Assessment order under sections 147 and 143(3) invalid without mandatory section 143(2) notice, PCIT lacks jurisdiction for section 263 revision

ITAT Raipur held that an assessment order passed under sections 147 and 143(3) without issuing mandatory notice under section 143(2) is invalid and void ab initio. The tribunal ruled that a belated return filed in response to section 148 notice, if acknowledged and e-verified by the department, cannot be treated as non-est merely due to delay. Since the assessment order was invalid due to non-issuance of section 143(2) notice, the PCIT lacked jurisdiction to initiate revisionary proceedings under section 263, as such proceedings cannot be based on an invalid assessment order.

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Issues Involved:
1. Jurisdiction under Section 263.
2. Validity of the assessment order passed under Section 147 read with Section 143(3) without issuance of notice under Section 143(2).
3. Assumption of jurisdiction by the Principal Commissioner of Income Tax (PCIT) based on audit objection.
4. Requirement of notice under Section 143(2) for a return filed in response to notice under Section 148.
5. Validity of the return filed beyond the stipulated time period under Section 148.

Summary:

Issue 1: Jurisdiction under Section 263
The assessee challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (PCIT) under Section 263, arguing that the assessment order passed under Section 147 read with Section 143(3) was without jurisdiction, illegal, and void ab initio due to the non-issuance of notice under Section 143(2). The tribunal found that the PCIT could not assume jurisdiction under Section 263 for non-Est proceedings vitiated by the non-issuance of a mandatory notice under Section 143(2).

Issue 2: Validity of the Assessment Order
The tribunal held that the assessment order passed under Section 147 read with Section 143(3) without issuing a notice under Section 143(2) is invalid and non-Est. This view is supported by the judgment of the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon, which mandates the issuance of notice under Section 143(2) for a valid assessment order under Section 143(3).

Issue 3: Assumption of Jurisdiction by PCIT
The PCIT's action under Section 263 was based on an audit objection. The tribunal noted that the PCIT cannot assume jurisdiction over an assessment order that is non-Est in the eyes of law. This position is supported by various judicial pronouncements, including the case of Maruti Clean Coal and Power Ltd. vs. PCIT-I, Raipur.

Issue 4: Requirement of Notice under Section 143(2)
The tribunal emphasized that the issuance of notice under Section 143(2) is a sine qua non for completing an assessment under Section 143(3). The absence of such a notice renders the assessment order invalid. This principle was reiterated in the case of Shri Dev Narayan Sahu vs. ITO by the ITAT, Raipur Bench.

Issue 5: Validity of the Return Filed Beyond the Stipulated Time
The tribunal held that a return filed beyond the stipulated time period under Section 148 does not render it invalid or non-Est. The return filed by the assessee was accepted by the Assessing Officer, and the assessment was completed based on this return. Therefore, the return cannot be treated as non-Est merely because it was filed with a delay.

Conclusion:
The tribunal concluded that the assessment order passed under Section 147 read with Section 143(3) without issuing a notice under Section 143(2) is non-Est and invalid. Consequently, the PCIT's order under Section 263, based on such a non-Est assessment order, is also invalid and without jurisdiction. The appeal of the assessee was allowed, and the order under Section 263 was set aside.

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