Assessment order quashed due to jurisdictional defects in section 143(2) notice - ITO lacked authority to conduct assessment

The ITAT Mumbai quashed an assessment order due to jurisdictional defects in the notice issued under section 143(2) of the Income Tax Act. The ITO who issued the notice lacked jurisdiction and was not empowered to conduct the assessment. Following the Bombay HC precedent in Ashok Devichand Jain case, the tribunal held that jurisdictional notices under section 143(2) are mandatory and statutory, and inherent defects in such notices are incurable. The assessment proceedings were consequently declared invalid and quashed.

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Issues Involved:
1. Applicability of Section 43CA of the Income-tax Act, 1961.
2. Jurisdictional validity of the notice issued under Section 143(2) of the Income-tax Act, 1961.

Summary:

1. Applicability of Section 43CA of the Income-tax Act, 1961:
The Assessee declared an income of Rs. 67,94,660/- for A.Y. 2014-15, which was processed under Section 143(1) of the Act. The case was selected for scrutiny, and the Assessing Officer (AO) made an addition of Rs. 2,05,29,102/- under Section 43CA, stating that the market value of the flats as per the stamp duty authority exceeded the agreement value. The Assessee argued that Section 43CA, effective from 01/04/2014, should not apply as the bookings and sales were made before 01/04/2013. However, the Ld. Commissioner upheld the AO's decision, noting that the sales were registered during the relevant year and the Assessee failed to prove that the entire consideration was received through account payee cheques before 01/04/2013. The Commissioner emphasized that the provisions of Section 43CA apply when the sale deed is executed after 01/04/2013, regardless of prior agreements.

2. Jurisdictional Validity of the Notice Issued Under Section 143(2):
The Assessee raised an additional ground challenging the jurisdiction of the notice issued under Section 143(2) by the Income Tax Officer (ITO) Ward 33(2)(3), arguing that as per CBDT Instruction No. 1/2011, only Deputy Commissioners/Assistant Commissioners (DC/AC) are authorized to issue such notices for cases with income above Rs. 30 lakhs in metropolitan cities. The Tribunal found merit in this claim, referencing the jurisdictional High Court's judgment in Ashok Devichand Jain Vs UOI & Ors, which held that notices issued by officers without jurisdiction are invalid. The Tribunal observed that the notice under Section 143(2) was issued by an ITO who lacked jurisdiction over the Assessee's case, rendering the assessment order void. Consequently, the assessment order dated 30/09/2016 was quashed.

Conclusion:
The appeal filed by the Assessee was allowed, as the Tribunal quashed the assessment order on jurisdictional grounds, making it unnecessary to address the merits of the case. The decision was pronounced in the open court on 21/12/2023.

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