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2020 (11) TMI 494 - AT - Income TaxNon-issue of legally valid notice u/s. 143(2) - Whether it is a curable defect? - AO jurisdiction over the case of the appellant - territorial jurisdiction of the ITO, Ward-1, Shillong to issue notice to assessee - assessee has raised the jurisdiction of the AO at Gauhati who passed the assessment order without issuing notice u/s. 143(2) - HELD THAT - Admittedly the AO at Gauhati had enjoyed jurisdiction u/s. 124 of the Act since its place of business was at Ulubari at Gauhati and the Shillong Assessing Officer did not enjoy jurisdiction u/s 124 or u/s 127 of the Act. Therefore, in our opinion as far as in the appellant s case is concerned, the provision of section 124(3) does not come into play since the Shillong Assessing Officer never had jurisdiction u/s 124 of the Act. In my considered opinion Section 124(3) of the Act does not in any way help the Department to justify the action of AO at Shillong in issuing notice under Section 143(2) to the assessee, which is an action done by him without jurisdiction. So the challenge raised by the Ld, Sr. DR against the legal issue raised by assessee fails. Since in the present case no valid notice u/s 143(2) was issued by the AO who held jurisdiction over the case of the appellant, the consequent order passed u/s 143(3) dated 24.03.2014 was legally unsustainable and therefore is null in the eyes of law and therefore quashed.
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to issue notice under Section 143(2) of the Income-tax Act, 1961. 2. Validity of the assessment order under Section 143(3) without issuing a valid notice under Section 143(2). 3. Applicability of Section 124(3) regarding the challenge to the jurisdiction of the AO. 4. Impact of the assessee's participation in the assessment proceedings on the validity of the assessment order. 5. Relevance of PAN jurisdiction in determining the territorial jurisdiction of the AO. Detailed Analysis: 1. Jurisdiction of the Assessing Officer (AO) to issue notice under Section 143(2): The primary issue raised by the assessee was that the AO (Addl. CIT, Range-3, Gauhati) framed the assessment without issuing a notice under Section 143(2), which was a jurisdictional requirement. The notice was issued by ITO, Ward-1, Shillong, who did not have territorial jurisdiction over the assessee, whose principal place of business was in Guwahati. The Tribunal noted that the jurisdiction of an AO is determined by the principal place of business of the assessee as per Section 124(1) of the Act. Since the assessee's principal place of business was in Guwahati, the ITO, Shillong did not have the jurisdiction to issue the notice. 2. Validity of the assessment order under Section 143(3) without issuing a valid notice under Section 143(2): The Tribunal emphasized that the issuance of a notice under Section 143(2) is mandatory for assuming jurisdiction to frame an assessment under Section 143(3). The Hon’ble Supreme Court in ACIT Vs. Hotel Blue Moon (2010) held that the non-issuance of a legally valid notice under Section 143(2) is not a curable defect. Therefore, the assessment order framed without such notice is null and void. 3. Applicability of Section 124(3) regarding the challenge to the jurisdiction of the AO: The Tribunal rejected the CIT(A)'s reliance on Section 124(3), which precludes an assessee from challenging the jurisdiction of an AO after a certain period. The Tribunal clarified that Section 124(3) applies only when the AO assumes jurisdiction as per the directions or orders issued under Section 120(1) or (2). Since the ITO, Shillong did not have jurisdiction under Section 124, the provision did not apply, and the assessee was not estopped from challenging the jurisdiction. 4. Impact of the assessee's participation in the assessment proceedings on the validity of the assessment order: The Tribunal dismissed the argument that the assessee's participation in the assessment proceedings before the Addl. CIT, Guwahati, validated the assessment order. The Tribunal reiterated that the issuance of a notice under Section 143(2) is a mandatory requirement, and non-compliance renders the assessment order null and void, regardless of the assessee's participation. 5. Relevance of PAN jurisdiction in determining the territorial jurisdiction of the AO: The Tribunal rejected the contention that the ITO, Shillong had jurisdiction based on the PAN jurisdiction of the assessee. The Tribunal noted that PAN jurisdiction is an internal arrangement without statutory recognition. The Act recognizes only territorial, pecuniary, and class-based jurisdictions, and not PAN jurisdiction. Conclusion: The Tribunal concluded that the ITO, Shillong did not have the jurisdiction to issue the notice under Section 143(2) and, therefore, the assessment order passed by the Addl. CIT, Guwahati, was null and void. The appeal of the assessee was allowed, and the assessment order was quashed. The Tribunal upheld the principle that the issuance of a valid notice under Section 143(2) is a mandatory requirement for assuming jurisdiction to frame an assessment under Section 143(3).
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