2018 (5) TMI 749 - AT - Income Tax

Issue of notice u/s 143(2) - service of valid notice - jurisdiction of ITO issuing notice - PAN of assessee attached to ITO, Ward-1(1), Siliguri - validity of assessment - period of limitation - Held that - In instant case, the revenue has not brought on record to show that notification u/s 127 passed by the Commissioner of Income Tax conferring the jurisdiction over the assessee with ITO-Ward1(1), Silguri. It is the responsibility of the Income Tax department to migrate PAN to the correct AO, if there is a mismatch. Simply because the PAN is attached to ITO, Ward-1(1), Siliguri he cannot assume the jurisdiction over the assessee and issue the notice without having powers vested in him. Therefore, the notice issued by the ITO, Ward-1(1), Siliguri is invalid, hence the same should be treated as non-est. The first notice was issued by the ITO, Ward-1(1), Siliguri who is having no jurisdiction, hence it is invalid. The second notice issued by the ITO, Ward-1(1), Guntur was barred by limitation as in this case, the return was furnished on 07.09.2013 and the time limit allowed to serve notice u/s 143(2) gets barred by 30.09.2014. Hence, the notice issued u/s 143(2) by the AO, Guntur on 14.11.2014. The prerequisite for making the assessment u/s 143(2) is service of valid notice. Non service of valid notice makes the assessment illegal and void-ab-initio. Hon ble Supreme Court in the case of Bluemoon Hotels 2010 (2) TMI 1 - SUPREME COURT OF INDIA held that the service of valid notice is prerequisite for making the assessment u/s 143(3). Since the notice issued u/s 143(2) in this case by the jurisdictional ITO held to be barred by limitation and the notice issued by ITO, Ward-1(1), Siliguri is without jurisdiction, we hold that the assessment made u/s 143(3) consequent to the notice issued u/s 143(2) by ITO, Ward-1(1) dated 14.11.2014 required to be squashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment made under section 143(3) due to the notice issued by ITO, Ward-1(1), Guntur being barred by limitation.
2. Validity of the notice issued under section 143(2) by ITO, Ward-1(1), Siliguri without jurisdiction.
3. Powers of the Commissioner of Income Tax (Appeals) under section 251 to remit the matter back to the file of the Assessing Officer.

Issue-wise Detailed Analysis:

1. Validity of the assessment made under section 143(3) due to the notice issued by ITO, Ward-1(1), Guntur being barred by limitation:
The assessee filed the return of income on 07.09.2013, and the notice under section 143(2) was issued by ITO, Ward-1(1), Guntur on 14.11.2014, which was served on 20.11.2014. As per the proviso to section 143(2), no notice shall be served after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, the notice issued by ITO, Ward-1(1), Guntur was barred by limitation as it was issued after 30.09.2014. The Tribunal cited the decision of ITAT Delhi in the case of ITO Vs. NVS Builders Pvt. Ltd., which held that the entire assessment proceedings are vitiated due to non-service of jurisdictional notice under section 143(2) within the period of limitation by the AO having jurisdiction over the case. Consequently, the assessment made under section 143(3) was annulled.

2. Validity of the notice issued under section 143(2) by ITO, Ward-1(1), Siliguri without jurisdiction:
The assessee argued that the notice issued by ITO, Ward-1(1), Siliguri was void-ab-initio as the jurisdiction over the assessee vested with ITO, Ward-1(2), Guntur. The Tribunal noted that the ITO, Ward-1(1), Siliguri was not a prescribed Income Tax Authority under Rule 12E of the I.T. Rules and had no authorization from the Central Board of Direct Taxes (CBDT) to issue the notice. The Tribunal referred to the decision of the Hon’ble Kolkata High Court in the case of ITO and Others Vs. Santosh Kumar Dalmia, which held that if the income tax officer did not have jurisdiction to issue the notice, the notice is invalid. Therefore, the notice issued by ITO, Ward-1(1), Siliguri was treated as non-est, and the assessment made based on such notice was invalid.

3. Powers of the Commissioner of Income Tax (Appeals) under section 251 to remit the matter back to the file of the Assessing Officer:
The revenue challenged the powers of the Commissioner of Income Tax (Appeals) [CIT(A)] under section 251 to remit the matter back to the file of the Assessing Officer (AO). The Tribunal noted that section 251(1) of the I.T. Act provides that in disposing of an appeal, the Commissioner (Appeals) shall have the power to confirm, reduce, enhance, or annul the assessment. The CIT(A) had directed the AO to verify the books of accounts and determine the income after giving an opportunity to the assessee. The Tribunal found that the CIT(A) had exceeded the powers conferred under section 251 by remitting the matter back to the AO. Consequently, the Tribunal set aside the order of the CIT(A) and annulled the assessment made under section 143(3).

Conclusion:
The Tribunal held that the notice issued under section 143(2) by ITO, Ward-1(1), Siliguri was invalid due to lack of jurisdiction, and the notice issued by ITO, Ward-1(1), Guntur was barred by limitation. Consequently, the assessment made under section 143(3) was annulled. The Tribunal also found that the CIT(A) had exceeded the powers under section 251 by remitting the matter back to the AO. The appeal of the revenue was dismissed, and the cross objections of the assessee were partly sustained.