2022 (6) TMI 1458 - AT - Income Tax

Validity of assessment order framed by non-jurisdictional officer - competent officer to proceed with the assessment by way of issue of notice u/s 143(2) - when notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment - as submitted that the jurisdiction to pass the assessment order in this case laid with the ACIT/DCIT as the income declared by the assessee was more than Rs. 20 lacs HELD THAT - Jurisdiction of Income Tax Authorities may be fixed not only in respect of territorial area but also having regard to a person or classes of persons and income or classes of income also. Therefore, the CBDT having regard to the income as per return has fixed the jurisdiction of the Assessing Officers. Thus in this case, the competent officer to proceed with the assessment by way of issue of notice u/s 143(2) of the Act was DCIT/ACIT, whereas, the notice u/s 143(2) has been issued by the ITO, Ward-1(1), Kolkata who did not have any jurisdiction to issue the aforesaid notice. As has been held by the various courts of the country including the Apex Court, the issuance of notice u/s 143(2) by the concerned Assessing Officer of a competent jurisdiction is mandatory to assume jurisdiction to proceed to frame assessment u/s 143(3) of the Act. The identical issue also came into consideration in the case of Bhagyalaxmi Conclave (P) Ltd. v. DCIT 2021 (2) TMI 181 - ITAT KOLKATA wherein the Tribunal further relying upon various other decisions of the Co-ordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that when the notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment and the assessment was framed by the other officer who did not issue the notice u/s 143(2) before proceeding to frame the assessment, then such an assessment order was bad in law. Thus assessment order passed by the Assessing Officer (ACIT) was bad in law for want of issuance of notice u/s 143(2). Decided in favour of assessee.

Summary

Issues Involved: Jurisdiction of the Assessing Officer, Issuance of Notice under Section 143(2), Natural Justice, Addition of Income, Penalty Proceedings, Charging of Interest.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The assessee contested the jurisdiction of the Assessing Officer (AO) to frame the assessment order dated 26.12.2017 under Section 143(3) of the Income Tax Act. The AO did not have jurisdiction to frame the assessment as the notice under Section 143(2) was issued by an officer who did not have the competent jurisdiction. The competent officer to issue the notice under Section 143(2) was the ACIT/DCIT, given that the returned income was more than Rs. 20 lakhs. The Tribunal relied on the Supreme Court decision in ACIT vs. M/s Hotel Blue Moon, which held that the issuance of notice under Section 143(2) by the concerned AO of competent jurisdiction is mandatory to assume jurisdiction to frame the assessment.

2. Issuance of Notice under Section 143(2):
The Tribunal noted that the notice under Section 143(2) was issued by the ITO, Ward-3(3), Aurangabad, who did not have the jurisdiction to issue such notice. The issuance of notice under Section 143(2) by the competent AO is sine qua non to assume jurisdiction to frame the assessment under Section 143(3). The Tribunal referred to various case laws, including the decision in Bhagyalaxmi Conclave (P) Ltd. v. DCIT, which held that an assessment order is bad in law if the notice under Section 143(2) is issued by an officer who did not have jurisdiction.

3. Natural Justice:
The assessee argued that the assessment order was violative of the settled principles of natural justice as no reasonable opportunity was allowed to furnish a defense during the assessment proceedings. The Tribunal did not delve deeply into this issue as the assessment order was quashed on jurisdictional grounds.

4. Addition of Income:
The AO made additions to the income on account of undisclosed TDS and receipts from the Executive Engineer, REO Works Division, Bhagalpur. The assessee contended that these additions were arbitrary and unjustified. However, the Tribunal did not address the merits of these additions as the assessment order was quashed on jurisdictional grounds.

5. Penalty Proceedings:
The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income. The assessee argued that the initiation of penalty proceedings was arbitrary and illegal. The Tribunal did not need to address this issue as the assessment order was quashed on jurisdictional grounds.

6. Charging of Interest:
The AO charged interest under Sections 234B and 234D without making any provision in the assessment order. The assessee contended that the charging of interest was arbitrary and illegal. The Tribunal did not address this issue as the assessment order was quashed on jurisdictional grounds.

Conclusion:
The Tribunal quashed the assessment order on the grounds that the AO did not have the jurisdiction to issue the notice under Section 143(2). As the jurisdictional issue was decided in favor of the assessee, the Tribunal did not address the merits of the other issues raised in the appeal. The appeal of the assessee was allowed, and the assessment order was declared null and void.