). Thereafter, the notice u/s 143(2) of the Act dated 10.08.2018 was issued and served upon the assessee. In the assessment proceeding, the assessee was asked to submit various details like cash deposits made during the demonetization period and supporting evidences but no compliance was made on the part of the assessee. Finally, the ld. AO assessed the total income at ₹1,16,44,240 by framing the assessment vide order dated 23.12.2019. 04. In the appellate proceedings also the ld. CIT (A) confirmed the order of the ld. AO when there is no compliance made on the part of the assessee. 05. After hearing the rival contentions and perusing the materials available on record, we find that particularly the notice was issued u/s 143(2) of the Act on 10.08.2018, a copy of which is available at page no. 53 of the Paper Book. We note that the said notice has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II Dated 23.06.2017. The said notice is extracted below for the sake of ready reference:- “आमकरअधिनियम 1961 कीिारा 143(2) क ेअिीििोटिस Printed from counselvise.com Page | 3 ITA No. Notice under section 143(2) of the Income-tax Act, 1961 संवीक्षा (क ंप्यूिरआिाररतसंवीक्षाचयि Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससस, Sir/Madam/ M/s, आपकोसूधचतककयाजाताहैककनििासरणवर्स 2017-18 क ेपावतीसंख्या284764621021117क ेअिुसारआपक ेद्वाराटदिांक02/11/2017कोदाखिलकीगईआयकरवववरणी कोसंवीक्षाक ेललएचुिागयाहै। This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack, no. 284764621021117on 02/11/2017 has been selected for Scrutiny. 2. इससंबंिमें, आपकोटदिीक04/10/2018 को12:30PM तकसाक्ष्यप्रस्तुतकरिेअथवासाक्ष्यप्रस्तुतकरािेकाअवसरप्रदािककयाजारहाहैजजसपरआपउक्तआयकरवववरणीक ेसमथसि मेंनिभसरहैं/ रहेंगे। 2. In this regard, an opportunity is being given to you to produce or cause to produce any evidence on which you may like to rely in support of the said return of income by 04/10/2018 at 12:30 PM. 3. उपयुसक्तनिटदसष्िप्रमाण / सूचिाकोआपकोऑिलाइिमाध्यमसेइलेक्रॉनिकरूपमें Incometaxindiaefiling.gov.in परअपिेई- फाईललंगिाताद्वाराप्रस्तुतककयाजािाहै।बादकीनििासरणकायसवाहीभीआयकरववभागकी 'ई-कायसवाही' सुवविाद्वाराकीजायेगी। 'ई-कायसबाही' परएकसंक्षक्षप्तिोिआपक ेसंदभसक ेललएसंलग्िहै। 3. The evidence/information specified above has to be furnished online electronically through your E-filing account in incometaxindiaefiling.gov.in. Subsequent assessment proceedings shall also be conducted electronically through the 'E-Proceeding' facility of Income-tax Department. A brief note on 'E-Proceeding' is enclosed for your kind reference. 4. नििासरणकायसवाहीक ेदौराि, यटदआवश्यकहोगातोसूचिा / दस्तावेजहेतुववशेर्प्रश्िावली (यों) याअधियाचिा (यााँ) कोबादमेंजारीककयाजाएगा। 4. In course of assessment proceedings, if required, specific questionnaire(s) or requisition(s) for information/document shall be issued subsequently. 5. क ृपयाध्यािदेंककयटदआपक ेपासई-फाइललंगिाताहैतोआपक ेललएपैरा 3 लागूहै।आपक ेद्वारास्वयंअपिािातािबिालेिेतकनििासरणकायसवाहीआपक ेद्वारावखणसतकीगईई-मे Printed from counselvise.com Page | 4 ITA No. is created by you, assessment proceedings shall be carried out either through your specified e-mail account or manually (if e-mail is not available). संलग्िक : यचौिरर Enclosure as above सील/seal भवदीय Yours faithfully, Anil Kumar De Ward 24(1), Hooghly” 06. In our opinion, the notice issued u/s 143(2) of the Act which is not in the prescribed format as in the CBDT instruction is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. The case of the assessee find support from the decision of Shib Nath Ghosh Vs. ITO in ITA No. 1812/KOL/2024 for A.Y. 2018-19 vide order dated 29.11.2024, wherein the co-ordinate Bench has held as under:- “10. After hearing both the sides and the materials available on record, we find that the notice issued u/s 143(2) dated 9th August, 2017 was not in any of the formats as provided in the CBDT instruction F.No.225/157/2017/ITA-II dated 23.06.2017. We have examined the notice, copy of which is available at page no.1 of the Paper Book and find that the same is not as per the format of CBDT Instruction F.No. 225/157/2017/ITA-II dated 23.06.2017 as stated above. In our opinion, the instruction issued by the CBDT are mandatory and binding on the Income tax authorities failing which the proceedings would be rendered as invalid. Hon'ble Apex Court in case of UCO Bank (supra) held that the circular issued by CBDT in exercise of its statutory powers u/s 119 of the Act, are binding on the authorities. The Hon'ble Apex court held as under:- “The Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases Which can be properly categorized as belonging to a class, can thus be given the Printed from counselvise.com Page | 5 ITA No. benefit of relaxation of law by Issuing circulars binding on the taxing authorities. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes issued a circular dated October 6, 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, It need not be included in the assessee's taxable income, provided the Income-tax Officer is satisfied that recovery is practically improbable. Twenty-six years later, on June 20, 1978, in view of the judgment of the Kerala High Court In STATE BANK OF TRAVANCORE v. CIT [1977] 110 ITR 336, the Board by another circular, withdrew with immediate effect the earlier circular. However, by circular dated October 9, 1984, the Board decided that Interest in respect of doubtful debts credited to suspense account by banking companies would be subjected to tax but Interest charged in an account where there has been no recovery for three consecutive accounting years would not be subjected to tax in the fourth year and onwards. The circular also stated that if there is any recovery in the fourth year or later, the actual amount recovered only would be subjected to tax in the respective years. This procedure would apply to assessment year 1979-80 and onwards.” 07. Considering the facts of the instant case in the light of the decision of the co-ordinate bench, we are inclined to hold that notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially to that is also invalid and is hereby quashed. 08. The other grounds raised on merit are not being decided at this stage and are being left open to be decided if need arises for the same at later stage. 09. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 04.11.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 04.11.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 6 ITA No. Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "