2024 (8) TMI 40 - AT - Income Tax

Assessment framed without issuing a mandatory notice u/s. 143(2) by jurisdictional officer - assessee had filed the return of income with Range-1(1), Jamshedpur, and the notice under section 143(2) was issued by ITO, Ward-3(1), Jamshedpur - HELD THAT - Jurisdiction over the assessee vested with the ITO, Ward-1(1), Jamshedpur vide Notification dated 15.11.2014 issued by the CIT, Jamshedpur whereas the impugned notice u/s 143(2) was issued by ITO, Ward-3(1), Jamshedpur on 31.08.2015. Therefore, the ITO, Ward-3(1), Jamshedpur lacked jurisdiction to issue u/s 143(2) which is non-est in the eyes of law. This is a glaring example of an inherent lack of jurisdiction of the AO in issuing notice u/s 143(2) which means that no valid notice was ever issued by the ITO, Ward- 1(1), Jamshedpur, having valid jurisdiction over the assessee. There was no order of transfer u/s 127 for transferring the case from ITO, Ward-3(1), Jamshedpur to ITO, Ward- 1(1), Jamshedpur as coming out from the order sheet. In the present case, the ITO, Ward- 1(1), Jamshedpur passed the assessment order dated 02.12. 2016 without any transfer order u/s 127 and is therefore invalid. Thus the assessment was framed without issuing any valid notice u/s 143(2) from the jurisdictional AO. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of the assessment order under section 144 of the Income Tax Act, 1961.
2. Non-issuance of notice under section 143(2) of the Income Tax Act, 1961.
3. Jurisdictional challenge regarding the issuance of notice and framing of the assessment order.

Issue-wise Detailed Analysis:

1. Validity of the assessment order under section 144 of the Income Tax Act, 1961:

The appellant challenged the assessment order framed under section 144 of the Income Tax Act, 1961, on the grounds that it was issued without a prior notice under section 143(2). The Tribunal found that the assessment was framed by ITO, Ward-1(1), Jamshedpur without issuing the mandatory notice under section 143(2), which rendered the assessment invalid and void ab initio. The Tribunal relied on the Hon'ble Calcutta High Court's decision in the case of Nopany & Sons, which held that non-issuance of notice under section 143(2) is not a procedural irregularity but a mandatory requirement, and failing to comply with it invalidates the assessment.

2. Non-issuance of notice under section 143(2) of the Income Tax Act, 1961:

The Tribunal noted that the assessee had filed the return of income with Range-1(1), Jamshedpur, and the notice under section 143(2) was issued by ITO, Ward-3(1), Jamshedpur. The assessment was ultimately framed by ITO, Ward-1(1), Jamshedpur without issuing any fresh notice under section 143(2). The Tribunal emphasized that the issuance of notice under section 143(2) by the jurisdictional AO is a sine qua non for initiating assessment proceedings under section 143(3), as held by the Hon'ble Supreme Court in ACIT vs. Hotel Blue Moon.

3. Jurisdictional challenge regarding the issuance of notice and framing of the assessment order:

The Tribunal observed that the ITO, Ward-3(1), Jamshedpur, initially issued the notice under section 143(2) without jurisdiction since the jurisdiction over the assessee was vested with ITO, Ward-1(1), Jamshedpur. There was no order of transfer under section 127 for transferring the case from ITO, Ward-3(1) to ITO, Ward-1(1). The Tribunal found that the assessment order dated 02.12.2016, passed by ITO, Ward-1(1), Jamshedpur, was invalid due to the lack of jurisdiction and non-issuance of a valid notice under section 143(2) by the jurisdictional AO. The Tribunal distinguished the case from the Hon'ble Supreme Court's decision in DCIT (Exemption) & Anr. Vs. Kalinga Institute of Industrial Technology, where the jurisdiction was correctly assumed post the filing of the return, and the assessee had complied with notices issued under section 142(1).

Conclusion:

The Tribunal set aside the order of the Ld. CIT(A) and quashed the assessment framed by the AO as without jurisdiction. Consequently, the appeal of the assessee was allowed, and the assessment proceedings were declared invalid and bad in law. The Tribunal held that the non-issuance of notice under section 143(2) by the jurisdictional AO and the lack of an order of transfer under section 127 rendered the assessment proceedings void. The judgment was pronounced in the open court on 29th July, 2024.