Reopening of assessment and transfer pricing procedure requires issuance of the statutory notice before assuming jurisdiction; failure vitiates subsequent action.

Reopening of assessment and transfer pricing procedure require formal assumption of jurisdiction by the assessing officer, which is activated only upon issuance of the statutory notice under Section 143(2); failure to issue that notice vitiates subsequent steps including reference to the transfer pricing officer, and such steps are quashed. CBDT Instruction clarifies that jurisdiction must be assumed before taking assessment actions. Periods during which the file awaited compliance with internal procedure may be excluded when computing the six-month limitation only where statutory explanations to the limitation apply; unreasonable delay in seeking and disposing objections cannot expand the statutory limitation.

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Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act.
2. Assumption of jurisdiction for re-assessment under Section 147 of the Act.
3. Requirement of notice under Section 143(2) within the statutory time limit.
4. Reference to the Transfer Pricing Officer (TPO) and compliance with procedural requirements.

Detailed Analysis:

1. Validity of Notice under Section 148 of the Income Tax Act:
The petitioner, a company incorporated in Spain, received a notice under Section 148 of the Act on 12.12.2019, which it challenged. The petitioner had filed a return for the assessment year (AY) 2016-17 and obtained a Nil tax withholding certificate for amounts received from Indian entities. Despite filing the return in time, the petitioner received the notice under Section 148, which led to the filing of a return in compliance with the notice and seeking reasons for the notice. The objections to the notice were raised following the procedure laid down by the Supreme Court in GKN Drive shafts (India) Ltd. v. Income Tax Officer, but were ultimately rejected.

2. Assumption of Jurisdiction for Re-assessment under Section 147 of the Act:
The petitioner argued that the assumption of jurisdiction for re-assessment under Section 147 was invalid due to the non-issuance of a notice under Section 143(2) within the statutory time limit. The petitioner cited several judicial precedents, including Assistant Commissioner of Income-tax v. Hotel Blue Moon and Sapthagiri Finance & Investments v. Income-tax Officer, to support the argument that the issuance of a notice under Section 143(2) is mandatory for the validity of re-assessment proceedings.

3. Requirement of Notice under Section 143(2) within the Statutory Time Limit:
The core issue was whether the failure to issue a notice under Section 143(2) within the statutory time limit vitiated the re-assessment proceedings. The petitioner contended that the notice under Section 143(2) should have been issued within six months from the end of the financial year in which the return was furnished, extended to 31.03.2021 by the TOLA Act. Since no notice was issued by this deadline, the petitioner argued that the entire re-assessment process was invalid. The court agreed, stating that the non-issuance of the notice within the stipulated time frame is fatal to the proceedings, as supported by multiple judicial decisions.

4. Reference to the Transfer Pricing Officer (TPO) and Compliance with Procedural Requirements:
The petitioner also challenged the reference to the TPO for determining the Arms' Length Price of international transactions. The TPO issued a notice under Section 92CA, which the petitioner requested to defer until the objections to the jurisdiction were resolved. The court noted that the jurisdiction to assess, including referring matters to the TPO, is contingent upon the proper issuance of a notice under Section 143(2). Since this did not occur, the reference to the TPO was also invalid.

Conclusion:
The court concluded that the non-issuance of a notice under Section 143(2) within the statutory period vitiated the re-assessment proceedings, including the notice under Section 148, the rejection of objections to the jurisdiction, and the reference to the TPO. The court quashed the impugned notice under Section 148 dated 12.12.2019, the order dated 23.07.2021, and the reference to the TPO on 24.11.2020. The writ petitions were allowed, with no costs, and the connected miscellaneous petitions were closed.

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