2017 (12) TMI 43 - AT - Income Tax

Limitation period for issuance of statutory notice under section 143(2) - ITO jurisdiction of issuing notice - transfer of file to ACIT - Held that - Notice under section 143(2) of the Act was issued on September 6, 2013 by the Income-tax Officer, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the Income-tax Officer realised that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the Assistant Commissioner of Income-tax, Circle-27, Haldia on September 24, 2014 when the Assistant Commissioner of Income-tax issued statutory notice which was beyond the time limit prescribed for issuance of notice under section 143(2) of the Act. We note that the Assistant Commissioner of Income-tax by assuming the jurisdiction after the time prescribed for issuance of notice under section 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the Assistant Commissioner of Income-tax, Circle-27, Haldia after the limitation period for issuance of statutory notice under section 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law - Decided in favour of assessee.

Summary

Issues:
1. Jurisdictional validity of notice under section 143(2) of the Income-tax Act, 1961.
2. Timeliness of notice under section 143(2) of the Income-tax Act, 1961.
3. Validity of assessment order based on the notice under section 143(2) of the Income-tax Act, 1961.
4. Jurisdictional transfer of assessment file.
5. Manual selection of the case without prior approval.

Analysis:

Issue 1: Jurisdictional validity of notice under section 143(2) of the Income-tax Act, 1961
The appellant challenged the jurisdiction of the Income-tax Officer, Ward-27(1) Haldia, to issue the notice under section 143(2) based on Central Board of Direct Taxes Instruction No. 1/11. The Central Board's instruction specified different monetary limits for assessment jurisdiction based on income levels. The appellant argued that since the returned income exceeded the specified limit, only the Assistant Commissioner of Income-tax had the jurisdiction to conduct the assessment. The Tribunal agreed that the Income-tax Officer lacked jurisdiction to issue the notice, and the subsequent transfer to the Assistant Commissioner was also beyond the time limit prescribed, rendering the notice invalid.

Issue 2: Timeliness of notice under section 143(2) of the Income-tax Act, 1961
The notice under section 143(2) was issued by the Income-tax Officer on September 6, 2013, beyond his jurisdictional limit. The subsequent transfer of the case to the Assistant Commissioner on September 24, 2014, for scrutiny was also deemed untimely. The Tribunal held that the Assistant Commissioner's assumption of jurisdiction after the prescribed time limit for issuing the notice made the notice and the consequential assessment order invalid in the eyes of the law.

Issue 3: Validity of assessment order based on the notice under section 143(2) of the Income-tax Act, 1961
The Tribunal found that the assessment order passed by the Assistant Commissioner based on the invalid notice was illegal, void ab initio, and liable to be quashed. The issuance of the notice beyond the statutory time limit rendered the assessment order null and void.

Issue 4: Jurisdictional transfer of assessment file
The assessment file was transferred from the Income-tax Officer to the Assistant Commissioner based on the income level exceeding the specified limit. However, the transfer and subsequent actions were deemed invalid due to the initial notice being issued by the Income-tax Officer beyond his jurisdiction.

Issue 5: Manual selection of the case without prior approval
The appellant raised concerns about the manual selection of the case without prior approval from the Joint Commissioner of Income-tax/Additional Commissioner of Income-tax, as per the guidelines. While this issue was not explicitly addressed in the judgment, it was noted as one of the additional grounds raised by the appellant.

In conclusion, the Tribunal allowed the appeal of the assessee based on the legal issues raised regarding the jurisdictional validity and timeliness of the notice under section 143(2) of the Income-tax Act, 1961. The assessment order was quashed, and the appeal was allowed.