2017 (3) TMI 1792 - HC - Income Tax

Invalid Notice Under Section 148: Jurisdictional Defects Are Fundamental

Principal Commissioner Of Income Tax-II Lucknow Versus Mohd. Rizwan Prop. M/s M.R. Garments Moulviganj Lucknow

The court held that a notice under Section 148 of the Income Tax Act, 1961 issued by an officer without jurisdiction is a fundamental defect, not a mere ... Reopening of assessment u/s 147 - notice u/s 148 was issued by ITO-IV(1), Lucknow who had no jurisdiction in the matter and after transfer of case, ITO-V(2) who had jurisdiction in the matter, proceeded to make assessment without issuing notice u/s 148 which was mandatory, being a jurisdictional step - HELD THAT:- The curability permitted u/s 292BB is with regard to service of notice upon Assessee and not with regard to competence of authority who has issued notice. A similar question was considered in Commissioner of Income Tax, Gujarat-II Vs. Kurban Hussain Ibrahimji Mithiborwala [1971 (9) TMI 9 - SUPREME COURT] and Court said 'Income Tax Officer's jurisdiction to reopen an assessment under Section 34 depends upon issuance of a valid notice. If notice issued by him is invalid for any reason, entire proceedings taken by him would become void for want of jurisdiction.' Court then held that notice was invalid as A.O. had no jurisdiction to revise assessment then it cannot be treated to be mere irregularity so as to validate proceedings of assessment if the Assessee had participated. Similar is the view taken by a Full Bench of this Court in Laxmi Narain Anand Prakash Vs. Commissioner of Sales Tax, Lucknow [1980 (1) TMI 212 - ALLAHABAD HIGH COURT] The contention of learned counsel for Revenue that participation of Assessee before Jurisdictional A.O. would operate as acquiescence or waiver and will not invalidate proceedings is thoroughly misconceived. In Abdul Qayume Vs. Commissioner of Income Tax [1989 (12) TMI 37 - ALLAHABAD HIGH COURT] Court said 'an admission or an acquiescence cannot be a foundation for assessment where the income is returned under an erroneous impression or misconception of law. It is well settled that a jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an Assessee cannot confer upon any jurisdictional authority, something which he lacked inherently. Even if, it can be said that Assessee submitted to jurisdiction of A.O., law is that Assessee cannot confer jurisdiction on an authority who did not have the same and we find support from Commissioner of Income Tax Vs. Hari Raj Swarup and sons [1982 (3) TMI 42 - ALLAHABAD HIGH COURT] In Mir Iqbal Husain Vs. State of U.P. [1963 (10) TMI 33 - ALLAHABAD HIGH COURT] it was held that requirement of valid notice cannot be waived. The mere fact that Assessee filed Return of Income pursuant to invalid notice would not render notice valid or validate subsequent proceedings which are vitiated in law for want of valid notice. In Raza Textile Ltd. Vs. Income Tax Officer, Rampur [1972 (9) TMI 15 - SUPREME COURT] Court said that it is incomprehensible to think that a quasi-judicial authority like A.O. can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. If an order is passed by a judicial or quasi-judicial authority having no jurisdiction, it is an obligation of Appellate Court to rectify the error and set aside order passed by authority or forum having no jurisdiction. This is what was held in State of Gujarat Vs. Rajesh Kumar Chimanlal Barot and another [2010 (5) TMI 600 - ALLAHABAD HIGH COURT] - Decided against Revenue and in favour of Assessee. Issues Involved:1. Whether notice under Section 148 of the Income Tax Act, 1961 is a procedural step or jurisdictional.2. Whether notice issued by an authority having no jurisdiction can attain validity by referring to Section 292BB of the Act, 1961 only because the Assessee participated before the transferee Assessing Authority.3. Whether a jurisdictional issue could have been raised by the Assessee at any stage or the objection at a subsequent stage is not permissible in view of Section 124(3)(a).4. Whether assessment made by an Assessing Officer, after the transfer of a case from the stage when another officer had already issued notice under Section 148, though had no jurisdiction in the matter and the transferee authority did not issue any fresh notice, can be said to be valid.Detailed Analysis:1. Jurisdictional Nature of Notice under Section 148:The court addressed whether a notice under Section 148 of the Income Tax Act, 1961 is a procedural step or a jurisdictional requirement. It was held that the issuance of a notice under Section 148 by an officer without jurisdiction is not a mere procedural irregularity but a fundamental jurisdictional defect. The court emphasized that the satisfaction required to reopen an assessment must be that of the Assessing Officer (A.O.) who has jurisdiction over the Assessee. This satisfaction cannot be delegated or assumed by an officer without jurisdiction. The court cited several precedents, including the Supreme Court's decisions in *Commissioner of Income Tax, Kerala Vs. Thayaballi Mulla Jeevaji Kapasi* and *Y. Narayana Chetty and another Vs. Income Tax Officer, Nellore and others*, to reinforce that a valid notice under Section 148 is a condition precedent for initiating reassessment proceedings.2. Validity of Notice under Section 292BB:The court examined whether the participation of the Assessee before the transferee A.O. could validate an otherwise invalid notice issued by an officer without jurisdiction under Section 292BB of the Act. It was concluded that Section 292BB pertains to the service of notice and not the competence of the authority issuing the notice. Therefore, a defect in the jurisdiction of the officer issuing the notice cannot be cured by Section 292BB. The court referenced *Commissioner of Income Tax, Gujarat-II Vs. Kurban Hussain Ibrahimji Mithiborwala* and other judgments to assert that the jurisdictional defect cannot be waived or cured by participation or acquiescence of the Assessee.3. Raising Jurisdictional Issues at Any Stage:The court analyzed whether an Assessee could raise jurisdictional objections at any stage of the proceedings. It was held that jurisdictional issues could be raised at any time, and the Assessee is not precluded from contesting the jurisdiction of the officer issuing the notice. The court highlighted that jurisdiction cannot be conferred by consent or waiver, and any proceedings based on a notice issued by an officer without jurisdiction are void ab initio. The court cited *Mir Iqbal Husain Vs. State of U.P.* and other cases to emphasize that a jurisdictional defect cannot be overlooked or cured by subsequent actions.4. Validity of Assessment by Transferee Officer:The court deliberated on the validity of an assessment made by a transferee A.O. when the original notice under Section 148 was issued by an officer without jurisdiction, and the transferee officer did not issue a fresh notice. It was held that the entire reassessment proceedings are invalid if the initial notice under Section 148 was issued by an officer without jurisdiction. The court pointed out that the transferee officer must issue a fresh notice to validate the reassessment proceedings. The court referenced *Commissioner of Income Tax Vs. Rajeev Sharma* and other precedents to support its conclusion that reassessment proceedings initiated by an invalid notice are void.Conclusion:The court concluded that the notice under Section 148 issued by an officer without jurisdiction is invalid, and the entire reassessment proceedings based on such a notice are void. The appeal by the Revenue was dismissed, and the questions were answered in favor of the Assessee. The court emphasized that jurisdictional defects cannot be cured by participation or acquiescence of the Assessee, and a valid notice by a competent officer is a prerequisite for reassessment proceedings.