2018 (10) TMI 1114 - AT - Income Tax

Scrutiny assessment - Non issuing notice u/s. 143(2) upon the assessee company - validity of assessment u/s 144 - ITO s jurisdiction to assess the corporate entity like the assessee company - transfer of the jurisdiction as contemplated u/s. 127 of the Act to ITO, Wd-6(1), Kolkata - Held that - No notice u/s. 143(2) was issued by ITO, Wd-6(1), Kolkata before completing the assessment. We note that ITO, Wd-34(2), Kolkata did not enjoy the jurisdiction over the assessee company by virtue of both the earlier Notification No. 228/2001 dated 31.07.2001(CBDT) as well as the latest Notification No. 50/2014 dated 22.10.2014 of CBDT. Therefore, the assessment completed by ITO, Wd- 6(1), Kolkata on the strength of the notice issued u/s. 143(2) of the Act by ITO, Wd-34(2), Kolkata (who did not enjoy jurisdiction) is non-est in law and, therefore, is bad in law and consequently null in the eyes of law. Moreover, we also take note that Pr. CIT/CIT-12, Kolkata under whom ITO, Ward-34(2), Kolkata functioned has not issued any order of transfer of the jurisdiction as contemplated u/s. 127 of the Act to ITO, Wd-6(1), Kolkata. In the light of the above as well as the contention of the assessee that no opportunity of hearing was rendered to it by ITO, Wd-6(1), Kolkata before framing assessment u/s. 144 of the Act which omission on the part of AO also is against principles of natural justice and the impugned assessment u/s 144 of the Act is fragile for non-adherence of principles of natural justice on the part of AO. - Decided in favour of assessee.

Summary

Issues:
1. Lack of notice u/s. 143(2) of the Income-tax Act, 1961 by the appropriate jurisdictional authority.
2. Jurisdictional transfer of the case without proper order u/s. 127 of the Income-tax Act, 1961.
3. Compliance with the principles of natural justice in assessment proceedings.

Analysis:

Issue 1: Lack of Notice u/s. 143(2)
The appellant contested that no notice u/s. 143(2) was served by the appropriate jurisdictional authority, ITO, Ward-6(1), Kolkata, before completing the assessment. It was argued that the notice issued by ITO, Ward-34(2), Kolkata, who lacked jurisdiction, was invalid. The Tribunal concurred, noting that the absence of a notice u/s. 143(2) from the correct authority rendered the assessment null and void. The appellant's additional grounds challenging the assessment order on this basis were upheld.

Issue 2: Jurisdictional Transfer without Proper Order
The Tribunal found that the jurisdictional transfer of the case from ITO, Ward-34(2) to ITO, Ward-6(1), Kolkata was not supported by a valid order u/s. 127 of the Act. The absence of such an order, as mandated by law, invalidated the transfer of jurisdiction. This lack of proper authority in transferring jurisdiction further contributed to the nullity of the assessment order.

Issue 3: Compliance with Principles of Natural Justice
The Tribunal also considered the appellant's argument regarding the lack of opportunity for a hearing before the assessment was finalized. It was observed that the failure to provide a hearing by ITO, Ward-6(1), Kolkata, violated principles of natural justice. This omission was deemed a further flaw in the assessment process, reinforcing the decision to quash the assessment order.

In conclusion, the Tribunal allowed the appeal of the assessee, ruling that the assessment order dated 13.03.2015 passed by ITO, Ward-6(1), Kolkata was corum non-judice due to the lack of a valid notice u/s. 143(2) and other procedural irregularities. The additional grounds raised by the appellant were accepted, leading to the quashing of the assessment order.