2020 (11) TMI 310 - AT - Income Tax

Validity of notice u/s 143(2) - Eligibility of issuance of notice u/s. 143(2) - as argued notice u/s 143(2) was issued by an officer who had no jurisdiction over the assessee - Assessee argued the competent person to issue notice u/s 143(2) was Income Tax Officer-6, Kanpur who had passed the assessment order as the income of the assessee was less than ₹ 20 lacs whereas the notice u/s 143(2) has been issued by DCIT and that too by two DCITs from Circle-4 6 - HELD THAT - In the present case instead of order having been passed by Commissioner, the transfer memo has been prepared by DCIT-6 and records have been transferred to jurisdictional Assessing Officer. CBDT instruction clearly states that for corporate assessees having income upto ₹ 20 lac, the assessment is to be done by Income Tax Officer. In the present case, admittedly the assessee is a corporate assessee and its returned income is less than ₹ 20 lac as the assessee had filed return for an income of ₹ 11,11,750/-. Therefore, as per the above instructions, the jurisdictional Assessing Officer was Income Tax Officer and not DCIT or ACIT who had issued noticed u/s 143(2) of the Act. It is also an admitted fact that jurisdictional Assessing Officer which is Income Tax Officer, Ward-6, Kanpur had not issued any notice u/s 143(2). In the present case we have already held that statutory notice u/s 143(2) was not issued by the jurisdictional Assessing Officer and therefore, the reliance placed by Learned D. R. on 292BB is of no help to Revenue. Keeping in view the above facts and circumstances and legal precedents, we allow the jurisdictional ground taken by the assessee that the notice u/s 143(2) was not issued by an officer having jurisdiction on the assessee and who had passed the assessment order and therefore, we hold that in view of non issue of statutory notice u/s 143(2), the assessment order is bad in law and void ab in initio and hence all further proceedings including the order passed by the learned CIT(A) is bad in law and therefore, the appeal filed by Revenue against the order of learned CIT(A) does not stand and is dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Conversion of limited scrutiny to full scrutiny without proper approval.
3. Validity of the assessment order due to non-issuance of mandatory notice under section 143(2).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The assessee challenged the jurisdiction of the Assessing Officer (AO) who issued the notice under section 143(2). It was argued that the notice was issued by the Deputy Commissioner of Income Tax (DCIT), Circle-6, Kanpur, but the assessment was completed by the Income Tax Officer (ITO), Ward-6(1), Kanpur, without the issuance of a valid notice under section 143(2) by the jurisdictional AO. The Tribunal found that the jurisdictional AO, as per the Central Board of Direct Taxes (CBDT) Instruction No. 1/2011, was the ITO for cases with income below ?20 lakhs. Since the statutory notice under section 143(2) was not issued by the jurisdictional AO, the assessment was held to be bad in law and void ab initio. The Tribunal relied on various judicial precedents, including the judgment of the Hon'ble Supreme Court in CIT vs. Laxman Das Khandelwal, which clarified that section 292BB does not cure the complete absence of notice but only infirmities in the manner of service of notice.

2. Conversion of Limited Scrutiny to Full Scrutiny Without Proper Approval:
The assessee contended that the assessment was initiated for limited scrutiny but was converted into full scrutiny without the mandatory approval of the Principal Commissioner of Income Tax (Pr. CIT), as required by CBDT Instruction No. 20/2015 and 5/2016. The Tribunal noted that these issues were not decided by the AO or CIT(A) but were crucial as they go to the root of the assessment. The Tribunal admitted the application under Rule 27 of the I.T.A.T. Rules and considered the judicial precedents where similar issues were decided in favor of the assessee. However, since the assessment order was already declared void ab initio due to jurisdictional issues, this ground became academic and was not further adjudicated.

3. Validity of the Assessment Order Due to Non-Issuance of Mandatory Notice Under Section 143(2):
The Tribunal found that the statutory notice under section 143(2) was issued by non-jurisdictional AOs (DCIT-4 and DCIT-6, Kanpur) and not by the jurisdictional AO (ITO-6(1), Kanpur). The Tribunal held that the issuance of notice by the jurisdictional AO was mandatory as per the CBDT instructions and judicial precedents. The absence of a valid notice under section 143(2) by the jurisdictional AO rendered the assessment order invalid. The Tribunal relied on several decisions, including those of the Kolkata Bench and the jurisdictional High Court, which consistently held that non-issuance of a valid notice under section 143(2) by the jurisdictional AO makes the assessment void ab initio.

Conclusion:
The Tribunal concluded that the assessment order was void ab initio due to the non-issuance of a valid notice under section 143(2) by the jurisdictional AO. Consequently, the appeal filed by the Revenue was dismissed, and the application filed by the assessee under Rule 27 was partly allowed. The other grounds raised by the Revenue and the assessee were not adjudicated as they became academic and infructuous.