Assessment order invalid due to jurisdictional defects when proper notice under section 143(2) not issued by jurisdictional officer

The ITAT Raipur held that an assessment order u/s 143(3) was invalid due to jurisdictional defects. The case was initially handled by ITO Ward 1(1) who lacked jurisdiction, then transferred to ITO Ward 1(4) without issuing a mandatory order u/s 127. The jurisdictional AO failed to issue a fresh notice u/s 143(2). Following SC precedents in Hotel Blue Moon and Laxman Das Khandelwal cases, the tribunal ruled that a valid notice u/s 143(2) by the jurisdictional AO is mandatory for scrutiny assessment, and its absence is not curable. The assessment proceedings violated mandatory procedural provisions, rendering the entire assessment order without jurisdiction. The case was decided in favor of the assessee.

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Issues Involved:
1. Validity of Jurisdiction and Notice under Section 143(2)
2. Deletion of Additions under Section 40A(3)
3. Deletion of Additions under Section 68
4. Deletion of Additions for Unexplained Cash Credits

Summary:

1. Validity of Jurisdiction and Notice under Section 143(2):
The assessee raised additional grounds challenging the jurisdiction of the Assessing Officer (AO) who issued the notice under Section 143(2). The return was filed with ITO-1(4), but the notice was issued by ITO-1(1), who lacked lawful jurisdiction. The Tribunal noted that no order under Section 127 for transfer of jurisdiction was issued, rendering the assessment invalid. The Tribunal quashed the assessment order under Section 143(3) due to the absence of a valid notice under Section 143(2) by the jurisdictional AO.

2. Deletion of Additions under Section 40A(3):
The department contested the deletion of an addition of Rs. 1,42,85,000/- made under Section 40A(3) for cash payments towards the purchase of land. The CIT(A) had deleted the addition, but the Tribunal did not address this issue in detail as the assessment was quashed on jurisdictional grounds.

3. Deletion of Additions under Section 68:
The department challenged the deletion of Rs. 1,66,50,000/- out of a total addition of Rs. 1,73,00,000/- made under Section 68 for unexplained cash credits. The CIT(A) had deleted the addition based on an affidavit, but the Tribunal did not delve into this issue due to the quashing of the assessment order.

4. Deletion of Additions for Unexplained Cash Credits:
The department also contested the deletion of Rs. 18,05,000/- credited in the bank account, which was not disclosed in the return or audit report. The Tribunal did not adjudicate this issue as the assessment was quashed on jurisdictional grounds.

Conclusion:
The Tribunal quashed the assessment order under Section 143(3) due to the invalid assumption of jurisdiction by the AO who issued the notice under Section 143(2). Consequently, the other grounds raised by both the assessee and the department became academic and were not adjudicated. The appeal of the assessee was allowed, and the appeal of the revenue was dismissed.

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