2018 (3) TMI 668 - AT - Income Tax

Reopening of assessment - validity of assessment - non issuing notice u/s. 143(2) - Held that - CIT(A) has rightly held that the assumption of jurisdiction to frame an assessment or non assumption of jurisdiction to frame an assessment goes to the root of the judicial act of framing an assessment order and in the event of non assumption of jurisdiction u/s. 143(2) of the Act to frame an assessment the act of the AO in framing an assessment order without issuing notice u/s. 143(2) cannot be saved under the provisions of section 292B or under section 292BB of I.T. Act, 1961, hence, the assessment order so framed will be void ab-initio for want of assumption of jurisdiction as assessment cannot be framed based upon jurisdiction calling for the Return of income. Assessment order framed without first assuming jurisdiction u/s. 143(2) of the I.T. Act, 1961 is void ab-initio. - Decided in favour of assessee.

Issues Involved:
1. Whether the assessment order is valid without issuing a notice under section 143(2) before completing the assessment under section 144.
2. The necessity of issuing a notice under section 143(2) when no return is filed in response to a notice under section 148.
3. The time limit for issuing a notice under section 143(2) and its applicability when no return is filed by the assessee.
4. The validity of the assessment order and the potential for it to be set aside or restored.

Detailed Analysis:

Issue 1: Validity of Assessment Order Without Notice Under Section 143(2)
The primary contention was whether the assessment order was valid given that no notice under section 143(2) was issued before completing the assessment under section 144. The Ld. CIT(A) annulled the assessment order on the grounds that the absence of notice under section 143(2) was a jurisdictional error. It was asserted that without assuming jurisdiction under section 143(2), the Assessing Officer (AO) could not frame the assessment order, and this omission was fatal to the maintainability of the assessment order. This position was upheld by the Tribunal, which confirmed that the assessment order so framed would be void ab-initio for want of jurisdiction.

Issue 2: Necessity of Notice Under Section 143(2) When No Return is Filed
The Revenue argued that notice under section 143(2) is mandatory only when a return has been furnished under section 139 or in response to a notice under section 142(1). However, the Tribunal found that the AO must assume jurisdiction under section 143(2) to frame an assessment order, regardless of whether the return was filed. The Tribunal emphasized that the same procedure must be followed for framing an assessment in the event of non-filing of the return of income as in the event of filing the return.

Issue 3: Time Limit for Issuing Notice Under Section 143(2)
The Revenue contended that there is a time limit for issuing a notice under section 143(2), which must be served on the assessee before the expiry of six months from the end of the financial year in which the return is furnished. However, in this case, no return was filed by the assessee. The Tribunal reiterated that the AO must assume jurisdiction under section 143(2) to frame an assessment, irrespective of whether the return was filed or not. The Tribunal noted that the legal requirement for issuing notice under section 143(2) applies equally to cases where the return is not filed.

Issue 4: Validity of the Assessment Order and Potential for It to Be Set Aside or Restored
The Tribunal upheld the Ld. CIT(A)'s decision to annul the assessment order on jurisdictional grounds. It was noted that the jurisdictional High Court had held that an assessment order framed without first assuming jurisdiction under section 143(2) is void ab-initio. The Tribunal confirmed that the assessment order could not be salvaged under sections 292B or 292BB of the I.T. Act, 1961. The Tribunal also directed that the AO could reframe the assessment after following the correct procedure and providing the assessee with a reasonable opportunity to be heard.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s order that the assessment order was void ab-initio due to the failure to issue a notice under section 143(2) before completing the assessment under section 144. The Tribunal emphasized the necessity of following the prescribed procedure for assuming jurisdiction, irrespective of whether the return of income was filed by the assessee. The Revenue was directed to reframe the assessment following the correct legal procedure.

← Previous Next →