SUBHENDU NANDY,BURDWAN V. I.T.O., WARD - 2(2), BURDWAN

ITA 2022/KOL/2024

AI Insights

The case involves Subhendu Nandy, the appellant, who contested the validity of a notice issued under section 143(2) of the Income Tax Act, 1961, by the Income Tax Officer, Ward 2(2), Burdwan. The notice was part of the scrutiny assessment for the assessment year 2017-18, following the selection of Nandy's case due to cash deposits during the demonetization period. The primary legal contention raised was that the notice did not adhere to the prescribed formats as per the CBDT instructions, rendering the subsequent assessment order invalid. The Tribunal, referencing decisions from the Hon'ble Apex Court and various coordinate benches, upheld the appellant's argument, leading to the quashing of the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712058 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Jute Corporation of India Ltd. Vs CIT, National Thermal Power Co. Ltd v. CIT, Hind Ceramics Pvt. Ltd. Vs. DCIT, M/s Durga Automotives Pvt. Ltd Vs DCIT, Sajal Biswas Vs. ITO, Shib Nath Ghosh Vs. ITO, Tapas Kumar Das Vs. ITO, UCO Bank (supra)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUCHIKA SHARMA
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Invalid notice; Bad and doubtful debts
• Section: 143(3); 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 2022/KOL/2024 (Assessment Year: 2017-18) Subhendu Nandy C/o S.N. Ghosh & Associates, Advocates Sagar Mansion, 2. Garstin Place, 2 nd Floor, Suite Nos, 202 & 203, Hare Street, Kolkata-700001, West Bengal Vs. ITO, Wd 2(2), Burdwan Aaykar Bhavan, Burdwan, Kachari Road, Court Compound, P.O. & P.S. Burdwan, Dist. Purba, bardhaman-713101, West Bengal (Appellant) (Respondent) PAN NO. AEGPN0674P Assessee by : Shri Somnath Ghosh, AR Revenue by : Shri Ruchika Sharma, DR Date of hearing: 21.05.2025 Date of pronouncement: 23.07.2025 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 29.07.2024 for the AY 2017-18. 02. At the outset, the ld. Counsel for the assessee raised an additional ground challenging the validity of notice issued u/s 143(2) of the Act by raising following additional grounds: - \"FOR THAT in the facts and circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. acted unlawfully in not appreciating that none of the conditions precedent existed for and/or were fulfilled by the Ld. Income Tax Officer, Ward 2(2). Burdwan for his specious action of framing the assessment order u/s. 143(3) of the Income Tax Act, 1961 on 24-12-2019 in the instant case de hors any valid notice u/s. 143(2) of the Income Tax Act, 1961 issued in contravention of the C.B.D.T. Printed from counselvise.com Page | 2 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 Instruction F. No. 225/157/2017/ITA-II Dated 23-06-2017 and the impugned inaction on that account renders the assessment order framed ab initio void, ultra vires and null in law.\" 03. The ld. Counsel for the assessee submitted that this ground was not raised either before the ld. AO or before the ld. CIT (A) and is being raised for the first time before the Tribunal. The ld. AR submitted that this is pure legal issue concerning the validity of the notice issued u/s 143(2) of the Act dated 24.09.2018 by the ld. AO to the assessee. The ld. AR submitted that no verification of facts are required to be done from any quarter whatsoever and therefore, the said additional ground may kindly be admitted for adjudication. The ld. AR submitted that the assessee is within his legitimate and lawful rights to raise the additional ground for the first time before any appellate authority and therefore, the same may be admitted and decided. In defense of his argument the ld. AR relied on the decisions of Hon'ble Apex Court in the case of Jute Corporation of India Ltd. Vs CIT in 187 ITR 688(SC) and National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 (SC). 04. The ld. DR on the other hand submitted that the issue was not raised before the other authorities below and therefore, may be restored to any of the authorities below for adjudication. 05. After hearing the rival contentions and perusing the materials available on record, we find that the issue of validity of notice is a legal issue which goes to the root of the matter. We further find that no verification of facts is required to be made qua the said ground as all the facts are available in the appellate folder. Accordingly, we are inclined to admit the additional ground raised by the assessee for adjudication by relying on the decision of Hon'ble Apex Court in the case of Jute Corporation of India Ltd. Vs CIT (supra) and National Thermal Power Co. Ltd v. CIT (supra). Printed from counselvise.com Page | 3 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 06. The facts in brief are that the assessee filed the return of income on 30.10.2017, declaring total income of ₹4,97,610/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the reason that the assessee has deposited cash during demonetization period. Notice u/s 143(2) of the Act and 142(1) of the Act were issued through ITBA portal and duly served upon the assessee. The assessee also complied with the said notices by filing the necessary information/ details before the ld. Assessing Officer. Finally, the ld. AO made an addition of ₹15,63,608/- u/s 69A of the Act and ₹1,71,94,825/- u/s 40(A)(3) of the Act, thereby assessing the total income at ₹1,92,56,043/- vide order dated 24.12.2019, passed u/s 143 of the Act. 07. The said order was affirmed by the ld. CIT (A) by upholding the assessment order when the assessee did not make any compliance to the various notices issued through e-mail and dismissing the appeal on the basis of material available before the appellate authority. 08. The ld. AR vehemently submitted before us that the assessment framed by the ld. AO is invalid because the notice issued u/s 143(2) of the Act dated 24.09.2018, is not as per CBDT instruction No.225/157/2017/ITA-II dated 23.06.2017. The ld. AR submitted that according to the said instruction, the notice issued u/s 143(2) of the Act is neither of three formats namely; (i) Limited Scrutiny (Computer Aided Scrutiny Selection) (ii) Complete Scrutiny (computer Aided Scrutiny Selection) (iii) Compulsory Manual Scrutiny. The ld. AR submitted that in Para No.3 of the said instruction, it was stated that all scrutiny noticed u/s 143(2) of the Act shall henceforth be issued in these revised formats only and in Para no.4, it was noted that the above may be brought to the notice of all for necessary compliance. The ld. AR Printed from counselvise.com Page | 4 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 stated that the notice issued u/s 143(2) of the Act dated 24.09.2018 is not in format with either of the formats as specified in the said instruction. Therefore, the notice issued is invalid and the assessment framed consequentially is also bas in law and kindly quashed. In defense of his argument, the ld. AR relied on the series of decision namely; Hind Ceramics Pvt. Ltd. Vs. DCIT in ITA Nos. 608 & 610/KOL/2024 for A.Y. 2012-13 & 17-18, M/s Durga Automotives Pvt. Ltd Vs DCIT in ITA No. 675/KOL/2024 for A.Y. 2017-18, Sajal Biswas Vs. ITO in ITA No. 1244/KOL/2023 for A.Y. 2017-18. The ld. AR prayed that the assessment framed in consequence to the said invalid notice issued u/s 143(2) of the Act is also invalid and bad in law and may kindly be quashed. 09. The ld. DR on the other hands submitted that the notice issued u/s 143(2) of the Act is a computer-generated notice and does not possible to make any changes therein, so that the same could confirm to the instruction relied on by the ld. AR. Therefore, the additional ground raised by the assessee may kindly be dismissed. 010. We have heard the rival contentions and perused the material place before us including the CBDT Instruction as noted above and also notice issued u/s 143(2) of the Act. In our opinion the notice issued u/s 143(2) is not in conformity with the CBDT instruction No. Instruction F. No. 225/157/2017/ITA-II dated 23.06.2017 and accordingly the notice issued is invalid and so is the consequential assessment framed. The case of the assessee is squarely covered by the decision of the coordinate benches stated above. For the sake of ready reference, we extract the operative part of M/s Durga Automotives Pvt. Ltd Vs DCIT (supra) as under: Printed from counselvise.com Page | 5 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 “9. 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 09.08.2018, specifies only computer 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:- “6. 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 अधिनियम 1961 की िारा 143(2) क े अिीि िोटिस Notice under section 143(2) of the Income-tax Act, 1961 संवीक्षा (क ंप्यूिर आिाररत संवीक्षा चयि Scrutiny (Computer Alded Scrutiny Selection) महोदय/महोदया/ भेससस, Sir/Madam/ M/s, आपको सूधचत ककया जाता है कक नििासरण वर्स 2017-18 क े पावती संख्या 269322761301017 क े अिुसार आपक े द्वारा टदिांक 30/10/2017 को दाखिल की गई आयकर वववरणी को संवीक्षा क े ललए चुिा 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 संबंि में, आपको टदिीक 16/11/2018 को 01:00 PM तक साक्ष्य प्रस्तुत करिे अथवा साक्ष्य प्रस्तुत करािे का अवसर प्रदाि ककया जा रहा है जजस पर आप उक्त आयकर वववरणी क े समथसि में निभसर हैं/ 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. 3. उपयुसक्त निटदसष्ि प्रमाण / सूचिा को आपको ऑिलाइि माध्यम से इलेक्रॉनिक रूप में Incometaxindiaefiling.gov.in पर अपिे ई-फाईललंग िाता द्वारा प्रस्तुत ककया जािा है। बाद की Printed from counselvise.com Page | 6 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 नििासरण कायसवाही भी आयकर ववभाग की 'ई-कायसवाही' सुवविा द्वारा की जायेगी। 'ई-कायसबाही' पर एक संक्षक्षप्त िोि आपक े संदभस क े ललए संलग्ि 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 reference. 4. नििासरण कायसवाही क े दौराि, यटद आवश्यक होगा तो सूचिा / दस्तावेज हेतु ववशेर् प्रश्िावली (यों) या अधियाचिा (यााँ) को बाद में जारी ककया जाएगा। 4. In course of assessment proceedings, if required, specific questionnaire(s) or requisition(s) for information/document shall be issued subsequently. 5. क ृपया ध्याि दें कक यटद आपक े पास ई-फाइललंग िाता है तो आपक े ललए पैरा 3 लागू है। आपक े द्वारा स्वयं अपिा िाता ि बिा लेिे तक नििासरण कायसवाही आपक े द्वारा वखणसत की गई ई-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:- 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), Printed from counselvise.com Page | 7 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 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. 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. 11. Since, we have allowed the appeal of the assessee on legal issue, the other grounds raised on merit are not being adjudicated at this stage and are being left open to be decided at the later stage if need arises for the same.” 011. Therefore, in view of the above facts and circumstances and decisions of the coordinate benches, we are inclined to hold that the notice issued u/s 143(2) of the Act is invalid and so is the consequential assessment framed. The additional ground raised by the assessee is allowed. Printed from counselvise.com Page | 8 ITA No. 2022 KOL 2024 Subhendu Nandy; A.Y. 2017-18 012. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 23.07.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 23.07.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata Printed from counselvise.com "