Assessment under Section 143(3) invalid due to defective notice under Section 143(2) and jurisdictional errors

The ITAT Kolkata held that the notice issued under section 143(2) was invalid as it did not comply with CBDT instructions, rendering the subsequent assessment under section 143(3) void. The notice lacked clarity on the nature of scrutiny and was issued by a non-jurisdictional AO, violating pecuniary jurisdiction rules. Reliance was placed on precedents where similar procedural defects led to quashing of assessments. Consequently, the assessment framed without a valid notice under section 143(2) was set aside, and the assessee's appeal was allowed.

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ISSUES:

Validity of notice issued under section 143(2) of the Income-tax Act when not issued in conformity with CBDT instructions.Effect of issuance of notice under section 143(2) by a non-jurisdictional Assessing Officer in light of pecuniary jurisdiction rules prescribed by CBDT Instruction No.1/2011.Whether assessment framed consequential to an invalid notice under section 143(2) is itself valid.

RULINGS / HOLDINGS:

The notice under section 143(2) that "neither mentioned it either to be a limited or a complete scrutiny nor compulsory manual scrutiny" and was not in the prescribed format as per CBDT instructions is an invalid notice, rendering all consequential proceedings invalid.The notice issued under section 143(2) by an ITO who lacked pecuniary jurisdiction as per CBDT Instruction No.1/2011 is invalid, and consequently, the assessment framed by the ACIT Circle without a valid notice under section 143(2) is also invalid.Following precedent decisions, the assessment framed consequential to such invalid notices under section 143(2) is quashed as void ab initio.

RATIONALE:

The Court applied the statutory framework of the Income-tax Act, specifically sections 142, 143(2), and 143(3), alongside binding CBDT instructions-namely CBDT Instruction No.1/2011 and CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017.The Court relied on the principle that CBDT circulars issued under section 119 of the Income-tax Act are "mandatory and binding on the Income tax authorities," as affirmed by the Apex Court, and failure to comply renders the proceedings invalid.The Court followed consistent precedent from coordinate Benches and High Court rulings holding that notices issued without adherence to prescribed formats or by officers lacking jurisdiction are invalid, resulting in invalid assessments.No dissent or doctrinal shift was noted; the judgment aligns with established jurisprudence emphasizing strict compliance with procedural mandates and jurisdictional limits to uphold fairness and legality in tax assessments.

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