2013 (6) TMI 419 - AT - Income Tax

Invalid Notice under Section 143(2) Renders Assessment Void

The Tribunal held that the notice under section 143(2) was invalid as it was issued without proper jurisdiction and prior approval from the JCIT, ... Scrutiny / regular assessment - Validity of notice u/s.143(2) - assessee contested that the original notice issued under section 143(2) dated 21.10.2001 issued by the ACIT-24(2) was bad in law as was issued without prior approval of the JCIT and was not accompanied by the notice under section 142(1) - Held that:- CIT (A) decided the issue in relation to contention that a notice u/s 142(1) was not issued along with notice u/s 143(2), the fact that the notice was issued on 21.10.2002 and served on assessee later do indicate that at the time of issuance of notice, there is no valid approval by the JCIT as it came afterwards. Shorn of all complaints and counter arguments, the simple fact is that the notice under section 143(2) was prepared and issued along with the proposal for approval of scrutiny made to the JCIT by AO. As contended by assessee the Assessment Year selected by AO and approved by the JCIT is not AY 2000-01, but AY 2001-02. Even though the Asstt. Commissioner subsequently gave the report to authorities that it is a typographical error, the fact is that the record indicates that the proposal was sent for AY 2001-02 but notice was issued for AY 2000-01. One factor which support the contention of the Revenue authorities that it is typographical error is that the total income stated against that column is the income returned by assessee for AY 2000-01. So there seems to be some mistake on the part of AO which was compounded by the approval letter of the JCIT for the same AY but when assessee is challenging the same in various proceedings including the writ petitions before the Hon'ble High Court, one cannot ignore the fact that the year of the assessment was mentioned as AY 2001-02 and not AY 2000-01. Therefore, two reasons i.e. the year of selection was wrong and the notice served on assessee was issued prior to the actual approval by the JCIT are to be taken into consideration. Even though the names mentioned in the report was also wrongly spelt at various places, it is not material for deciding the issue as the notice was issued to assessee on 21.10.2002 i.e. before getting approval from the JCIT. On this reason alone the issuance of notice has to be held bad in law. Since assessee's contentions on jurisdiction are accepted, there is no need to adjudicate the Revenue appeal on the relief granted by the CIT (A) in the order. Therefore Revenue grounds as dismissed, for the reasons stated above - appeal filed by assessee is allowed. Issues Involved:1. Jurisdiction of AO to initiate scrutiny proceedings.2. Validity of notice under section 143(2).3. Claims of bad debts and business losses.4. Procedural lapses and alleged misconduct by tax authorities.Issue-Wise Detailed Analysis:1. Jurisdiction of AO to initiate scrutiny proceedings:The assessee contended that the AO did not have jurisdiction to initiate scrutiny proceedings as the original notice under section 143(2) dated 21.10.2002 was issued without prior approval of the JCIT and was not accompanied by a notice under section 142(1). The Tribunal noted that the notice was issued before the JCIT's approval, which came on 23.10.2002, and that the approval was for AY 2001-02, not AY 2000-01. The Tribunal held that the notice under section 143(2) was issued without valid approval, making it bad in law. Consequently, the proceedings initiated and completed were deemed ab-initio void.2. Validity of notice under section 143(2):The Tribunal examined whether the notice under section 143(2) was correctly issued. The facts showed that the notice was issued on 21.10.2002 but the JCIT's approval was dated 23.10.2002. The Tribunal held that issuing the notice before obtaining the JCIT's approval rendered it invalid. The Tribunal emphasized that procedural lapses, such as issuing a notice without prior approval, could not be overlooked, thus invalidating the notice and subsequent proceedings.3. Claims of bad debts and business losses:The assessee's claims regarding bad debts and business losses were not adjudicated on merits due to the jurisdictional issue. The Tribunal directed the AO to accept the originally filed return of income, rendering the consideration of other claims, including those in the revised return, unnecessary.4. Procedural lapses and alleged misconduct by tax authorities:The assessee raised multiple allegations of procedural lapses and misconduct by tax authorities, including fabricating records and extortion. The Tribunal noted the extensive history of complaints and criminal cases filed by the assessee against tax officials. However, the Tribunal clarified that its findings on the jurisdictional issue were solely for the purpose of the income tax proceedings and should not influence any other legal proceedings.Conclusion:The Tribunal concluded that the notice under section 143(2) was issued without proper jurisdiction due to the lack of prior approval from the JCIT and procedural errors. Consequently, the assessment proceedings were declared void. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, directing the AO to accept the originally filed return of income. The decision was pronounced in open court on 5th June 2013.