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2021 (3) TMI 515 - AT - Income TaxNon issue of notice u/s.143(2) - AO did not issue the mandatory statutory notice u/s. 143(2) of the Act before framing the assessment order u/s 143(3) - HELD THAT - The issuance of notice u/s. 143(2) is mandatory for framing scrutiny notice u/s. 143(3) of the Act as held in the case of CIT V Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT wherein held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and in the absence of a valid notice u/s 143(2) the scrutiny assessment u/s 143(3) cannot be framed and omission to issue notice u/s 143(2) of the Act is not a curable defect. Since the assessee has been able to demonstrate before us that there has been no notice issued u/s. 143(2) of the Act by the AO (DCIT Circle-3(1), Kolkata before he framed to scrutiny assessment u/s. 143(3) of the Act dated 17.03.2015, the assessment order is null in the eyes of law and the assessee succeeds on the legal issue raised before us. Since the AO (DCIT, Circle-3(1), Kolkata did not issue the mandatory notice u/s 143(2) of the Act, he did not enjoy the jurisdiction to frame the assessment u/s. 143(3) of the Act. Therefore, the order passed by the AO (DCIT, Circle-3(1), Kolkata is null in the eyes of law and it has to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in issuing the notice under Section 143(2) of the Income Tax Act, 1961. 2. Validity of the assessment order passed without the service of a valid notice under Section 143(2). 3. Transfer of case without an order under Section 127 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Jurisdiction of the Assessing Officer (AO) in issuing the notice under Section 143(2) of the Income Tax Act, 1961: The primary issue raised by the assessee was that the notice under Section 143(2) was issued by the DCIT, Circle-2, Gorakhpur, who did not have jurisdiction over the assessee's case. The assessee's registered office was in Kolkata, West Bengal, and thus the jurisdiction lay with the AO in Kolkata. The legal framework for the jurisdiction of Income Tax authorities is outlined in Sections 120, 124, 127, and 129 of the Income Tax Act. It was argued that the DCIT, Circle-2, Gorakhpur, did not have territorial jurisdiction as per Section 124 or by virtue of Section 120 or by transfer under Section 127. The Tribunal noted that the issuance of a valid notice under Section 143(2) is mandatory for framing an assessment under Section 143(3), as held by the Supreme Court in CIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC). 2. Validity of the assessment order passed without the service of a valid notice under Section 143(2): The Tribunal observed that the AO in Kolkata, who framed the assessment order under Section 143(3), did not issue a fresh notice under Section 143(2) after the case was transferred from Gorakhpur. The legal issue was whether the AO in Kolkata could frame the assessment without issuing and serving a notice under Section 143(2). The Tribunal relied on the Supreme Court's ruling in CIT v. Hotel Blue Moon, which mandates the issuance of a valid notice under Section 143(2) for jurisdiction to frame a scrutiny assessment under Section 143(3). Since the AO in Kolkata did not issue the mandatory notice, the assessment order was deemed null and void. 3. Transfer of case without an order under Section 127 of the Income Tax Act, 1961: The assessee argued that the transfer of the case from Gorakhpur to Kolkata was not made by passing an order under Section 127, which governs the power to transfer cases. The Tribunal noted that the transfer of jurisdiction should be done following the provisions outlined in Section 127, which requires a reasonable opportunity of being heard and recording reasons for the transfer. The lack of a valid transfer order under Section 127 further invalidated the jurisdiction of the AO in Kolkata. Conclusion: The Tribunal concluded that the assessment order passed by the AO in Kolkata was null and void due to the lack of a valid notice under Section 143(2) and the improper transfer of jurisdiction without an order under Section 127. Consequently, the appeal of the assessee was allowed, and the assessment order was quashed. The Tribunal did not delve into the merits of the AO's action as the jurisdictional issue rendered the assessment order invalid. The order was pronounced in the open court on 10.03.2021.
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