2024 (11) TMI 957 - AT - Income Tax

ITO without jurisdiction issued invalid notice under section 143(2) making assessment order incurable despite later transfer

Changaai Mangalote Ibrahim Versus ITO Ward-1 (2) (4) Bangalore

ITAT Bangalore held that notice u/s 143(2) issued by non-jurisdictional ITO was invalid and incurable. The assessee's income of Rs. 59,29,270/- for AY ... Notice u/s 143(2) issued by non jurisdictional AC/DC - notice issued by officer who did not have the authority over the assessee - HELD THAT:-Notice u/s 143(2) is the jurisdictional notice and any inherent defect therein is not curable. In the present facts of the case, after considering the instruction No.1/2011 cited notice u/s 143(2) dated 04/07/2017 having been issued by an Income Tax Officer who had no jurisdiction over the assessee, such notice in our view has not been issued validly and is issued without authority in law. Revenue also could not controvert the same by submitting any other Notifications/Circular/Instruction to this effect. As per the Instruction No.1/2011 dated 31.1.2011 by the Board as in the present case, the total income declared by the assessee is Rs. 59,29,270/- for the assessment year 2016-17 and therefore, the notice ought to have been issued by ld. AC/DC himself instead of transferring the same to the ITO, Ward-1(2)(1) in consequence to JCIT’s Notification Order u/s 120(5) of the Act dated 27/08/2018. In the present case, the ITO, ward-1(2)(4), Bangalore had issued the notice U/s 143(2) on 04/07/2017 & thereafter the case was transfer from ACIT, Circle- 1(2)(1), Bangalore on 29/08/2018 consequent to ld. JCIT’s Notification Order U/s 120(5) of the Income Tax Act dated 27/08/2018. Therefore the notice issued U/s 143(2) of the Act dated 04/07/2017 is illegal, bad in law & without jurisdiction. We set aside the order of the revenue authority by quashing the order of the assessment framed u/s 143(3) of the Act dated 26/12/2018 since the issue of notice u/s 143(2) of the Act dated 04/07/2017 was not issued by the jurisdictional ld. AC/DC as specified in the CBDT Instruction No.1/2011 dated 31.1.2011 which is not a curable defect. Hence, the additional ground raised by the assessee is allowed. Issues Involved:1. Validity of the notice issued under section 143(2) by a non-jurisdictional assessing officer.2. Disallowance of deduction claimed under section 54F of the Income Tax Act.3. Liability to pay interest under sections 234A, 234B, and 234C of the Income Tax Act.Issue-wise Detailed Analysis:1. Validity of the Notice Issued Under Section 143(2):The primary issue was whether the notice under section 143(2) issued by the Income Tax Officer, Ward-1(2)(4), Bangalore, was valid given that it was issued by a non-jurisdictional officer. The Tribunal examined the facts and determined that the notice was issued without jurisdiction, as the officer who issued it did not have the authority over the assessee. This was deemed an incurable defect, as the jurisdictional notice is critical and any inherent defect therein is not curable. The Tribunal relied on precedents, including the judgment of the High Court of Bombay in Ashok Devichand Jain v. Union of India, which held that a notice issued by an officer without jurisdiction is invalid. Consequently, the Tribunal quashed the assessment order framed under section 143(3) of the Act, dated 26/12/2018, as it was based on an invalid notice.2. Disallowance of Deduction Claimed Under Section 54F:The assessee claimed a deduction under section 54F for reinvestment in a property. However, the assessing officer disallowed this claim, stating that the conditions under section 54F were not met, as the property was not a habitable residential house. The CIT(A)/NFAC upheld this view, noting that there was no sanction plan due to legal issues, and hence, the conditions for deduction under section 54F were not satisfied. The Tribunal did not address this issue further due to the quashing of the assessment order based on the jurisdictional defect in the notice under section 143(2).3. Liability to Pay Interest Under Sections 234A, 234B, and 234C:The assessee contested the liability to pay interest under sections 234A, 234B, and 234C, arguing that there was no liability to additional tax. The Tribunal did not delve into this issue due to the quashing of the assessment order on the grounds of the invalid notice under section 143(2).Conclusion:The Tribunal allowed the appeal filed by the assessee, primarily on the grounds that the notice issued under section 143(2) was invalid due to the lack of jurisdiction of the issuing officer. As a result, the subsequent assessment order was quashed, rendering the other issues raised by the assessee moot. The Tribunal's decision underscores the importance of jurisdictional compliance in the issuance of statutory notices under the Income Tax Act.