2025 (9) TMI 429 - AT - Income Tax

Notice under s.143(2) issued 02.11.2017 held time-barred; assessment under s.143(3) dated 27.12.2017 void ab initio

ITAT DELHI - AT held that notice under s.143(2) issued on 02.11.2017 by the jurisdictional ITO was time-barred, so the AO lacked valid jurisdiction. ... Valid notice u/s 143(2) - period of limitation - HELD THAT:- Notice u/s 143 as issued within the prescribed time limit by the AO who has the jurisdiction on the case of the assessee. It is not disputed that the issued dated 02.11.2017 by the jurisdictional ITO Ward-17(2) Delhi was time barred as it was issued after expiry of due date i.e. 30.09.2016. Meaning thereby, the assessment order passed u/s 143(3) dated 27.12.2017 was legally unsustainable in absence of valid notice u/s 143(2) and it would be liable to be treated as null and void in the eyes of law. We hold that the assessment order passed by the AO without assumption of jurisdiction as invalid and as such, same is quashed as void-ab-initio. Appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice under section 143(2) of the Income Tax Act issued by the Assessing Officer who ultimately framed the assessment, but after the statutory time-limit, can sustain an assessment under section 143(3). 2. Whether a prior notice under section 143(2) issued by a different Assessing Officer (to whom only records were transferred or who lacked jurisdiction) cures the jurisdictional defect if no transfer under section 127 was made. 3. Whether an assessment passed without a valid, timely assumption of jurisdiction (i.e., without a valid notice under section 143(2) within the prescribed time) is void ab initio. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a belated notice issued by the Assessing Officer who framed the assessment (section 143(2) time limit) Legal framework: Section 143(2) prescribes issuance of notice to enable assessment proceedings and is a prerequisite for assumption of jurisdiction to pass an assessment under section 143(3); statutory time-limits govern the validity of such notices. Precedent Treatment: The Tribunal relied on judicial authorities holding that notices issued beyond prescribed limitation by the officer purporting to assume jurisdiction are invalid; such authorities were accepted and followed in the Tribunal's reasoning. Interpretation and reasoning: It is an undisputed fact on the record that the notice dated 02.11.2017 issued by the Assessing Officer who framed the assessment was issued after the prescribed due date (30.09.2016) for the assessment year. A notice issued after expiry of the statutory period cannot validly confer jurisdiction to proceed with the assessment under section 143(3). The Tribunal emphasized that the temporal requirement for a section 143(2) notice is jurisdictional, not merely procedural. Ratio vs. Obiter: Ratio - A belated notice under section 143(2) issued by the Assessing Officer who framed the assessment does not confer jurisdiction and renders the subsequent assessment invalid. Obiter - none additional on this point. Conclusions: The belated notice dated 02.11.2017 did not validate the assessment; therefore the assessment framed under section 143(3) is legally unsustainable for lack of valid assumption of jurisdiction. Issue 2: Effect of an earlier notice issued by a different Assessing Officer lacking jurisdiction and the requirement of transfer under section 127 Legal framework: Sections 120, 124 and 127 (as discussed) govern allocation and transfer of territorial jurisdiction among Assessing Officers; a transfer of a taxpayer's case to another AO that otherwise lacks statutory jurisdiction requires a formal transfer/decentralization order under section 127 for jurisdiction to vest legitimately. Precedent Treatment: The Tribunal relied upon higher-court decisions concluding that mere transfer of records (absent a section 127 transfer order) does not effect a transfer of jurisdiction and that a notice issued by an officer without jurisdiction is a nullity. Those authorities were followed and treated as binding on the relevant propositions. Interpretation and reasoning: The earlier notice dated 28.07.2016 was issued by an AO who, on the material, did not have jurisdiction because the case had been transferred administratively without the mandatory section 127 transfer order. The Tribunal found that the first notice relied upon by the lower appellate authority related to an officer who had no jurisdiction; therefore that notice cannot validate subsequent proceedings by a different AO. Acceptance of departmental contentions that administrative or circular orders can bypass section 127 would create the possibility of multiple simultaneous jurisdictional AOs and is inconsistent with the statutory scheme. Ratio vs. Obiter: Ratio - A notice under section 143(2) issued by an officer who lacks jurisdiction (in absence of a valid section 127 transfer order) is invalid; mere transfer of records does not substitute for transfer of jurisdiction. Obiter - observations rejecting the proposition that section 120/CBDT notifications can override section 127 were made in support of the ratio. Conclusions: The earlier notice by the non-jurisdictional AO did not cure the defect; without a section 127 transfer, jurisdiction cannot be conferred and a notice from that officer is a nullity. Issue 3: Consequence of assessment passed without valid assumption of jurisdiction - voidness of assessment Legal framework: Jurisdictional preconditions (valid, timely notice under section 143(2) and proper statutory transfer where applicable) must be satisfied before an assessment under section 143(3) can be sustained. Precedent Treatment: The Tribunal followed authorities holding that absence of a valid notice within limitation or absence of statutory transfer renders the assessment void ab initio; those authorities were applied rather than distinguished or overruled. Interpretation and reasoning: Given (a) the jurisdictional AO's notice was time-barred, and (b) the earlier notice was by an officer without jurisdiction due to absence of a section 127 transfer order, the assessment was framed without lawful assumption of jurisdiction. The Tribunal treated the defect as fundamental: an assessment without valid assumption of jurisdiction is legally unsustainable and must be quashed as void ab initio. Ratio vs. Obiter: Ratio - An assessment passed in the absence of a valid, timely notice under section 143(2) by the competent Assessing Officer (or valid transfer under section 127 when jurisdiction is shifted) is void ab initio. Obiter - none material beyond supporting observations on administrative transfer practices. Conclusions: The assessment dated 27.12.2017 was quashed as void ab initio for lack of valid assumption of jurisdiction; the appeal was therefore allowed. Cross-references See Issue 1 and Issue 2 interdependently: validity of any notice under section 143(2) depends both on timeliness and on being issued by an Assessing Officer who legitimately possesses jurisdiction (which itself may require a section 127 transfer where applicable).