2023 (12) TMI 1414 - AT - Income Tax

Issuance of notice u/s 143(2) by non jurisdictional officer - Notice issued by ACIT/ DCIT v/s ITO - HELD THAT - As per the CBDT Instruction 1/2011 dated 31.01.2011 the moment the return of income has been filed by the assessee disclosing taxable income more than 15 lakhs or 20 lakhs for Mofussil and metro areas respectively as the case may be the scrutiny notice u/s 143(2) of the Act could be issued only by the authority in the rank of ACIT/ DCIT and not by ITO. It is bounden duty on the part of the ld. DCIT to have issued notice u/s 143(2) of the Act within the prescribed time provided in the statute after having assumed jurisdiction over the assessee which is admittedly not done in the instant case by the ld. DCIT. Hence it could be safely concluded that the entire scrutiny assessment framed u/s 143(3)144 by DCIT Circle Haridwar without issuing a valid and legal notice u/s 143(2) of the Act become void abinitio and deserves to be quashed. Whether department would be rescued by the provisions of section 292BB? - We are unable to comprehend ourselves to agree to this argument of the revenue in as much as in our considered understanding the provisions of section 292BB applies only in case of improper service/ wrong service of notice and not to objection not taken by the assessee during assessment proceedings. Section 292BB of the Act does not save the defect of non-issue of valid notice u/s 143(2) of the Act by the jurisdictional officer. Hence in the absence of valid and legal notice issued by the jurisdictional officer the assessment framed on the assessee requires to be quashed. Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the issuance of a notice under section 143(2) of the Income-tax Act, 1961, by an officer lacking pecuniary jurisdiction renders the assessment proceedings void ab initio.

2. Whether the absence of a statutory valid notice under section 143(2) by the jurisdictional officer invalidates the entire assessment proceedings.

3. The applicability of Section 292BB of the Income-tax Act in cases of non-issuance of a valid notice under section 143(2).

ISSUE-WISE DETAILED ANALYSIS

1. Jurisdictional Validity of Notice under Section 143(2)

- Relevant Legal Framework and Precedents: The legal framework involves section 143(2) of the Income-tax Act, which mandates the issuance of a notice for scrutiny assessment. The jurisdictional aspect is governed by CBDT Instruction No. 1/2011, which specifies that non-corporate assessees with taxable income above a certain threshold should be assessed by an authority of the rank of Assistant Commissioner or Deputy Commissioner (ACIT/DCIT).

- Court's Interpretation and Reasoning: The Tribunal noted that the initial notice under section 143(2) was issued by the Income Tax Officer (ITO), who lacked the jurisdiction as per the CBDT instruction due to the assessee's income level. The Tribunal emphasized that jurisdictional validity is crucial for the legality of the notice.

- Key Evidence and Findings: The notice under section 143(2) was issued by the ITO, Ward-1, Roorkee, whereas the jurisdiction should have been with the ACIT/DCIT due to the assessee's income exceeding Rs. 15 lakhs.

- Application of Law to Facts: The Tribunal applied the CBDT instruction to conclude that the notice issued by the ITO was void ab initio, as it was not issued by the competent authority.

- Treatment of Competing Arguments: The Department argued that the notice was issued under the Computer Assisted Selection of Cases for Scrutiny (CASS) and that section 292BB could rescue the proceedings. However, the Tribunal rejected this, stating that section 292BB applies to improper service of notice, not to the non-issuance of a valid notice.

- Conclusions: The Tribunal concluded that the entire assessment was void due to the lack of a valid notice under section 143(2) from the jurisdictional officer.

2. Absence of Statutory Valid Notice by Jurisdictional Officer

- Relevant Legal Framework and Precedents: Section 143(2) requires a valid notice to be issued by the jurisdictional officer. The Tribunal referenced several precedents, including decisions from the Punjab and Haryana High Court, Allahabad High Court, Madras High Court, and the Supreme Court, which support the necessity of jurisdictional validity for notices.

- Court's Interpretation and Reasoning: The Tribunal emphasized that the absence of a valid notice by the jurisdictional officer renders the proceedings void. It highlighted that the DCIT, who assumed jurisdiction, failed to issue a notice under section 143(2) within the prescribed time.

- Key Evidence and Findings: The DCIT did not issue a subsequent notice under section 143(2) after assuming jurisdiction, which was a critical procedural lapse.

- Application of Law to Facts: The Tribunal applied the statutory requirement and precedents to determine that the absence of a valid notice by the DCIT invalidated the assessment.

- Treatment of Competing Arguments: The Department's reliance on section 292BB was dismissed, as the Tribunal clarified that it does not apply to non-issuance of a notice.

- Conclusions: The Tribunal quashed the assessment proceedings due to the absence of a statutory valid notice by the jurisdictional officer.

SIGNIFICANT HOLDINGS

- The Tribunal held that the issuance of a notice under section 143(2) by an officer lacking jurisdiction renders the assessment void ab initio. It stated, "the entire scrutiny assessment framed u/s 143(3)/144 of the Act...without issuing a valid and legal notice u/s 143(2) of the Act become void ab initio and deserves to be quashed."

- The Tribunal established the principle that section 292BB does not cure the defect of non-issuance of a valid notice by the jurisdictional officer. It noted, "Section 292BB of the Act does not save the defect of non-issue of valid notice u/s 143(2) of the Act by the jurisdictional officer."

- The Tribunal quashed the assessment proceedings, allowing the assessee's appeal on the grounds of jurisdictional and procedural invalidity.