2019 (9) TMI 1259 - AT - Income Tax

Validity of Notice u/s 143(2) - period of limitation - notice issued by an officer who had no jurisdiction over the assessee - curable defect u/s 292B - HELD THAT - It is an admitted fact that the assessee efiled the return of income on 14/09/2015 mentioning the address at Mohali, in the earlier years also, the returns of income were filed at the same address. Therefore the A.O. Ward-6(4) Mohali was having the jurisdiction upon the case of the assessee. In the present case the ACIT, Circle-1, Amritsar who was not having the jurisdiction over the assessee s case issued the notice under section 143(2) dt. 12/08/2016 therefore the said notice was beyond the jurisdiction. From the proviso to sub section 2 of Section 143 of the Act, it is clear that no notice under section 143(2) of the Act shall be served on the assessee after the expiry of six months from the end of the Financial Year in which the return was furnished. In the present case the assessee filed the return on 14/09/2015 and the Financial Year ended on 31/03/2016. Therefore the time available to issue the notice under section 143(2) was upto 30/09/2016 but the A.O. who was having the jurisdiction i.e; the ITO, Ward 6(4) Mohali issued the notice under section 143(2) alongwith the questionnaire under section 142(1) of the Act to the assessee on 22/05/2017. As notice under section 143(2) of the Act was not issued in prescribed time limit as per the proviso to section 143(2) of the Act by the A.O. having the jurisdiction upon the case of the assessee and the notice issued by the ACIT, Amritsar suffered from an inherent lacuna affecting his jurisdiction so the same could not be cured by having resort to the provisions of section 292B of the Act. Therefore the assessment framed under section 143(3) of the Act, by the A.O. without issuing the notice u/s 143(2) of the Act within the time limit prescribed in the proviso to section 143(2) of the Act was invalid and accordingly quashed. - Decided in favour of assessee.

Summary

Issues involved:
1. Disallowance of cash payments under section 40A(3) of the Income Tax Act.
2. Jurisdictional issue regarding the notice under section 143(2) of the Act.

Detailed Analysis:
1. Disallowance of Cash Payments:
The appellant contested the addition of ?32,32,000 on account of cash payments disallowed under section 40A(3) of the Act. The appellant argued that the cash payments were made at the insistence of farmers and were covered by business/commercial expediency, meeting the conditions of Rule 6DD of the Income Tax Rules. It was contended that the assessing officer's disallowance was based on preconceived notions and disregarded detailed submissions and evidence provided. The appellant also challenged the lack of fair opportunity given by the Commissioner of Income Tax (Appeals) in sustaining the disallowance. The Tribunal considered the arguments and found in favor of the appellant, allowing the appeal against the disallowance.

2. Jurisdictional Issue:
The jurisdictional issue revolved around the notice under section 143(2) of the Act. The appellant raised objections regarding the jurisdiction of the assessing officer who issued the notice, stating that the notice was beyond the scope of limited scrutiny and violated statutory conditions. The Tribunal examined the relevant provisions of Section 143(2) and cited case law to support its decision. It noted that the notice was issued after the prescribed time limit, rendering it invalid. The Tribunal held that the assessment framed under section 143(3) of the Act without a valid notice under section 143(2) was invalid and subsequently quashed the assessment. The appeal was allowed in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, allowing the appeal against the disallowance of cash payments under section 40A(3) and invalidating the assessment due to jurisdictional issues with the notice under section 143(2) of the Act.