2018 (6) TMI 1733 - AT - Income Tax

Validity of the notice u/s. 143(2) - issue of notice by AO not having jurisdiction to assess assessee in terms of the territorial area assigned to him u/s. 120 - transfer of the assessee s return by ITO, Ward II(3), Jalandhar to another ITO (at Jalandhar, where the assessee s office is locate - HELD THAT - The whole purport of law, as we see it, is from the standpoint as to whether any prejudice is caused to the assessee. The transfer of the assessee s return by ITO, Ward II(3), Jalandhar to another ITO (at Jalandhar, where the assessee s office is locate, and in fact, the ITO with whom he filed his return) would not make the issue of notice u/s. 143(2) by him on 15.09.2010 (or 21.09.2010) invalid. This is irrespective of whether the said transfer is prompted by the assessee s objection-as contended by the assessee, or the transfer of the assessee s PAN to the transferee ITO, as stated by the ld.CIT(A). There is no challenge, nor possibly could be, to the inherent competence of the ITO, Ward II(3) Jalandhar to issue a notice u/s. 143(2), which competence is in fact the same as that of any other ITO at Jalandhar or Kapurthala. Once, therefore, there is a valid assumption of jurisdiction to frame the assessment u/s. 143(3), by service of a valid notice u/s. 143(2) in time, the proceedings are to be taken to their logical conclusion. The assessment by the ITO, Ward IV-(1), Jalandhar, with whom the assessee filed his return, and who received the assessee s return from ITO, Ward II(3) Jalandhar on 21.07.2011, cannot therefore be faulted with. In fact, no further objection was raised by the assessee, with he rather participating in the assessment proceedings. How, then, could he challenge the jurisdiction of the ITO, Ward IV(1) Jalandhar with whom he has in fact filed his return for the year, as his AO, in the appellate proceedings. The issue of notices u/ss. 142(1) and 143(2) by ITO, Ward IV(1) Jalandhar on 21.07.2011 is again in consonance with the law which contemplates issue of such notices on change of incumbency or succession in jurisdiction. The same is only an administrative mechanism to accord with the principles of natural justice, with section 129 even granting the assessee the right to insist on being reheard in the matter, i.e., to the extent already heard by the previous officer/s. - Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of the Income Tax Officers (ITOs) over the assessee.
2. Validity of the notice issued under section 143(2) of the Income Tax Act, 1961.
3. Compliance with section 124(3) regarding the objection to jurisdiction.
4. Legal and factual examination of the jurisdictional issue.

Detailed Analysis:

1. Jurisdiction of the Income Tax Officers (ITOs) over the assessee:
The primary issue raised by the assessee was the jurisdiction of the ITOs at Jalandhar over him. The assessee argued that neither ITO II(3), Jalandhar, nor ITO Ward IV(1), Jalandhar, had jurisdiction over him as his PAN was lying with ITO Moga. The assessee contended that his address fell under the jurisdiction of the Income Tax Officer at Kapurthala.

2. Validity of the notice issued under section 143(2) of the Income Tax Act, 1961:
The notice under section 143(2) was issued by ITO, Ward II(3), Jalandhar, on 15.09.2010, and another notice on 21.09.2010. The assessee objected to the jurisdiction of the ITO, Ward II(3), Jalandhar, on 21.01.2011. Both the AO and the CIT(A) found the notices valid as they were issued based on the address specified in the PAN record. The subsequent transfer of the assessee’s return to ITO, Ward IV(1), Jalandhar, was due to the transfer of the assessee’s PAN.

3. Compliance with section 124(3) regarding the objection to jurisdiction:
The Revenue argued that under section 124(3), the assessee could question the AO’s jurisdiction only within thirty days of the service of notice under section 143(2), which was not done in this case. The assessee’s objection was raised much later, making it not maintainable. The transfer of the assessee’s case by ITO, Ward II(3), Jalandhar, to ITO, Ward IV(1), Jalandhar, did not invalidate the notices issued on 15.09.2010 and 21.09.2010.

4. Legal and factual examination of the jurisdictional issue:
The tribunal examined the legal framework and case law regarding the jurisdiction of the AO. It was noted that the term ‘Assessing Officer’ in section 143(2) means the AO defined under section 2(7A) of the Act, who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1) or section 120(2). The tribunal observed that the AO’s jurisdiction is determined by the address communicated by the assessee in the PAN record. The tribunal highlighted that the assessee had not objected to the first notice under section 143(2) served in time, which assumed jurisdiction to frame the assessment under section 143(3).

The tribunal also discussed the scheme of the Act in relation to the jurisdiction of Income Tax Authorities, particularly section 124, which deals with the jurisdiction of Assessing Officers. The tribunal noted that an objection to the AO’s jurisdiction must be raised within the time prescribed by section 124(3). The tribunal referred to various case laws to emphasize that an irregular exercise of jurisdiction does not render the order a nullity, and such an order can be set aside.

Conclusion:
The tribunal concluded that the assessee’s objection to the jurisdiction of ITO, Ward II(3), Jalandhar, was not maintainable as it was raised beyond the prescribed time limit under section 124(3). The tribunal found that the notice under section 143(2) dated 15.09.2010 was validly issued and served in time, thus assuming jurisdiction to frame the assessment under section 143(3). The tribunal dismissed the assessee’s appeal, stating that the objection to the jurisdiction was not valid both on facts and in law.

Order:
The assessee’s appeal was dismissed, and the stay application became infructuous. The order was pronounced in the open court on June 27, 2018.