2016 (7) TMI 1440 - AT - Income Tax

Validity of reassessment - notice u/s. 143(2) has not been issued by the Competent Authority - curable defect u/s 292BB - Held that - In the instant case the assessment notice has been issued by the ITO Ward 3(1) having no jurisdiction on the assessee. The Income Tax Authorities can exercise their powers within the provisions of the Act. Income Tax Authorities cannot confer jurisdiction on an officer which the statute itself does not confer. No hesitation to reverse the orders of Authorities Below on this legal point. As the legal issue has been decided in favour of assessee, we are not adjudicating other grounds of appeal of the assessee.

Issues Involved:
1. Validity of the assessment order under section 143(3) due to the issuance of notice under section 143(2) by an officer without jurisdiction.
2. Legality of the assessment order without the mandatory issuance of notice under section 143(2).
3. The applicability of section 292BB in curing the defect of non-issuance of notice under section 143(2).
4. Assessment of sale proceeds as income from other sources.
5. Rejection of the assessee's claim of Long Term Capital Loss.
6. Disallowance of Long Term Capital Loss on sale of shares.
7. Disallowance of total expenses claimed by the assessee.
8. Additional ground regarding the receipt being considered as a gift and exempt under section 47(iii).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 143(3):
The assessee challenged the validity of the assessment order on the grounds that the notice under section 143(2) was issued by ITO Ward-3(1), who did not have jurisdiction over the assessee. The jurisdiction was with DCIT Central Circle-XI and later transferred to ITO Ward-56(4) by an order under section 127. The Tribunal found that the notice issued by ITO Ward-3(1) was invalid as it was issued by an officer without jurisdiction, making the assessment order null and void.

2. Legality of the Assessment Order without Mandatory Issuance of Notice under Section 143(2):
The Tribunal emphasized that the issuance of notice under section 143(2) is mandatory for making a scrutiny assessment. The failure to issue such notice by the jurisdictional AO (DCIT Central Circle-XI or ITO Ward-56(4)) rendered the assessment invalid. The Tribunal relied on several judicial precedents, including the Supreme Court's decision in ACIT v. Hotel Blue Moon, which held that the omission to issue notice under section 143(2) cannot be a procedural irregularity and is not curable.

3. Applicability of Section 292BB:
The Tribunal held that section 292BB, which deems notice to be valid if the assessee has cooperated in the proceedings, does not apply in this case as the assessee had raised an objection before the completion of the assessment. Moreover, section 292BB is applicable from AY 2008-09 onwards, whereas the case pertains to AY 2007-08.

4. Assessment of Sale Proceeds as Income from Other Sources:
The Tribunal did not adjudicate this issue separately as the principal legal ground regarding the validity of the assessment was decided in favor of the assessee.

5. Rejection of Assessee's Claim of Long Term Capital Loss:
Similarly, this issue was not separately adjudicated due to the decision on the principal legal ground.

6. Disallowance of Long Term Capital Loss on Sale of Shares:
The Tribunal did not address this issue separately as the assessment order itself was declared invalid.

7. Disallowance of Total Expenses Claimed by the Assessee:
This issue was also not separately adjudicated due to the decision on the principal legal ground.

8. Additional Ground Regarding the Receipt Being Considered as a Gift:
This additional ground was not separately adjudicated as the principal legal ground regarding the validity of the assessment was decided in favor of the assessee.

Conclusion:
The Tribunal allowed the assessee's appeal on the principal legal ground of non-issuance of notice under section 143(2) by the competent authority, rendering the assessment order null and void. Consequently, other issues raised by the assessee and the Revenue's appeal were not adjudicated separately. The Revenue's appeal was dismissed as infructuous.

← Previous Next →