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TMI Blog2020 (11) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Sr. DR against the legal issue raised by assessee fails. Since in the present case no valid notice u/s 143(2) was issued by the AO who held jurisdiction over the case of the appellant, the consequent order passed u/s 143(3) dated 24.03.2014 was legally unsustainable and therefore is null in the eyes of law and therefore quashed. - I.T.A. No. 354/Gau/2018 - - - Dated:- 13-11-2020 - Shri A. T. Varkey, JM For the Appellant : Shri Akkal Dudhewala, AR For the Respondent : Shri Jayanta Mridha, JCIT, Ld. DR ORDER PER SHRI A.T.VARKEY, JM This appeal is preferred by the assessee against the order of Ld. CIT(A)-1, Guwahati dated 17-09-2018 for assessment year 2011-12. 2. At the outset, The Ld. Counsel for the assessee Shri Akkal Dudhewala drew our attention to the legal issue raised by the assessee i.e. ground no. 5 wherein the assessee has raised the issue that the action of AO (Addl. CIT, Range-3, Gauhati) to have framed the assessment u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) without issuing notice u/s. 143(2) of the Act (notice issued by ITO, Wd-1, Shillong) was without jurisdiction, so it is void ab initio. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Authorities under the jurisdiction of the Range/Circle-3, Guwahati. He drew our attention to page no. 1 to 5 of the paper book. which are the acknowledgement given u/s. 143(1) of the Act pertaining to the assessment of the assessee from AYs 2009-10 to 2013-14. The Ld. AR drew our attention to the fact that for AY 2009-10 the assessee had filed the return of income (ROI) in Form No. ITR-V for AY 2009-10 stating clearly that the designation of the AO was shown (Ward/Circle-3(1), Guwahati) and the ROI was received by the JCIT s office on 07.09.2009. Likewise, for AY 2010-11 it was filed before the same AO which was received by the JCIT on 28.01.2011. For AY 2011-12 (the present assessment year before us) the assessee had filed before the ITO, Ward/Circle-3(1), Guwahati wherein the column of territorial area was clearly shown as Ulubari (Bora Service), Guwahati (refer to page no. 3, ITR V Acknowledgment for AY 2011-12) wherein the AO was stated to be ACIT, Circle- 3, Guwahati. Likewise for AY 2012-13, ITR-V, shows the same address and the same description of AO i.e. Ward/Circle-3(1), Guwahati. For AY 2013-14 also there is no change. However, according to Ld. AR, suddenly from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the Ld. AR, non-issue of legally valid notice u/s. 143(2) before framing assessment u/s. 143(3) of the Act is not a curable defect as held by the Hon ble Supreme Court in ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC). However, the main contention of the Ld. Sr. DR is that since the assessee did not question the territorial jurisdiction of the ITO, Ward-1, Shillong after he received the statutory notice from him and, therefore, the assessee is estopped/shut out from doing so as stipulated by sub-section 3 of section 124 of the Act and since the assessee participated in the assessment proceeding before the Addl. CIT, Range-3, Guwahati so, there is no prejudice caused to the assessee. It is noted that the address of the assessee firm is Centre Point, 1st floor, G. S. Road, Ulubari, Gauhati-781007, and it is noted that it is being regularly assessed by Income Tax Authorities under Range-3, Guwahati from AY 2009-10 to AY 2013-14 (refer to page 1 to 5 of paper book) and even the return of income for the relevant AY 2011-12 was filed before the JCIT, Range-3, Guwahati. It is noted that the territorial jurisdiction of the assessee is at Guwahati, so the question is whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income- tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of sub- section (3), where an assessee calls in question the jurisdiction of an- Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub- section (2) before the assessment is made. (5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub- section (1) or sub- section (2) of section 120.] 127. Power to transfer cases (1) The Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never in respect of any proceeding under this Act an income- tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income- tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor: Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard. 6. A bare reading of the foregoing provisions reveal that an Assessing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income Tax Authorities, as specified u/s. 116 of the Act. As per sub-section (2) of Section 120 of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the orders in writing, for the exercise of the powers and performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod prescribed under clauses (a), (b) and (c) of section 124(3) of the Act [i.e, within one month]. We also note that sec. 124(5) saves the action of the AO who has territorial jurisdiction over the assessee in respect of the income earned by the assessee from the territorial jurisdiction vested in him by virtue of any directions or orders issued u/s. 120(1) or (2) of the Act. So, this saving provision which saves the action of an AO is limited to the income accruing or arising or received within the limits of his territorial area as conferred to him (AO) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the AO is vested with the jurisdiction by an order/direction issued under sub-sec. (1) or (2) of sec. 120 of the Act. Thus, as per the scheme of the Act, it can be seen that sections 120 and 124 vest jurisdiction on Income Tax Authorities and on an AO respectively and, therefore, both sections i.e. sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans all proceedings under the Act in respect of any year which may be pending on the date of such order or direction or it may have been completed on or before such date, and includes also all proceedings under the Income-tax Act which may be commenced after the date of such order or direction of any year. This definition of the expression case implies that, once a transfer is made by the authority specified in subsection (1) or (2) of section 127 of the Act who had the jurisdiction over an AO who in turn had jurisdiction over the assessee/person/entity, by virtue of direction/order issued under section 120(1) or (2) of the Act, then the entire assessment of the person i.e. pre-transfer and post-transfer as on date of transfer will stand transferred and thereafter for all purposes of the Income Tax Act, the AO of the assessee to whom the case is transferred, will be the Assessing Officer in respect of the said the assessee for pre and post proceedings from the date of transfer. In other words, once transfer order of a case of an assessee is issued u/s. 127 of the Act the effect will be that (i) all the proceedings of the assessee under the Act in respect of any year which may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act unless empowered to by the Act as discussed supra which is not the case of Revenue. As per section 124 of the Act the Income Tax Authority gets jurisdiction, if the assessee s place of business is in his territorial jurisdiction and in case if the assessee has business or profession in different places, then the principle place of business will determine who the Assessing Officer is for the assessee. And in case if the assessee is not into business or profession, then the jurisdiction is based upon the residence of an assessee. In this case, since the principal place of business is in Guwahati the ITO, Shillong does not have the territorial jurisdiction to issue notice u/s. 143(2) of the Act and the Revenue has not led any evidence before me to show that ITO Shillong had been empowered as per the Act to issue notice u/s 143(2) of the Act. 9. Coming to the contention of the Ld. CIT, DR that since the assessee did not question the territorial jurisdiction of the ITO, Ward-1, Shillong after he received the statutory notice from him and, therefore, the assessee is estopped/shut out from doing so as stipulated by sub-section 3 of section 124 of the Act. In this regard, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, etc) and has not recognized PAN jurisdiction, question of addressing this legal issue on PAN jurisdiction does not arise. 11. Coming to the next argument of the Ld. DR that since the assessee has participated in the assessment proceeding before the Addl. CIT, Guwahati there is no prejudice caused to the assessee, I am of the opinion that the AO before framing the assessment u/s. 143(3) of the Act has to follow the law as prescribed by the Act. It is settled law that issuance of notice in sub-section (2) of section 143 is mandatory before he passes an order u/s 143(3) of the Act and omission to do so makes the order null in the eyes of law. Here the notice has been issued by an AO who did not enjoy jurisdiction over the assessee which action is non-est in the eyes of law as discussed supra. Therefore, all subsequent action is null in the eyes of law because it ab in-itio void. Therefore, the assessee succeeds in its legal ground. 12. Before I part, I would like to deal with the case law which was relied on by the Ld. CIT(A) to dismiss the legal issue. It is noted that the Ld. CIT(A) relied on the order of the Hon ble Delhi High Court in the case of S. S. Ahlualiwa (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside? 4. The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and sub-sections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal. 13. The only question that arises for our consideration in this batch of appeals is: whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid. 8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon's case2. The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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