2023 (3) TMI 252 - AT - Income Tax

Appeal allowed due to lack of notice under section 143(2), assessment order deemed void. Principal Commissioner's order quashed. (2)

The Tribunal allowed the appeal, emphasizing the necessity of issuing a notice under section 143(2) for a valid assessment order. It held that the absence ... Revision u/s 263 - Validity of assessment order passed - no valid service of notice u/s 143(2) - HELD THAT:- valid service of notice u/s 143(2) - HELD THAT:- In the present case, the revenue authorities is not in a position to show that there was a valid service of notice u/s 143(2) of the Act before completion of assessment. Being so, the assessment order is ab-initio which cannot be survived. This is being so, where there is no valid assessment order that order cannot be subject matter of revision u/s 263 of the Act by PCIT. Accordingly, on the primary ground raised by assessee, we quash the order passed by PCIT u/s 263 of the Act. Appeal filed by the assessee is allowed. Issues:1. Validity of assessment order passed under section 144 of the Income-tax Act, 1961 without issuing notice under section 143(2).2. Jurisdiction of Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act.3. Consideration of errors and prejudice in assuming jurisdiction under section 263.4. Requirement of notice under section 143(2) for a valid assessment order.Issue 1: Validity of Assessment Order Passed Under Section 144 Without Notice Under Section 143(2):The case involved an appeal against an assessment order passed under section 144 of the Income-tax Act without issuing a notice under section 143(2). The appellant contended that the absence of such a notice rendered the assessment order invalid. The CIT(A) observed that the AO had passed the assessment order on a best judgment basis without considering all facts correctly. The appellant's argument was supported by legal precedents emphasizing the mandatory nature of issuing a notice under section 143(2) before completing the assessment. The Tribunal held that the absence of a valid notice under section 143(2) made the assessment order ab-initio void and not subject to revision under section 263.Issue 2: Jurisdiction of PCIT Under Section 263:The PCIT had set aside the assessment order under section 144 for revision under section 263, citing errors prejudicial to the interest of revenue. The appellant challenged this decision, arguing that the assessment was not valid in the first place due to the absence of a notice under section 143(2). The Tribunal agreed with the appellant, quashing the PCIT's order under section 263. The Tribunal emphasized that without a valid assessment order, there could be no revision under section 263, thereby upholding the appellant's appeal.Issue 3: Consideration of Errors and Prejudice in Assuming Jurisdiction Under Section 263:The PCIT invoked section 263 based on errors and prejudice in the assessment order passed under section 144. However, the Tribunal highlighted that the fundamental issue of the absence of a notice under section 143(2) rendered the assessment order invalid from the start. As a result, the Tribunal concluded that the PCIT's assumption of jurisdiction under section 263 was not valid, as the assessment order itself was defective due to the lack of a mandatory notice under section 143(2).Issue 4: Requirement of Notice Under Section 143(2) for a Valid Assessment Order:The Tribunal reiterated the legal position that the issuance of a notice under section 143(2) before completing an assessment is mandatory. Citing relevant legal precedents, the Tribunal emphasized that the absence of such a notice renders the assessment order ab-initio void and not subject to revision under section 263. Therefore, the Tribunal upheld the appellant's argument regarding the necessity of a notice under section 143(2) for a valid assessment order, ultimately leading to the allowance of the appeal.In summary, the Tribunal allowed the appeal, emphasizing the importance of issuing a notice under section 143(2) for a valid assessment order and highlighting that the absence of such a notice renders the assessment ab-initio void and not subject to revision under section 263. The Tribunal quashed the PCIT's order under section 263, concluding that without a valid assessment order, there can be no revision under section 263.