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2016 (2) TMI 1226 - AT - Income TaxAbsence of statutory notice u/s 143(2) - AO holding jurisdiction over the case never issued notice u/s 143(2) - Addition on account of unaccounted sales, difference in closing stock and raw material consumption respectively - assessment proceedings were initiated by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar - no objection was raised within the meaning of section 124(3) to reject the assessee s contention - HELD THAT - Admittedly, the notice u/s143(2) of the Act was issued by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar. Now in Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA has held that the Assessing Officer must necessarily issue notice u/s 143(2) of the Act within the time prescribed in the proviso to section 143(2); that the requirement of notice u/s 143(2) cannot be dispensed with. Though Hotel Blue Moon (supra) pertains to Block assessment, the jurisdictional issue therein, is the same as that applicable to yearly regular assessment. In the present case, the AO holding jurisdiction over the case never issued notice u/s 143(2) of the Act to the assessee. As such, the said AO did not have jurisdiction to proceed further and to make assessment. The Hon ble Supreme Court in Hotel Blue Moon (supra), held that the omission on the part of the assessing authority to issue notice u/s 143(2) of the Act cannot be a mere procedural irregularity and the same is not curable. Thus, in keeping with Hotel Blue Moon (supra), since the assessment order was passed in the absence of statutory notice u/s 143(2) of the Act by the AO by holding jurisdiction over the case, the said assessment order is invalid in law. Regarding the CIT(A) s objection to the assessee not having raised any objection u/s 124(3) of the Act within 30 days of the service of notice u/s 143(2) firstly, nowhere has the assessee challenged the jurisdiction of the AO who passed the assessment order, i.e., ACIT, Circle-IV, Jalandhar. This has also not been disputed by the Department. The grievance of the assessee, rather, is that the notice issued u/s 143(2) was not issued by the AO passing the assessment order, and so, the assessment order is bad in law. This being the case, section 124(3) does not come into play at all, and the observations of the CIT(A) in this regard is incorrect. In MI Builders (P) Ltd. vs. ITO , 2007 (9) TMI 324 - ITAT LUCKNOW-B dealing with sections 124(2) (3)/148, it has been held reassessment proceedings having been initiated by the AO who did not have jurisdiction over the case, completion of reassessment in continuation of such initiation by AO having jurisdiction was invalid in law. In the present case, assessment proceedings were initiated by the DCIT, Range-1, Jalandhar, whereas the assessment order was passed by the ACIT, Circle-IV, Jalandhar which completion of the assessment was invalid in law. As such, there was no occasion for the provisions of section 124 to come into play. CIT(A) has also objected that no prejudice was caused to the assessee in this matter. Here, again, since initiation of the assessment proceeding is bad in law, the assessment order passed cannot be held to be legally valid. Therefore, all prejudice stands caused to the assessee. - Decided against revenue.
Issues Involved:
1. Deletion of additions on account of unaccounted sales, difference in closing stock, and raw material consumption. 2. Non-issue and non-service of statutory notice under section 143(2) by the AO holding jurisdiction. 3. Validity of the assessment order due to the jurisdictional issue. 4. Rejection of books under section 145(3). Detailed Analysis: 1. Deletion of Additions: The Department appealed against the CIT(A)'s decision to delete additions made by the AO on account of unaccounted sales (Rs. 13,934,642), difference in closing stock (Rs. 694,694), and raw material consumption (Rs. 6,818,881). The Department argued that the CIT(A) failed to appreciate the thorough examination conducted by the AO and incorrectly relied on the case of M/s. Atam Valves Pvt. Ltd., which was distinguishable. 2. Non-Issue and Non-Service of Statutory Notice: The assessee's cross-objections raised the issue of non-issue and non-service of statutory notice under section 143(2) by the AO holding jurisdiction. The facts revealed that the notice under section 143(2) was issued by DCIT, Range-1, Jalandhar, whereas the jurisdiction had shifted to Range-IV, Jalandhar. The assessee argued that the notice was issued by an officer not holding jurisdiction, rendering the notice and subsequent proceedings invalid. 3. Validity of Assessment Order: The CIT(A) observed that the objection to the notice under section 143(2) was not raised within 30 days as required by section 124(3) of the Income Tax Act. The CIT(A) also noted that the return was filed in the office of Range-I, Jalandhar, and no prejudice was caused to the assessee. However, the Tribunal found that the assessment order was invalid as the mandatory notice under section 143(2) was not issued by the AO holding jurisdiction, citing the Supreme Court's decision in "Hotel Blue Moon". 4. Rejection of Books under Section 145(3): The assessee argued that the CIT(A) should have also held the rejection of books under section 145(3) as bad. However, this issue became moot following the Tribunal's decision on the jurisdictional issue. Tribunal's Decision: The Tribunal concluded that the assessment order was invalid due to the absence of a statutory notice under section 143(2) issued by the AO holding jurisdiction. The Tribunal accepted the assessee's cross-objections, leading to the cancellation of the assessment order. Consequently, the Department's appeals were dismissed, and the assessee's cross-objections were allowed. The Tribunal's findings applied mutatis mutandis to related appeals and cross-objections. Conclusion: The Tribunal's judgment emphasized the importance of jurisdictional compliance in issuing statutory notices under section 143(2). The failure to issue such a notice by the AO holding jurisdiction rendered the assessment order invalid, leading to the dismissal of the Department's appeals and the acceptance of the assessee's cross-objections.
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