Assessment quashed as AO completing assessment failed to issue mandatory fresh notice under Section 143(2) after transfer

ITAT Kolkata held that the assessment was invalid as the mandatory notice under s.143(2) was not issued by the AO who ultimately framed the assessment. The notice was issued by ITO Ward 44(4), Kolkata, while the assessment was completed by ITO Ward 3(3), Kolkata, without issuing a fresh s.143(2) notice after transfer of jurisdiction. Relying on SC/HC precedents, including decisions in similar jurisdictional defects, the Tribunal ruled that an AO who has not issued a valid s.143(2) notice lacks authority to complete the assessment. Consequently, the assessment order was quashed and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether additional jurisdictional grounds challenging the validity of assessment for want of proper notice under section 143(2) and absence of valid transfer of jurisdiction could be admitted at the appellate stage.

1.2 Whether an assessment framed by an Assessing Officer who has not issued the mandatory notice under section 143(2) is without jurisdiction and void ab initio, when such notice was issued by a different Assessing Officer.

1.3 Whether, in the absence of a proper order under section 127 transferring jurisdiction between Assessing Officers, an assessment made by the transferee officer is invalid.

1.4 Consequentially, whether additions made under section 68 could survive if the assessment itself is held to be without jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admission of additional jurisdictional grounds at appellate stage

Interpretation and reasoning

2.1 The Tribunal noted that the additional grounds regarding non-issuance of notice under section 143(2) by the Assessing Officer who framed the assessment, and lack of proper transfer of jurisdiction, go to the root of the matter and are pure questions of law.

2.2 Relying on the decisions of the Supreme Court in Jute Corporation of India Ltd. v. CIT and National Thermal Power Co. Ltd. v. CIT, the Tribunal held that such legal grounds, even if not raised before the lower authorities, can be admitted at the appellate stage where they arise from facts already on record and affect the validity of the assessment itself.

Conclusion

2.3 The additional grounds raising jurisdictional objections were admitted for adjudication.

Issue 2: Validity of assessment where notice under section 143(2) issued by one officer and assessment framed by another

Legal framework (as discussed)

2.4 The Tribunal proceeded on the basis of the statutory requirement that a valid scrutiny assessment under section 143(3) must be preceded by a mandatory notice under section 143(2) issued by the Assessing Officer having jurisdiction over the assessee.

Interpretation and reasoning

2.5 On facts, the Tribunal found that the notice under section 143(2) was issued by ITO Ward 44(4), Kolkata, whereas the assessment was ultimately framed by ITO Ward 3(3), Kolkata.

2.6 It was thus undisputed that the officer who completed the assessment had not himself issued the statutory notice under section 143(2).

2.7 The Tribunal held that, in such a situation, the officer passing the assessment order does not acquire valid jurisdiction to complete the assessment merely on the strength of a notice issued by another officer.

2.8 The Tribunal applied the ratio of the jurisdictional High Court in Pr. CIT v. Eversafe Securities Pvt. Ltd. and Kusum Goyal v. ITO, wherein it was held that if the Assessing Officer passing the assessment order has not issued the jurisdictional notice under section 143(2), he has no authority to frame the assessment.

Conclusion

2.9 The assessment framed by ITO Ward 3(3), Kolkata, without issuance of notice under section 143(2) by that officer, was held to be without proper jurisdiction and invalid.

Issue 3: Necessity of valid transfer order under section 127 for assumption of jurisdiction by another Assessing Officer

Legal framework (as discussed)

2.10 The Tribunal referred to the principle, as enunciated by the jurisdictional High Court in Kusum Goyal v. ITO, that even in intra-city transfers, while opportunity of hearing under section 127(1) and (2) may be dispensed with, the statutory requirement of passing an order of transfer under section 127(3) must be complied with, and such order must exist on record.

Interpretation and reasoning

2.11 In the present case, the assessee contended that no valid transfer order under section 127 had been passed for transfer of the assessee's case from the original jurisdictional officer to the officer who finally framed the assessment.

2.12 The Tribunal, placing reliance on the reasoning in Kusum Goyal, noted that jurisdiction cannot "automatically" vest in another officer without a proper order of transfer under section 127 being passed and recorded, even where the transfer is within the same city.

2.13 It further noted that the view that no order is required for intra-city transfers has been specifically rejected by the jurisdictional High Court, which insists on the existence of an order of transfer on record.

2.14 In the absence of any demonstrated or referred valid transfer order under section 127 conferring jurisdiction on ITO Ward 3(3), the assumption of jurisdiction by that officer was held to be unsustainable.

Conclusion

2.15 The Tribunal held that the assessment order passed by ITO Ward 3(3), Kolkata, was without valid transfer of jurisdiction under section 127 and hence bad in law and void ab initio.

Issue 4: Consequential validity of additions under section 68

Interpretation and reasoning

2.16 The assessee had challenged the addition under section 68 relating to share capital and premium; however, the Tribunal first examined the foundational issue of jurisdiction and validity of the assessment.

2.17 Having held that the assessment itself was void for want of proper notice under section 143(2) by the officer framing the assessment and for lack of valid transfer of jurisdiction, the Tribunal found it unnecessary to go into the merits of the section 68 addition.

Conclusion

2.18 Since the assessment was quashed as being without jurisdiction, all additions made therein, including those under section 68, automatically stood annulled. The appeal was allowed on this jurisdictional ground.

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