MILANI SWANIRBHAR GOSTHI,MURSHIDABAD V. A.O., WARD 42(1), , MURSHIDABAD

ITA 397/KOL/2025

AI Insights

The case involves Milani Swanirbhar Gosthi, the appellant, contesting the validity of an income tax assessment for the assessment year 2018-19. The primary contention was the invalidity of the notice issued under section 143(2) of the Income-tax Act, 1961, which was claimed not to comply with the CBDT instruction dated June 23, 2017. The appellant also challenged the jurisdiction of the NFAC to issue notices under section 142(1) before the faceless assessment scheme was notified. The Tribunal, referencing similar cases and CBDT instructions, ruled in favor of the appellant, leading to the quashing of the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772230 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Tapas Kumar Das Vs. ITO, Shib Nath Ghosh Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP LAKRA
• Assessee Lawyers: S. K. TULSIYAN; SONAM BAJORIA; ARS
• Keywords: Invalid notice; Bad and doubtful debts
• Section: 143(3); 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.397/KOL/2025 (Assessment Year:2018-19) Milani Swanirbhar Gosthi Nil Shyamnagar, Banjetia Berhampore, Murshidbad-742101, West Bengal Vs. Income Tax Officer, Ward 42(1), Murshidabad 39 R.N. Tagore Road, Behrampur, Murshidabad-742101 West Bengal (Appellant) (Respondent) PAN No. AAALM0919N Assessee by : Shri S.K. Tulsiyan, & Ms. Sonam Bajoria, ARs Revenue by : Shri Sandeep Lakra, DR Date of hearing: 30.07.2025 Date of pronouncement: 28.08.2025 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 16.01.2025for the AY 2018-19. 2. The issue raised in ground no.1 is against the invalid notice issued u/s 143(2) of the Act dated 22.09.2019, in violation of CBDT instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017. 3. The facts in brief are that the assessee filed the return of income on 15.10.2018, declaring total income of ₹19,96,730/-. The case of the assessee was selected for complete scrutiny and accordingly, notice Printed from counselvise.com Page | 2 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 u/s 143(2) and 142(1) of the Act, along with questionnaire were issued and served upon the assessee. Finally, the assessment was framed vide order dated 18.03.2021, passed u/s 143(3), read with section 143(3A) and 143(3B) of the Act. 4. In the appellate proceedings, the appeal was decided ex-parte in limine when the assessee failed to comply with the notices issued by the appellate authority. 5. The assessee has challenged the very basis of the assessment on the ground that the statutory notices u/s 143(2) of the Act dated 22.09.2019, was not in conformity with CBDT instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017 and therefore, the entire proceedings, including the assessment order framed is nullity and bad in the eyes of law. The ld. AR in defense of his arguments relied on the decision of Tapas Kumar Das Vs. ITO in ITA No. 1660/KOL/2024 vide order dated 11.03.2025 for A.Y. 2017-18, wherein similar issue has been decided in favour of the assessee. The ld. AR therefore prayed that the additional ground raised by the assessee may kindly be allowed 6. The ld. DR on the other hand submitted that this is a computer- generated notice and the non-mentioning of the fact of either limited or complete scrutiny or compulsory manual scrutiny would not render the issuance of notice u/s 143(2) of the Act as invalid. Therefore, ground raised by the assessee may kindly be dismissed. 7. 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 22.09.2019, specified only computer aided scrutiny selection which neither mentioned it either to be a limited or Printed from counselvise.com Page | 3 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 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 proceedings 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 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:- ““आमकरअधिनियम 1961 कीिारा 143(2) क ेअिीििोटिस 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 ेपावतीसंख्या 269322761301017 क ेअिुसारआपक ेद्वाराटदिांक 30/10/2017 कोदाखिलकीगईआयकरवववरणीकोसंवीक्षाक ेललएचुिागयाहै। 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. इससंबंिमें, आपकोटदिीक 16/11/2018 को 01:00 PM तकसाक्ष्यप्रस्तुतकरिेअथवासाक्ष्यप्रस्तुतकरािेकाअवसरप्रदािककयाजारहाहैजजसपरआपउक्तआयकरवववरणी क ेसमथसिमेंनिभसरहैं/ 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 16/11/2018 at 01:00 PM. Printed from counselvise.com Page | 4 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 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 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 7. 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 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:- Printed from counselvise.com Page | 5 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 “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 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.” 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.” 8. Since the facts of the assessee’s case are similar to one as decided by the co-ordinate Bench extracted above, 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 ground no.1 of appeal is allowed. 9. The assessee has also challenged the assessment framed by the national faceless assessment unit on the ground of not having any Printed from counselvise.com Page | 6 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 jurisdiction to frame the assessment. The ld. Counsel for the assessee submitted that the notice u/s 142(1) of the Act was issued by NFAC on 13.01.2021, without having any jurisdiction / power to issue such notice and finally the assessment was framed u/s 143(3) vide Order dated 18.03.2021. The ld. Counsel for the assessee submitted that there is a separate section for issuance of notice u/s 142B of the Act which was inserted from 01.11.2020 for faceless enquiry and valuation.The ld. Counsel for the assessee submitted that u/s 142B of the Act faceless enquiry or valuation scheme 2022 were duly notified on 30th March, 2022, vide notification no.19/2022/F. No.370142/15/2022.TPL for issuing notice u/s 142(1) of the Act in faceless manner through automated allocation in accordance with and to the extent provided u/s 144B of the Act with reference to making faceless assessment of total income or loss of the assessee. Accordingly, section 144B of the Act was also stipulated by Finance Act, 2022, with effect from 01.04.2022, to include provisions for issuance of notice u/s 142(1) of the Act vide clause (iii) of Section 144B of the Act. Accordingly, therefore submitted that national faceless assessment center has no power to issue notice u/s 142(1) of the Act prior to 30th March, 2022, because the scheme of faceless enquiry u/s 142B of the Act for issuance of notice u/s 142(1) by NFEAC was notified on 30.03.2022, vide notification no.19 /2022. 10. The ld. DR on the other hand strongly opposed the argument of the assessee by submitting that the notice u/s 142(1) was issued from the portal of the department and assessee has no locustandi to challenge the said notice. Printed from counselvise.com Page | 7 ITA No.397/KOL/2025 Milani SwanirbharGosthi; A.Y. 2018-19 11. Even on this limb of the argument, we find merit and accordingly, hold that the order passed by the NFAC, is without jurisdiction. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 28.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.08.2025 Sudip Sarkar, Sr.PS 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 "