M D Sons & Ors. v. ITO (Special Bench)

Case snapshot

Sections / provisions: 143(2); 292B

Questions before the Court / Tribunal

• Notice format; limited scrutiny label; curability under section 292B: The Special Bench matter concerns whether an omission or defect in the notice format, including the scrutiny descriptor, invalidates assessment proceedings or can be treated as a curable procedural defect under section 292B.

Material facts and background

ORDER Per Padmavathy S, Accountant Member: This special Bench was constituted by the Hon’ble President vide his order dated 10.11.2025 in the case of the assessee M D Sons due to conflicting decisions

of various Co-ordinate Benches of the Tribunal.

adjudication to the Special Bench reads as follows:"Whether notices issued u/s 143(2) of the Income Tax Act, 1961 on or after 23rd June 2017 which are not in the prescribed format as per CBDT Instruction/F No.225/157/2017/ITA.II), despite the provisions of section 292B of the Income Tax Act, renders the consequent assessment orders invalid?". Brief facts necessary for the disposal of the above question are as follows: 2.

The assessee is a partnership firm. It is engaged in the business of trading in

cigarettes and food items. For the Assessment Year (A.Y) 2017-18, the return of income was filed on 04.11.2017 declaring a loss of Rs.2,30,72,700/-. The said return was processed u/s 143(1) of the Income Tax Act, 1961 (the Act).The case was selected for scrutiny through 'Computer Aided Selection Scrutiny'(CASS) and statutory notice u/s 143(2) of the Act was issued on 21.09.2018, and served on the assessee on e-mail address. Subsequently the Assessing Officer (AO) issued notice u/s 142(1) and show cause notices calling upon the assessee to furnish various details. The assessee furnished the details as called for from time to time. The AO completed the assessment on 28.12.2019 u/s 143(3) of the Act assessing the income of the assessee at Rs.3,48,75,050/-. 3.

Aggrieved the assessee filed further appeal before the CIT(A) who gave

partial relief to the assessee. The assessee preferred further appeal before the Tribunal against the order of the CIT(A). Before the Tribunal the assessee raised an additional ground that the notice issued u/s 143(2) is not in the format prescribed by the CBDT instruction dated 23.06.2017 issued in F No.225/157/2017ITA-II. Hence, it was contended that all the consequential proceedings are bad and liable to be quashed. The assessee relied on the following decisions of the various coordinate

Appellant / assessee submissions

Submissions of assessee's Authorised Representative (AR) The ld AR, presented elaborate submissions during the course of hearing and

also submitted written submissions. The arguments and the written submissions made by the ld AR are summarised hereunder – 5.1 The tax administration has transitioned to a technology-driven scrutiny framework under Digital India, with Project Insight and Operation Clean Money initiatives using advanced data analytics and intelligence tools to promote transparency, reduce litigation, improve assessment quality, and enable non-intrusive, riskbased compliance verification. 5.2 CASS-based scrutiny selection relies on automated risk profiling using CPCprocessed returns and multi-source data (AIR, CIB, 26AS, TDS, reporting entities, etc.), generating issue-specific case packets; CBDT observed misuse through unfocused enquiries and therefore directed officers to restrict verification to system-flagged issues (Instruction No.7/2014). 5.3 CBDT introduced Limited Scrutiny vs Complete Scrutiny controls to prevent fishing enquiries — Limited Scrutiny must remain confined to flagged issues, while expansion to Complete Scrutiny requires threshold escapement indicators and prior Pr.CIT/CIT approval, reinforced through multiple binding instructions from 2014–2019. 5.4 CBDT mandated standardized...

Revenue / respondent submissions

Mr. Raviraj R.V, Advocate, Sr. Standing Counsel

6.1. The Revenue submits that the question of law does not arise in the present case, as the notice issued u/s 143(2) dated 21.09.2018 was in accordance with the format approved by the CBDT as on that date, including the revised format approved on 31.07.2018. It is contended that the formats were revised pursuant to CBDT Instruction dated 23.06.2017 and further modified for the CASS 2018 cycle, and the notice issued is in conformity with the format deployed in the ITBA system. Placing reliance on the CBDT clarification dated 16.01.2026, it is submitted that such formats are finalized by DGIT (Systems) in consultation with CBDT and, once deployed, cannot be altered by the Assessing Officer, who has no role in the matter. 6.2. It is further contended that CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017 is merely an internal administrative communication, not issued u/s 119 of the Act, and does not confer any enforceable right upon the assessee. The Revenue submits that no format for notice u/s 143(2) is prescribed under the Act or Rules and that the format is only a non-statutory form. It is thus argued that any deviation, if at all, cannot render the notice invalid. The...

2238/2026, CM APPL. 10798/2026 & CM APPL. 10799/2026 dated 17.02.2026] where it is held that – “2. Learned counsel for the petitioner relied upon the circulars dated 23.06.2017 and 13.10.2021 and contended that if an assesse’s case has been selected for scrutiny, the respondents are required to indicate in the notice that why his/her/its case has been taken up for scrutiny so also the fact that whether the scrutiny is limited or complete (circular dated 23.06.2017). 3. Learned counsel for the petitioner argued that since the impugned notice does not fulfil such requirements, the same is fundamentally barred in the eyes of law. 4. Ms. Monica Benjamin, learned Junior Standing Counsel for the respondent on the other hand argued that the circulars so issued nowhere provide that while issuing the notice under Section 143(2) of the Act of 1961, the reason for taking a case for scrutiny is to be given. She submitted that maybe the first notice dated 24.06.2025 was a general notice but thereafter, a specific notice dated 24.09.2025 under Section 142(1) of the Act of 1961 was issued whereby relevant information so also documents were demanded. 5. Having heard learned counsel for the...

Court / Tribunal analysis and reasoning

also submitted written submissions. The arguments and the written submissions made by the ld AR are summarised hereunder – 5.1 The tax administration has transitioned to a technology-driven scrutiny framework under Digital India, with Project Insight and Operation Clean Money initiatives using advanced data analytics and intelligence tools to promote transparency, reduce litigation, improve assessment quality, and enable non-intrusive, riskbased compliance verification. 5.2 CASS-based scrutiny selection relies on automated risk profiling using CPCprocessed returns and multi-source data (AIR, CIB, 26AS, TDS, reporting entities, etc.), generating issue-specific case packets; CBDT observed misuse through unfocused enquiries and therefore directed officers to restrict verification to system-flagged issues (Instruction No.7/2014). 5.3 CBDT introduced Limited Scrutiny vs Complete Scrutiny controls to prevent fishing enquiries — Limited Scrutiny must remain confined to flagged issues, while expansion to Complete Scrutiny requires threshold escapement indicators and prior Pr.CIT/CIT approval, reinforced through multiple binding instructions from 2014–2019. 5.4 CBDT mandated standardized...

5.7 Multiple Tribunal decisions have held that non-format 143(2) notices are invalid and have quashed consequential assessments -including Srimanta Kumar Shit v ACIT (ITA No.1911/Kol/2024) decided on 19.11.2024, which the Department did not challenge. 5.8 Where the Revenue accepts a legal position in one case, it cannot ordinarily dispute the same in another without just cause — Berger Paints India Ltd v CIT (2004) 266 ITR 99 (SC). 5.9 It is a settled principle that where law or prescribed procedure requires an act to be done in a particular manner, it must be done only in that manner — Chandra Kishore Jha v Mahavir Prasad (1999) 8 SCC 266 (SC). 5.10 Administrative authorities are bound by the procedural standards they themselves lay down — Sukhdev Singh v Bhagatram (1975) 1 SCC 421 (SC). 5.11 Courts have repeatedly quashed proceedings for breach of CBDT instructions/manuals, even after introduction of section 292B of the Act. The rulings establish that breach of binding Board instructions vitiates proceedings, notwithstanding curative provisions like section 292B. 5.12 Section 292B cures only technical mistakes, defects or omissions in a notice, provided the notice is otherwise...

powers, the Board issued the 2017 Instructions mandating that notices under section 143(2) must be issued only in the prescribed format. Such instructions are binding on income-tax authorities. 5.16 When the Board mandates a specific format for notice under section 143(2), compliance becomes a condition precedent for valid assumption of scrutiny jurisdiction. Hence, issuance of notice in correct format acquires a jurisdictional character. 5.17 Section 292B does not cure jurisdictional errors; it cures only mistakes in the exercise of jurisdiction. This principle is recognized in Smt. Mahesh Kumari Batra v. JCIT (2005) 95 ITD 152 (SB). 5.18 A defect that changes the scope or tenor of the notice or proceeding cannot be cured under section 292B. This principle is supported by CIT v. Spirit Global Construction (P.) Ltd (Delhi High Court), [SLP dismissed as reported in (2004) 300 Taxman 102 (SC)]. 5.19 Non-mentioning of the type/scope of scrutiny in a 143(2) notice obscures the limits of enquiry and may enable arbitrary expansion of issues. Such omission causes prejudice to the assessee and therefore is not protected by section 292B of the Act. 5.20 Repeated CBDT communications,...

curing a substantive invalid notice under section 292B. Participation cannot operate as an estoppel against law. 5.24 The decision is distinguishable as it does not examine the binding force of CBDT’s 2017 Instruction, a series of Board directions, on notice format, or the jurisdictional consequences of non-compliance, and thus cannot govern cases, where scope of scrutiny itself is unclear from the notice. 5.25 The Revenue’s reliance on an alleged revised format dated 31.07.2018 is untenable, as no such approval has been placed on record despite specific direction, and therefore an adverse inference ought to be drawn against the Revenue. 5.26 The assessee has placed on record copies of notices issued under section 143(2) to other assessees post 31.07.2018, which clearly follow the 2017 prescribed format and specifically mention “Limited Scrutiny (CASS)”, thereby evidencing the actual practice followed by the Department. 5.27 The assessee submits that the above material directly contradicts the Revenue’s contention regarding the existence of a revised format, inasmuch as notices issued subsequent to the alleged approval continue to follow the earlier prescribed format. 5.28 The...

Operative decision and relief

circumstances of each case including as to the manner in which the assessee has participated in the proceedings indicating that he was aware of the issues which are proposed to be examined in the scrutiny proceedings along with the incidental issue of prejudice, if any, which has to be demonstrated and substantiated by the assessee in facts and circumstances of each case.

12.3 We also note that the Hon'ble Delhi High Court in Bharat Bansal v. NFAC (W.P.(C) 2238/2026 dated 17.02.2026) has considered an identical issues and has held that the CBDT Circulars dated 23.06.2017 and 13.10.2021, governing the selection of cases for scrutiny assessment, are administrative instructions meant for internal departmental guidance and that the circulars merely regulate the manner and categories of cases to be selected for scrutiny and the extent of such scrutiny. The Hon'ble High Court further held that therefore the Assessing Officer is not required to state in the notice under section 143(2) why the assessee’s case was selected and that a notice under section 143(2) is only an intimation of scrutiny selection, while the specific issues and information sought can be communicated subsequently through notices viz., notices u/s.142(1) of the Act, issued during the assessment proceedings. In the present case, the assessee's primary contention is with regard to non-compliance with Circular dated 23.06.2017 which has been considered by the Hon'ble High Court in the above case and, therefore, in our view the ratio laid down supports the stand that omission to specify...

Authorities and precedents appearing in the judgment

• Allied Concepts India Pvt Ltd vs ITO
• CBDT introduced Limited Scrutiny vs Complete Scrutiny controls to prevent
• UCO Bank v. CIT (SC) and UOI v. Azadi Bachao Andolan
• Batra v. JCIT (2005) 95 ITD 152 (SB)
• B. This principle is supported by CIT v. Spirit Global
• Court in the case of Bharat Bansal v. NFAC (Delhi High Court)
• UNITAC Energy Solutions India Pvt. Ltd. v. ACIT WP(C) No. 1702 of
• Rani Kusum v. Kanchan Devi (2005) 6 SCC 705 (Supreme Court)
• CIT v. Jagat Novel Exhibitors Pvt. Ltd. 356 ITR 559 (Delhi)
• CIT v. Sudev Industries Ltd. 405 ITR 325 (Delhi)
• Shirish Madhukar Dalvi v. ACIT 287 ITR 242 (Bom)
• Lakhanpal National Ltd. vs ITO

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Notice format; limited scrutiny label; curability under section 292B. The operative result is classified as Special Bench reference answered against the assessee; appeals returned to the regular bench for disposal. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Notice format; limited scrutiny label; curability under section 292B. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

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