ITAT Holds No Fresh Section 143(2) Notice Required After Section 263

A real estate company’s assessment was originally completed under Section 143(3). However, the Principal Commissioner later stepped in using Section 263, labelling the original order “erroneous and prejudicial to the interests of revenue”. He directed the Assessing Officer (AO) to tax the annual value of “1MG Mall” as house-property income.

When the AO complied and hiked the tax, the company appealed. Their main defence? The AO didn’t issue a fresh scrutiny notice under Section 143(2) during the redo. The CIT(A) agreed and scrapped the entire assessment on this technicality.

Issue Raised: Is it mandatory for an AO to issue a brand-new Section 143(2) notice when passing an order specifically directed by a revision under Section 263?

Tribunal Held: The Tribunal overturned the CIT(A)’s decision, clarifying that a Section 263 proceeding isn’t a brand new assessment; it’s a continuation of the original one. Since a valid notice was already issued during the first round and the taxpayer didn’t file a fresh return, a second notice isn’t legally required.

The Tribunal noted that, unlike a total reassessment, the AO’s power here is strictly limited to the specific issues pointed out by the Commissioner. It also dismissed the taxpayer’s reliance on the famous Hotel Blue Moon case, explaining that the rules for “block assessments” don’t apply to revisionary proceedings. The case has been sent back to the CIT(A) to finally look at the actual facts of the mall’s income.

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