Invalid Assessment Order Anulled Due to Jurisdictional Issues Under Income Tax Act

The tribunal partly allowed the appeal, annulling the assessment order due to jurisdictional issues related to the notice under Section 143(2) of the Income Tax Act. It held that since the initial notice was issued by an officer lacking jurisdiction and no fresh notice was issued by the subsequent proper officers, the assessment order was deemed invalid. The tribunal emphasized the significance of proper jurisdiction in issuing statutory notices and ruled that jurisdictional defects cannot be rectified by the assessee's later involvement.

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Issues Involved:
1. Jurisdictional Issue regarding the issuance of notice under Section 143(2) of the Income Tax Act, 1961.
2. Validity of the assessment order passed by an Assessing Officer who did not issue the initial notice under Section 143(2).

Issue-wise Detailed Analysis:

1. Jurisdictional Issue regarding the issuance of notice under Section 143(2) of the Income Tax Act, 1961:

The primary contention raised by the appellant was that the notice under Section 143(2) was issued by the Income Tax Officer (ITO), Ward-1(1), Kanpur, whereas the assessment order was passed by ITO, Ward-3(5), who did not have the jurisdiction over the case. The appellant argued that the notice should have been issued by the jurisdictional Assessing Officer, which in this case was ITO, Ward-3(1), as per the appellant's address on record. The appellant supported this argument by referring to the copies of income tax returns and other documents, including an application to the Income Tax PAN Services Unit confirming the change of address to an area under the jurisdiction of ITO, Ward-3(1).

The respondent, represented by the Departmental Representative (DR), countered by stating that the PAN data record showed that the PAN was initially with ITO-1(1) and was transferred to ITO-3(5) on 05/12/2014. Thus, the notice was rightly issued by ITO-1(1) and the subsequent assessment order by ITO-3(5) was in continuation of the initial notice.

The tribunal found that it was undisputed that the notice under Section 143(2) was issued by ITO-1(1) and the case was later transferred to ITO-3(1) and subsequently to ITO-3(5). However, no fresh notice under Section 143(2) was issued by ITO-3(1) or ITO-3(5). The tribunal observed that the appellant had been filing returns from an address under the jurisdiction of ITO-3(1) and had applied for a change of address to another area still under the jurisdiction of ITO-3(1). Therefore, the initial notice under Section 143(2) should have been issued by the jurisdictional Assessing Officer, ITO-3(1), and not by ITO-1(1).

2. Validity of the assessment order passed by an Assessing Officer who did not issue the initial notice under Section 143(2):

The tribunal referred to the case of Bajrang Bali Industries, where under similar circumstances, it was held that the assessment order passed by an officer who did not issue the initial notice under Section 143(2) was invalid. The tribunal also cited the Allahabad High Court's decision in the case of Mohd. Rizwan, which emphasized that a notice issued by an authority without jurisdiction cannot be validated by subsequent participation of the assessee before the transferee Assessing Officer. The court held that if the initial notice under Section 148 was issued by an officer without jurisdiction, the entire reassessment proceedings would be vitiated, and Section 292BB would not cure the defect of jurisdiction.

The tribunal concluded that since the notice under Section 143(2) was issued by ITO-1(1), who did not have jurisdiction, and no fresh notice was issued by the subsequent jurisdictional officers (ITO-3(1) or ITO-3(5)), the assessment order was invalid. Therefore, the tribunal allowed Ground Nos. 1 and 2 raised by the appellant, rendering the rest of the grounds on merits of the case infructuous.

Conclusion:

The appeal was partly allowed, with the tribunal annulling the assessment order on the grounds of jurisdictional invalidity of the notice under Section 143(2). The tribunal emphasized the importance of jurisdictional authority in issuing statutory notices and upheld the principle that jurisdictional defects cannot be cured by subsequent participation of the assessee.

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