2019 (4) TMI 1364 - AT - Income Tax

Absence of statutory notice u/s 143(2) within stipulate time - AO holding jurisdiction over the case never issued notice u/s 143(2) - notice u/s 143(2) issued by the Dy. CIT, Circle-1, Jalandhar, who was not the A.O vested with the jurisdiction over the case of the assessee - curable defect u/s. 292B - HELD THAT - We find that the Dy. CIT Circle-IV, Jalandhar i.e. the AO vested with the jurisdiction over the case of the assessee had only issued a notice u/s 143(2), dated 28.05.2014. However, as the aforesaid notice issued by the Dy. CIT Circle-IV, Jalandhar under Sec.143(2) was beyond the specified time period contemplated under Sec.143(2), hence the same had no existence in the eyes of law. We are of the considered view that as there was no valid transfer of jurisdiction over the case of the assessee from the ACIT, Range IV, Jalandhar to Dy. CIT/ACIT, Circle-I Jalandhar, therefore, no valid notice could have been issued by the latter under Sec.143(2) of the I.T. Act. A.O exercising the jurisdiction over the case of the assessee had failed to issue a notice u/s. 143(2) within the stipulated time period, therefore, the assessment framed by him under Sec.143 (3), san issuance of the aforesaid notice is absolutely bereft of any force of law and cannot be sustained. Our aforesaid view that a valid assessment under Sec. 143(3) presupposes issuance of a notice under Sec.143(2) finds support from the judgement of the Hon ble Supreme Court in the case of ACIT Anr. Vs. Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT OF INDIA as held the omission on the part of the assessing officer to issue notice under Sec.143(2) cannot be held to be merely a procedural irregularity, as the same goes to the very validity of assumption of jurisdiction by the A.O and is not curable. A.O exercising the jurisdiction over the case of the assessee had failed to issue a notice u/s. 143(2) within the specified time period, thus the consequential assessment framed under Sec.143(3) by him cannot be sustained - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the assessment order due to non-issuance and non-service of statutory notice under Section 143(2) by the Assessing Officer (A.O) holding jurisdiction.
2. Justification of sustaining the addition made by the A.O out of agricultural income.

Detailed Analysis:

1. Validity of the Assessment Order:
Background:
The assessee, running a hotel and a club, filed its return of income for A.Y. 2012-13 and A.Y. 2013-14, declaring losses. The return was processed under Section 143(1) of the Income Tax Act, 1961. The case was later selected for scrutiny, and notices under Section 143(2) were issued by the Dy. Commissioner of Income Tax, Circle 1, Jalandhar. The assessee objected, claiming that the jurisdiction remained with the A.O, Range-IV, Jalandhar.

Contentions:
The assessee argued that the assessment framed without a valid notice under Section 143(2) by the jurisdictional A.O was invalid, relying on the Supreme Court judgment in ACIT Vs. Hotel Blue Moon. The CIT(A) rejected this, stating that the jurisdiction was with the ACIT, Circle-1, Jalandhar, and that the provisions of Section 292B would rectify any jurisdictional issues.

Tribunal's Findings:
The Tribunal observed that:
- The assessee had e-filed its return with the A.O, Range-IV, Jalandhar.
- Objections to the jurisdiction were raised timely.
- The A.O failed to refer the jurisdictional issue to the appropriate authority as required under Section 124(4).

The Tribunal highlighted several serious infirmities:
- No order vesting jurisdiction with ACIT/DCIT, Circle-1, Jalandhar, was presented.
- The statutory requirement of recording reasons for transferring the case was not fulfilled.
- The notices issued by ACIT, Circle-1, Jalandhar, were beyond the specified time period and thus invalid.

The Tribunal concluded that the assessment framed under Section 143(3) without a valid notice under Section 143(2) was invalid and not sustainable in law. The Tribunal quashed the assessment orders for both A.Y. 2012-13 and A.Y. 2013-14.

2. Justification of the Addition Made by the A.O:
Since the Tribunal quashed the assessment orders on jurisdictional grounds, it refrained from adjudicating the merits of the addition made by the A.O out of agricultural income.

Conclusion:
The Tribunal allowed the appeals for both A.Y. 2012-13 and A.Y. 2013-14, quashing the assessment orders due to the invalidity of the notices issued under Section 143(2) by the non-jurisdictional A.O. The issue of the addition made by the A.O was not addressed due to the quashing of the assessment on jurisdictional grounds.

Order Pronounced:
The order was pronounced in the open court on 15.01.2019.