The Assessing Officer issued me a notice under section 142(1) calling for a return after the assessment year had already ended. Is the assessment made on that notice valid?
No. The Delhi Special Bench held that a notice under section 142(1)(i) calling for a return cannot be issued after the end of the relevant assessment year. Where no return has been filed and the year has closed, the case is one of escaped assessment and the Assessing Officer must proceed under section 148 after satisfying section 147 - recording reasons and forming a reason to believe. Allowing him to call for a return under section 142(1)(i) instead would let those requirements be sidestepped, and the two provisions cannot operate in the same field at the same time. The notices in Motorola's and Ericsson's cases were issued after the year ended, so those assessments were invalid.
Decided by the ITAT (Income Tax Appellate Tribunal, Delhi - Special Bench constituted under section 255(4) by the President) on 2005-06-22, reported as (2005) 96 TTJ (Delhi) 1. It bears on section 142(1), section 147, section 148, section 139 of the Income Tax Act 1961, in Assessment & Scrutiny and Reassessment & Reopening matters.
This is the Special Bench authority for the proposition that section 142(1)(i) has a time limit built into it even though none is stated. The reasoning is structural: section 142 is headed inquiry before assessment and opens with for the purpose of making an assessment, so the powers in clauses (ii) and (iii) - calling for accounts, documents and information - can be exercised at any time until the assessment is made, because proceedings are already on foot. But clause (i), the power to call for a return, is the power that initiates proceedings, and it replaced section 139(2), which had to be exercised before the end of the assessment year. Initiation and completion are different things. The Bench preferred the Hyderabad decision in Dr. Vijay Kumar Datla over the Delhi decision in Sheraton International, and applied the Supreme Court in Narsee Nagsee & Co.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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Cross appeals and a cross objection of three non-resident assessees - Motorola Inc, Ericsson Radio Systems and Nokia Corporation - were heard together. At the assessees' request, and given the importance of the issues, the President constituted a Special Bench under section 255(4) and referred the question whether the revenues earned from the supply of equipment and software to Indian telecom operators were taxable in India. The Revenue at first opposed the constitution of the Special Bench and the joinder of Ericsson and Nokia, but later agreed. By order of 20 July 2004 the Bench directed that the entire appeals in all three cases be heard by it, over the Revenue's objection that only the referred question was before it. Two issues arose besides the referred question: the validity of the notices issued under section 142(1), which arose in Motorola and Ericsson, and the levy of interest under sections 234A and 234B, which arose in all three. In Motorola the notice under section 142(1) was issued on 3 November 1999 and served afterwards. The assessees argued that although section 142(1) prescribes no time limit, one is built into the scheme: before 1 April 1989 the corresponding power was in section 139(2), which required service before the end of the assessment year, and after the year closes the case is one of deemed escaped assessment under Explanation 2(a) to section 147, for which the only route is section 148. They relied on the Hyderabad Bench in Dr. Vijay Kumar Datla and criticised the Delhi Bench decision in Sheraton International Inc as per incuriam.
On this issue the Special Bench held that a notice under section 142(1)(i) cannot be issued after the end of the relevant assessment year. It preferred the Hyderabad Bench decision in Dr. Vijay Kumar Datla to the Delhi Bench decision in Sheraton International. In both Motorola's and Ericsson's cases the notices under section 142(1)(i) were issued after the end of the relevant assessment years and were therefore invalid, and the assessments made pursuant to them were invalid. The Bench recorded that this was sufficient to dispose of the appeals of Motorola and Ericsson, but that because the other issues had to be decided in Nokia's case, and because both sides asked for all issues to be adjudicated to avoid multiplicity of proceedings, it went on to hear and decide them.
The Bench read section 142 as it stood before amendment, when it was headed inquiry before assessment, opened with the words for the purpose of making an assessment, and contained no clause (i) authorising the Assessing Officer to call for a return; its other clauses let him require accounts, documents and information. Those other powers can indeed be exercised at any time until the assessment is made, and that was not disputed. But it does not follow that every power in the section may be exercised at any time regardless of the conditions attached to it. The power to call for a return is the power formerly exercised under section 139(2) to initiate assessment proceedings, and initiation is a different thing from making an assessment: the question of exercising powers for the purpose of making an assessment arises only once proceedings have been initiated and are pending. After the assessment year has ended and no return has been filed, the case is one of escaped assessment, and the Assessing Officer must issue notice under section 148 after satisfying section 147, recording reasons and establishing a reason to believe that income has escaped assessment. If he could instead call for a return under section 142(1)(i), those requirements would be given a go by. The two provisions cannot operate in the same field at the same time. The Bench held that the provisions of section 142(1)(i) as they stood in the years before it were quite similar to those the Supreme Court considered in CIT v. Narsee Nagsee & Co., and that no plausible reason had been offered for not applying that decision.
Notice Under Section 142(1)(i) cannot be issued after the end of the relevant assessment year.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi Special Bench held that a notice under section 142(1)(i) calling for a return cannot be issued after the end of the relevant assessment year. Where no return has been filed and the year has closed, the case is one of escaped assessment and the Assessing Officer must proceed under section 148 after satisfying section 147 - recording reasons and forming a reason to believe. Allowing him to call for a return under section 142(1)(i) instead would let those requirements be sidestepped, and the two provisions cannot operate in the same field at the same time. The notices in Motorola's and Ericsson's cases were issued after the year ended, so those assessments were invalid. This was decided by the ITAT (Income Tax Appellate Tribunal, Delhi - Special Bench constituted under section 255(4) by the President) and bears on section 142(1), section 147, section 148, section 139 of the Income Tax Act 1961. It is reported as (2005) 96 TTJ (Delhi) 1. This is the Special Bench authority for the proposition that section 142(1)(i) has a time limit built into it even though none is stated. The reasoning is structural: section 142 is headed inquiry before assessment and opens with for the purpose of making an assessment, so the powers in clauses (ii) and (iii) - calling for accounts, documents and information - can be exercised at any time until the assessment is made, because proceedings are already on foot. But clause (i), the power to call for a return, is the power that initiates proceedings, and it replaced section 139(2), which had to be exercised before the end of the assessment year. Initiation and completion are different things. The Bench preferred the Hyderabad decision in Dr. Vijay Kumar Datla over the Delhi decision in Sheraton International, and applied the Supreme Court in Narsee Nagsee & Co. If it applies to you, the first step is this: Check the date of the section 142(1) notice against the end of the assessment year before answering it; if it is late, take the jurisdictional objection at the earliest stage.
Cross appeals and a cross objection of three non-resident assessees - Motorola Inc, Ericsson Radio Systems and Nokia Corporation - were heard together. At the assessees' request, and given the importance of the issues, the President constituted a Special Bench under section 255(4) and referred the question whether the revenues earned from the supply of equipment and software to Indian telecom operators were taxable in India. The Revenue at first opposed the constitution of the Special Bench and the joinder of Ericsson and Nokia, but later agreed. By order of 20 July 2004 the Bench directed that the entire appeals in all three cases be heard by it, over the Revenue's objection that only the referred question was before it. Two issues arose besides the referred question: the validity of the notices issued under section 142(1), which arose in Motorola and Ericsson, and the levy of interest under sections 234A and 234B, which arose in all three. In Motorola the notice under section 142(1) was issued on 3 November 1999 and served afterwards. The assessees argued that although section 142(1) prescribes no time limit, one is built into the scheme: before 1 April 1989 the corresponding power was in section 139(2), which required service before the end of the assessment year, and after the year closes the case is one of deemed escaped assessment under Explanation 2(a) to section 147, for which the only route is section 148. They relied on the Hyderabad Bench in Dr. Vijay Kumar Datla and criticised the Delhi Bench decision in Sheraton International Inc as per incuriam. The matter was decided on 2005-06-22 by the ITAT (Income Tax Appellate Tribunal, Delhi - Special Bench constituted under section 255(4) by the President). On those facts the ITAT held as follows. On this issue the Special Bench held that a notice under section 142(1)(i) cannot be issued after the end of the relevant assessment year. It preferred the Hyderabad Bench decision in Dr. Vijay Kumar Datla to the Delhi Bench decision in Sheraton International. In both Motorola's and Ericsson's cases the notices under section 142(1)(i) were issued after the end of the relevant assessment years and were therefore invalid, and the assessments made pursuant to them were invalid. The Bench recorded that this was sufficient to dispose of the appeals of Motorola and Ericsson, but that because the other issues had to be decided in Nokia's case, and because both sides asked for all issues to be adjudicated to avoid multiplicity of proceedings, it went on to hear and decide them.
The Bench read section 142 as it stood before amendment, when it was headed inquiry before assessment, opened with the words for the purpose of making an assessment, and contained no clause (i) authorising the Assessing Officer to call for a return; its other clauses let him require accounts, documents and information. Those other powers can indeed be exercised at any time until the assessment is made, and that was not disputed. But it does not follow that every power in the section may be exercised at any time regardless of the conditions attached to it. The power to call for a return is the power formerly exercised under section 139(2) to initiate assessment proceedings, and initiation is a different thing from making an assessment: the question of exercising powers for the purpose of making an assessment arises only once proceedings have been initiated and are pending. After the assessment year has ended and no return has been filed, the case is one of escaped assessment, and the Assessing Officer must issue notice under section 148 after satisfying section 147, recording reasons and establishing a reason to believe that income has escaped assessment. If he could instead call for a return under section 142(1)(i), those requirements would be given a go by. The two provisions cannot operate in the same field at the same time. The Bench held that the provisions of section 142(1)(i) as they stood in the years before it were quite similar to those the Supreme Court considered in CIT v. Narsee Nagsee & Co., and that no plausible reason had been offered for not applying that decision. In the words reproduced by the source cited on this page: "Notice Under Section 142(1)(i) cannot be issued after the end of the relevant assessment year."
It was decided by the ITAT on 2005-06-22 and is reported as (2005) 96 TTJ (Delhi) 1. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 142(1), section 147, section 148, section 139, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. On this issue the Special Bench held that a notice under section 142(1)(i) cannot be issued after the end of the relevant assessment year. It preferred the Hyderabad Bench decision in Dr. Vijay Kumar Datla to the Delhi Bench decision in Sheraton International. In both Motorola's and Ericsson's cases the notices under section 142(1)(i) were issued after the end of the relevant assessment years and were therefore invalid, and the assessments made pursuant to them were invalid. The Bench recorded that this was sufficient to dispose of the appeals of Motorola and Ericsson, but that because the other issues had to be decided in Nokia's case, and because both sides asked for all issues to be adjudicated to avoid multiplicity of proceedings, it went on to hear and decide them. It arises in Assessment & Scrutiny and Reassessment & Reopening matters, on section 142(1), section 147, section 148, section 139 of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Delhi - Special Bench constituted under section 255(4) by the President. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Distinguish between the limbs of section 142(1): a call for accounts or information stands on a different footing from a call for a return. Where the Revenue defends a late notice, ask why section 148 was not used and point out that its safeguards - recorded reasons and a reason to believe - cannot be bypassed. Do not assume the position is the same for later years without checking the current text of section 142(1) and any High Court authority on it.
Still good law. A citator search returns 123 later decisions citing this Special Bench. On the s.142(1)(i) point the clearest genuine application is Chandrasekhar Balagopal v ACIT (ITAT Cochin, 28 April 2006, AY 2000-01): the Bench adopted the Special Bench's analysis of the scheme of assessment, noting that Motorola 'has considered the legal position as applicable under law, as it stands today, and relying on the decision of the Apex court in Ranchhodas Karsondas case (supra) has held ...', and on that footing declared the s.148 notice 'invalid and void ab initio'. A PRACTITIONER MUST KNOW THAT THAT ORDER DID NOT SURVIVE. In CIT v Chandrasekhar Balagopal (Kerala High Court, ITA No. 61 of 2008, 2 April 2009, Ramachandran Nair and Surendra Mohan JJ) the Revenue's appeal was allowed and the Tribunal's order was reversed on this very question: the Court held that under the amended s.147 an assessment of escaped income can be made on the basis of 'the return filed by the assessee, pending for assessment', without s.143(1)(a) processing first having been completed, and pointed to clause (b) of Explanation 2 to s.147; the matter was restored to the Tribunal for decision on merits. That reasoning is the opposite of the proposition for which the Cochin Bench had invoked Motorola, although the Kerala High Court does not name Motorola. Two further hits also do NOT support the order: in Smt. Krishna Verma v ACIT (ITAT Delhi Special Bench, 9 March 2007) Motorola appears only in the assessee's argument and the Bench decided the notice question the other way under s.292B; and in Bilal Ahmed Wani v ITO (ITAT Amritsar, 28 September 2018) the Bench read Motorola as assisting the Revenue. So while nothing overrules the Special Bench in terms, and it remains citable, there is High Court authority the other way on the substance and no later decision applying it that has itself been upheld. Note that the Special Bench's separate software/royalty reasoning has its own later history (Explanation 4 to s.9(1)(vi) and Engineering Analysis, SC, 2 March 2021) and is outside this entry. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page is clipped in the middle and then truncated at 110,000 characters, and it stops part way through the arguments on interest under sections 234A and 234B. As a result the Special Bench's answer to the very question referred to it - whether the revenues earned from the supply of equipment and software to Indian telecom operators were taxable in India - is not in the text at all, and nothing is said here about it, about the treatment of the software element, about permanent establishment, or about the outcome in Nokia's case. This record therefore covers only the section 142(1) holding, which was read in full including its operative consequence. The names of the members of the Special Bench do not appear in the harvested text. The batch line lists sections 9(1)(vi), 9(1)(i), 90 and 195, which relate to the referred question and are not covered here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
On this issue the Special Bench held that a notice under section 142(1)(i) cannot be issued after the end of the relevant assessment year. It preferred the Hyderabad Bench decision in Dr. Vijay Kumar Datla to the Delhi Bench decision in Sheraton International. In both Motorola's and Ericsson's cases the notices under section 142(1)(i) were issued after the end of the relevant assessment years and were therefore invalid, and the assessments made pursuant to them were invalid. The Bench recorded that this was sufficient to dispose of the appeals of Motorola and Ericsson, but that because the other issues had to be decided in Nokia's case, and because both sides asked for all issues to be adjudicated to avoid multiplicity of proceedings, it went on to hear and decide them.
TaxSphere, “Motorola Inc v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/motorola-inc-v-dcit/ (validity last checked 2026-08-29)
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