2021 (11) TMI 706 - AT - Income Tax

Revision u/s 263 by CIT-A - Jurisdiction of AO - invalid notice u/s 143(2) - valid jurisdiction available whatsoever with the AO Kolkata in the instant case -Transfer of case u/s 127 - HELD THAT - Assessee has taken a plea that where the assessment order has been framed on the basis of an invalid notice u/s 143(2) of the Act the very premise of the assessment framed is without any legal basis - assessment order in itself is illegal and bad in law owing to substantial defect of lack of jurisdiction. The action of the PCIT to revise such illegal order is a complete non-starter and is wholly unsustainable in law. We notice a few facts. An order under Section 127(2)(a) dated 13.09.2013 was passed by the CIT Kolkata II Kolkata whereby the jurisdiction over the assessee was transferred from the ITO Ward (4)(2) Kolkata to ACIT Central Circle Raipur. It was further noted at the bottom of the aforesaid transfer order that the order shall take immediate effect. Hence in view of the aforesaid transfer order the AO at Kolkata was ousted of its jurisdiction and consequently had no locus over the assessee from the date of aforesaid transfer order. AO at Kolkata was fully aware of this fact as can be seen from his action in respect of assessment year 2014-15. As pointed out on behalf of assessee the proceedings under Section 143(2) were dropped by AO Kolkata for AY 2014-15 when he was apprised of the fact of transfer of jurisdiction. The facts in the instant case are thus speaking for itself. It is not in dispute that the AO Kolkata at the relevant time of issuance of notice u/s 143(2) dated 09.08.2018 completely lacked jurisdiction over assessee to do so. The issuance of notice u/s 143(2) is governed by statutorily prescribed procedures. On a combined reading of Sections 120(1) 120 (2) 124(1) Rule 12E of the IT Rules 1962 and transfer order passed by CIT under Section 127 of the Act we have no hesitation to hold that there was no valid jurisdiction available whatsoever with the Assessing Officer Kolkata in the instant case. The notice issued under Section 143(2) of the Act by such officer is thus wholly without jurisdiction and thus a non-est notice. The assessment has been admittedly framed based on such non-est notice without taking any corrective step in this direction. Assessing Officer at Raipur has not issued any separate notice u/s 143(2) to assume power to assess the income of the assessee. He has merely continued his action based on a non-est notice issued by the AO of a different jurisdiction. The assessment order passed on the basis of an invalid and non-est notice thus cannot be countenanced in law. Consequently the revisional action under Section 263 is not permissible in law in parity with the decision of the co-ordinate Bench of the Tribunal in Supersonic Technologies (P) Ltd 2018 (12) TMI 912 - ITAT DELHI In the legal ground of lack of jurisdiction raised on behalf of the assessee. The impugned revisional order is thus required to be quashed on this ground alone. Hence we do not consider it expedient to go into the aspect of the merit of issues raised in the show-cause notice arising from an invalid and non-est order.The revisional order under Section 263 is thus quashed and set aside. Appeal of the assessee is allowed.

Summary

Issues:
Challenge to revisional order under Section 263 of the Income Tax Act, 1961 regarding Assessment Year 2017-18 based on lack of jurisdiction and legality of assessment order.

Analysis:

1. Revisional Order Challenge: The appeal was filed against the revisional order of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, seeking to set aside the assessment order passed by the Assessing Officer concerning Assessment Year 2017-18. The PCIT observed errors in the assessment order and issued a show-cause notice to the assessee listing various points for verification. The PCIT ultimately set aside the assessment order and directed fresh inquiries for a new assessment order.

2. Jurisdictional Challenge: The assessee challenged the jurisdiction of the Assessing Officer at Raipur, arguing that the assessment order was based on an invalid notice under Section 143(2) of the Act. The key argument was that the AO at Kolkata had no authority to issue the notice due to a prior transfer of jurisdiction to the AO at Raipur. The lack of a valid notice from the jurisdictional AO rendered the assessment proceedings void ab initio.

3. Legal Grounds: The legal counsel for the assessee contended that the assessment order was illegal and void due to the lack of jurisdiction, making it ineligible for revision under Section 263 of the Act. Citing relevant precedents, it was argued that a revision cannot rectify an assessment order that is fundamentally flawed. The counsel emphasized that Section 292BB does not apply to cure defects related to the issuance of notices by non-jurisdictional AOs.

4. Tribunal Decision: The Tribunal found merit in the lack of jurisdiction raised by the assessee, noting that the notice under Section 143(2) issued by the AO at Kolkata was without legal basis. The Tribunal held that the assessment order based on an invalid notice was illegal and could not be revised under Section 263. Consequently, the revisional order was quashed, and the appeal of the assessee was allowed.

5. Conclusion: The Tribunal ruled in favor of the assessee, setting aside the revisional order under Section 263 due to lack of jurisdiction and the illegal basis of the assessment order. The decision highlighted the importance of valid jurisdiction in assessment proceedings and emphasized that fundamental defects render assessment orders void ab initio, precluding revision under the Income Tax Act.