2023 (3) TMI 1432 - HC - Income Tax

Validity of scrutiny assessment - Jurisdiction of authority who issued notice - whether there is valid notice issued u/s 143(2) for commencing the scrutiny assessment? - HELD THAT - As on the date of selecting the case for scrutiny the very basis for having jurisdiction over the assessee is the returned income which was more than Rs.30 lakhs and the same was lying with the DCs/Acs but the notice u/s. 143(2) of the Act has been issued by ITO Ward-9(4) Kolkata. Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny the authority who issued the notice namely the Income Tax Officer Ward No.9(4) Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax. The above factual position recorded by the Tribunal is not in dispute. Therefore we are of the clear view that the Tribunal rightly allowed the assessee s appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter.

Summary

Issues involved:
The validity of notice under Section 143(2) of the Income Tax Act, 1961 for commencing scrutiny assessment.

Issue 1:
Whether the Tribunal was justified in quashing the Assessing Order under Section 143(3) due to the invalid Notice under Section 143(2) not being issued in accordance with law.

The Tribunal noted that the authority who issued the notice did not have jurisdiction at the time of scrutiny assessment selection. The Tribunal found that the statutory requirement of a valid notice under Section 143(2) is essential for assessment proceedings under Section 143(3) to be valid. Despite the subsequent assessment being done by a different authority with jurisdiction, the initial notice was issued by an officer lacking jurisdiction. The Tribunal concluded that the defect in the issuance of the notice is fundamental and renders the scrutiny proceedings invalid. The High Court agreed with the Tribunal's decision, stating that the defect in the notice issuance is incurable and goes to the root of the matter, leading to the quashing of the scrutiny proceedings.

Issue 2:
Whether the Tribunal erred in not recognizing that a change in the jurisdictional Assessing Officer does not affect the assessment proceedings after the initial notice under Section 143(2) is issued.

The Tribunal highlighted that the jurisdictional Assessing Officer who issued the notice did not have the necessary jurisdiction at the time of issuing the notice. Despite the subsequent assessment being conducted by an officer with jurisdiction, the initial notice's validity was crucial. The Tribunal emphasized that the notice under Section 143(2) is a critical requirement for initiating scrutiny assessment and that the defect in its issuance renders the subsequent proceedings invalid. The High Court concurred with the Tribunal's reasoning, affirming that the defect in the notice issuance fundamentally impacts the assessment proceedings, leading to the quashing of the scrutiny proceedings.

Conclusion:
The High Court dismissed the revenue's appeal, upholding the Tribunal's decision to quash the scrutiny proceedings due to the invalid issuance of the notice under Section 143(2). The Court found no grounds to differ with the Tribunal's findings, emphasizing the importance of a valid notice for commencing scrutiny assessments. The appeal was dismissed, and the substantial questions of law were answered against the revenue.