AI Insights
The case involves M/s. Durga Automotives Pvt. Ltd., the appellant, contesting the validity of a notice issued under section 143(2) of the Income Tax Act, 1961, by the Assessing Officer for the assessment year 2017-18. The notice was challenged on the grounds that it lacked specific details regarding the type of scrutiny and did not comply with CBDT Instruction F. No. 225/157/2017/ITA-II dated 23.06.2017. The Income Tax Appellate Tribunal, Kolkata, examined the procedural adherence of the notice and found it to be non-compliant with the mandatory CBDT instructions, leading to the decision to quash the notice and the subsequent assessment.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 126025 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-04-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2017-2018
Judgement Text
"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.675/Kol/2024 Assessment Year: 2017-18 M/s. Durga Automotives Pvt. Ltd. T.N. Road, Dagapur, Siliguri, Darjeeling, West Bengal-734003. (PAN: AABCD7913K) Vs. DCIT, Circle-1, Siliguri (Appellant) (Respondent) Present for: Appellant by : Shri Soumitra Choudhury, Advocate Respondent by : Shri Sallong Yaden, Addl. CIT, DR Date of Hearing : 22.04.2025 Date of Pronouncement : 22.04.2025 O R D E R Per Bench : The captioned appeal by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/NFAC/S/250/2023- 24/1056426955(1) dated 22.09.2023 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2017-18. 2. Shri Soumitra Choudhury, Advocate represented on behalf of the assessee and Shri Sallong Yaden, Addl. CIT, DR appeared on behalf of the revenue. 3. This appeal of the assessee is time barred by 72 days. A separate condonation petition dated 02.04.2024 has been placed in file. Considering the averments made in the said petition, we find that the 2 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 reasons given in the said petition is reasonable and we condone the delay and admit the appeal for hearing. 4. The assessee has filed additional grounds of appeal, which reads as follows: “1. For that on the facts of the case, the Assessing Officer issuing the notice u/s.143(2) of the I.T. Act, 1961 on 27.09.2018 did not have jurisdiction over the case of the assessee, as there was no mention of the type of scrutiny under which the case of the assessee has been selected, hence the notice is bad-in- law and the assessment order passed on the basis of such notice is baseless and should be quashed. 2. For that on the facts of the case, the A.O. was wrong in issuing notice u/s. 143(2) on 27.09.2018 without complying to the CBDT Instruction F. No. 225/157/2017/ITA-II dated 23.06.2017and so the notice issued u/s. 143(2) is not valid as per Provision of Act. 3. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.” 5. In the additional grounds, the assessee has challenged the notice issued u/s. 143(2) of the Act. The Ld. AR drew our attention to the notice u/s. 143(2) of the Act which reads as follows: 3 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 6. It was submitted by the Ld. AR that the format of the 143(2) notice has been provided by the CBDT along with a note on e-proceeding which are as follows: 4 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 5 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 6 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 7 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 8 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 7. It was a submission that as the notice issued u/s. 143(2) in the case of the assessee which has been extracted above is not in conformity with the notice issued u/s. 143(2) as prescribed in the e-proceeding 9 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 format. The notice u/s. 14392) is liable to be quashed. It was the submission that consequently the assessment order is also liable to be set aside. The Ld. AR placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Sajal Biswas Vs. ITO, ITA No. 1244/Kol/2023 dated 26.03.2025 wherein in para 9 and 10 the coordinate bench of this Tribunal has held as under: 09.After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the notice issued u/s 143(2) of the Act dated 10.08.2018, specifies only com- puter aided scrutiny selection which neither mentioned it either to be a limited or a complete scrutiny nor compulsory manual scrutiny. Thus, the said notice has been issued in violation of the instruction issued by CBDT as noted above. In our opinion, the revenue authorities have to follow the instruction issued by CBDT and violation thereto would certainly render the notice as invalid with the result all the consequential proceeding would also be invalid. The case of the assessee find support from the decision of the co-ordinate Bench in the case of Tapas Kumar Das Vs. ITO (supra), wherein a similar issue has been decided in favour of the assessee. The operative part of the same is extracted below:- “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, a copy of which is avail- able at page no. 25 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:- ““आमकरअिधिनयम 1961 कीधारा 143(2) क ेअधीननोिटस Notice under section 143(2) of the Income-tax Act, 1961 संवीƗा (क ंɗूटरआधाįरतसंवीƗाचयन Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससŊ, Sir/Madam/ M/s, आपकोसूिचतिकयाजाताहैिकिनधाŊरणवषŊ 2017-18 क ेपावतीसंƥा 269322761301017 क ेअनुसारआपक ेȪारािदनांक 30/10/2017 कोदाİखलकीगईआयकरिववरणीकोसंवीƗाक ेिलएचुनागयाहै। This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack, no. 269322761301017 on 30/10/2017 has been selected for Scrutiny. 2. इससंबंधमŐ, आपकोिदनीक 16/11/2018 को 01:00 PM तकसाƙŮˑुतकरनेअथवासाƙŮˑुतकरानेकाअवसरŮदानिकयाजारहाहैिजसपरआपउƅआय करिववरणीक ेसमथŊनमŐिनभŊरहœ/ रहŐगे। 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 16/11/2018 at 01:00 PM. 10 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 3. उपयुŊƅिनिदŊʼŮमाण / सूचनाकोआपकोऑनलाइनमाȯमसेइलेƃŌॉिनकŝपमŐ Incometaxindi- aefiling.gov.in परअपनेई- फाईिलंगखाताȪाराŮˑुतिकयाजानाहै।बादकीिनधाŊरणकायŊवाहीभीआयकरिवभागकी 'ई- कायŊवाही' सुिवधाȪाराकीजायेगी। 'ई-कायŊबाही' परएकसंिƗɑनोटआपक ेसंदभŊक ेिलएसंलưहै। 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 refer- ence. 4. िनधाŊरणकायŊवाहीक ेदौरान, यिदआवʴकहोगातोसूचना / दˑावेजहेतुिवशेषŮʲावली (यों) याअिधयाचना (याँ) कोबादमŐजारीिकयाजाएगा। 4. In course of assessment proceedings, if required, specific questionnaire(s) or requisi- tion(s) for information/document shall be issued subsequently. 5. क ृपयाȯानदŐिकयिदआपक ेपासई-फाइिलंगखाताहैतोआपक ेिलएपैरा 3 लागूहै।आपक ेȪाराˢयंअपनाखातानबनालेनेतकिनधाŊरणकायŊवाहीआपक ेȪाराविणŊतकीगईई-मे is created by you, assessment proceedings shall be carried out either through your speci- fied e-mail account or manually (if e-mail is not available). संलưक : यचौधįर Enclosure as above ” 7. In our opinion, the notice issued u/s 143(2) of the Act which is not in the pre- scribed format as provided under the Act is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. The case of the as- sessee 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 man- datory 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 cir- cular 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 as- sessee. The power is given for the purpose of just, proper and efficient management of the 11 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 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 as- sessee 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 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 Cen- tral 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 in- cluded 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.” 8. 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.” 10.Since the facts of the assessee’s case are similar to one as decided by the co-ordinate Bench, we therefore, respectfully following the same hold that the notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially is also invalid and is hereby quashed. The additional ground raised by the assessee is allowed.” 8. The Ld. AR also drew our attention to the decision of the Coordinate bench of this Tribunal in the case of Tapas Kr. Das Vs. ITO in ITA No. 1660/Kol/2024 dated 11.03.2025, wherein the coordinate Bench of this Tribunal has held in para 6 to 8 as under: 06.“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, a copy of which is available at page no. 25 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:- “आमकर अिधिनयम 1961 की धारा 143(2) क े अधीन नोिटस Notice under section 143(2) of the Income-tax Act, 1961 संवीƗा (क ंɗूटर आधाįरत संवीƗा चयन Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससŊ, Sir/Madam/ M/s, 12 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 आपको सूिचत िकया जाता है िक िनधाŊरण वषŊ 2017-18 क े पावती संƥा 269322761301017 क े अनुसार आपक े Ȫारा िदनांक 30/10/2017 को दाİखल की गई आयकर िववरणी को संवीƗा क े िलए चुना गया है। This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack, no. 269322761301017 on 30/10/2017 has been selected for Scrutiny. 2. इस संबंध मŐ, आपको िदनीक 16/11/2018 को 01:00 PM तक साƙ Ůˑुत करने अथवा साƙ Ůˑुत कराने का अवसर Ůदान िकया जा रहा है िजस पर आप उƅ आयकर िववरणी क े समथŊन मŐ िनभŊर हœ/ रहŐगे। 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 16/11/2018 at 01:00 PM. 3. उपयुŊƅ िनिदŊʼ Ůमाण / सूचना को आपको ऑनलाइन माȯम से इलेƃŌॉिनक ŝप मŐ Incomet- axindiaefiling.gov.in पर अपने ई-फाईिलंग खाता Ȫारा Ůˑुत िकया जाना है। बाद की िनधाŊरण कायŊवाही भी आयकर िवभाग की 'ई-कायŊवाही' सुिवधा Ȫारा की जायेगी। 'ई-कायŊबाही' पर एक संिƗɑ नोट आपक े संदभŊ क े िलए संलư है। 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 refer- ence. 4. िनधाŊरण कायŊवाही क े दौरान, यिद आवʴक होगा तो सूचना / दˑावेज हेतु िवशेष Ůʲावली (यों) या अिधयाचना (याँ) को बाद मŐ जारी िकया जाएगा। 4. In course of assessment proceedings, if required, specific questionnaire(s) or requisi- tion(s) for information/document shall be issued subsequently. 5. क ृपया ȯान दŐ िक यिद आपक े पास ई-फाइिलंग खाता है तो आपक े िलए पैरा 3 लागू है। आपक े Ȫारा ˢयं अपना खाता न बना लेने तक िनधाŊरण कायŊवाही आपक े Ȫारा विणŊत की गई ई-मे is created by you, assessment proceedings shall be carried out either through your speci- fied e-mail account or manually (if e-mail is not available). संलưक : यचौधįर Enclosure as above” 07. In our opinion, the notice issued u/s 143(2) of the Act which is not in the prescribed format as provided under the Act 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 13 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 23.06.2017 as stated above. In our opinion, the instruction issued by the CBDT are man- datory 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 cir- cular 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 pow- ers under section 119 of the Act which are binding on the authorities in the ad- ministration of the Act. Under section 119(2)(a), however, the circulars as con- templated 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 admin- istration 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 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 sub- jected 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.” 08.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.” 9. It was the submission that in view of the decision of the Coordinate Bench of this Tribunal on the identical issue the notice issued u/s. 143(2) is liable to be quashed and the consequential assessment order is also liable to be quashed. 10. In reply, the ld. Sr. DR vehemently supported the orders of the lower authorities. He has further filed a note in regard to the issue of notice u/s. 143(2) as follows: 14 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 “ 15 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 16 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 17 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 18 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 11. It was the submission that the order of the Ld. CIT(A) is liable to be upheld. 12. We have considered the rival submissions. A perusal of the facts of the present case clearly shows that the notice u/s. 143(2) is admittedly not in the format as provided under the note on e- 19 ITA No.675/Kol/2024 M/s. Durga Automotive Pvt. Ltd., AY 2017-18 assessment proceeding. In these circumstances, respectfully following the decisions of the coordinate bench of this tribunal cited supra, the notice issued u/s. 143(2) dated 27.09.2018 in the case of the assessee is held to be invalid and the same stands set aside. As the notice u/s. 14392) has been set aside the consequential assessment is also void and stands quashed. 13. In the result, the appeal of the assessee is allowed. Sd/- Sd/- (Rajesh Kumar) (George Mathan) Accountant Member) Judicial Member Dated: 22nd April, 2025 JD, Sr. P.S. Copy to: 1. The Appellant: M/s. Durga Automotives Pvt. Ltd. 2. The Respondent: DCIT, Circle-1, Siliguri 3. CIT(A), NFAC, Delhi 4. Pr. CIT- , Kolkata 5. DR, ITAT, Kolkata Bench, Kolkata 6. Guard file. //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "
Other Referred Cases
Sajal Biswas Vs. ITO, Tapas Kumar Das Vs. ITO, Shib Nath Ghosh Vs. ITO
Laws Referred To
Income Tax Act, 1961
1:1 Consultation on Tax Litigation
₹0
1:1 Consultation on FEMA Compliance
₹1
1:1 Consultation on Tax Litigation
₹1
Rectification Letter - Application for rectification of mistake under Section 154 of I.T. Act
Mehul₹0
Initial LLP Agreement
₹0
When Global Talent Meets GST: The Huawei Secondment Ruling explained
Team Counselvise - March 09, 2026
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026
Why Lacoste Won a 20-Year Trademark Battle Against Crocodile ?
Team Counselvise - March 10, 2026