Kerala High Court Stays Income Tax Proceedings Over Allegedly Defective Notices Issued In Violation Of CBDT Circular
K. Salma Jennath
5 Nov 2025 2:40 PM IST
The Kerala High Court on Monday (November 3) stayed the income tax proceedings in a batch of writ petitions, which had alleged that the notices issued by the Assistant Commissioner of Income Tax to be defective for being violative of the format prescribed in Central Board of Direct Taxes (CBDT) Circular No. F. No. 225/157/2017/ITA-II dated 23-06-2017.
According to the petition in WP(C) 39722/2025, the notice issued under Section 143(2) of the Income Tax Act was defective since it did not comply with the mandate under the 2017 circular for failing to specify whether the notice falls under 'Limited Scrutiny', 'Complete Scrutiny', or 'Compulsory Manual Scrutiny'.
According to Section 143(2), after return of income is furnished, the Assessing Officer or the concerned tax authority may issue a notice for scrutiny of income by requiring attendance or production of evidence when it is considered necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner.
The plea quotes instances in which the Income Tax Tribunals in other States, including the those in Kolkata and Delhi, have quashed such non-compliant notices. It also relies on various High Court decisions and Supreme Court decision in UCO Bank v. CIT to assert that the circulars issued by the CBDT under Section 119 IT Act are binding and mandatory on all Income Tax authorities.
The petitioner, thus, prayed for a direction to quash the irregular notice issued by the 1st respondent, Assistant Commissioner of Income Tax, along with all the consequential scrutiny proceedings initiated under it.
It also sought a declaration that the impugned notice was in violation of the CBDT circular and “ex facie illegal, void, and without jurisdiction”.
As an interim prayer, the petitioner has prayed for the stay of operation of proceedings initiated pursuant to the notice.
Allowing the interim prayer, Justice Ziyad Rahman A.A. gave time to the standing counsel for the respondents to take instructions in the matter and posted the case to November 18.
The Court made the following observation:
“Till such time, assessment proceedings which are the subject matter of this writ petition shall not be proceeded with.”
The petition is moved by Advocates Chandapillai Abraham P.G., Isaac Thomas and John Vithayathil.
Case No: WP(C) 39722/2025 and other cases
Case Title: Sreedhanya Construction Company v. The Assistant Commissioner of Income Tax and Anr. and other cases