Scrutiny assessment challenged over invalid s.143(2) notice issued by officer lacking pecuniary jurisdiction; assessment quashed.

The dominant issue was whether scrutiny assessment was vitiated because the statutory notice under s.143(2) was issued by an Assessing Officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011. The Tribunal held that where the returned income exceeded the threshold for an ITO in a metro, jurisdiction lay with the AC/DC; hence a s.143(2) notice issued by an ITO was by a non-jurisdictional AO and could not satisfy the mandatory jurisdictional precondition for assessment under s.143(3). Consequently, the assessment framed by another ITO was treated as made without valid mandatory notice and was held void; the appeal was allowed and the assessment was quashed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the scrutiny notice issued under section 143(2) by an Income Tax Officer lacking pecuniary jurisdiction under CBDT Instruction No. 1/2011 rendered the notice invalid.

(ii) Whether an assessment framed under section 143(3) pursuant to such invalid/non-jurisdictional notice could be sustained, or was liable to be quashed as invalid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of notice under section 143(2) issued by an officer lacking pecuniary jurisdiction

Legal framework (as discussed by the Tribunal): The Tribunal considered CBDT Instruction No. 1/2011 (dated 31.01.2011) prescribing pecuniary limits for assigning cases between ITOs and ACs/DCs, including that for non-corporate returns in metro cities the ITO's jurisdiction is "upto Rs. 20 lacs" and above that lies with AC/DC. The Tribunal treated this instruction as governing the jurisdictional competence relevant to issuance of the section 143(2) notice in the facts before it.

Interpretation and reasoning: The Tribunal found that the returned income was Rs. 20,45,560, i.e., above Rs. 20 lacs, and the assessee was assessed in Kolkata (a "metro city" under the Instruction). On these facts, it held that the section 143(2) notice dated 24.09.2018 issued by an ITO was in violation of the pecuniary jurisdiction laid down by CBDT Instruction No. 1/2011 and was therefore issued by a non-jurisdictional Assessing Officer.

Conclusion: The section 143(2) notice issued by the ITO was held to be invalid for want of jurisdiction in view of the applicable CBDT Instruction and the returned income exceeding the prescribed limit.

Issue (ii): Effect of invalid/non-jurisdictional notice on the validity of the assessment under section 143(3)

Legal framework (as applied by the Tribunal): The Tribunal proceeded on the basis that a valid scrutiny assessment under section 143(3) requires a valid, jurisdictionally competent notice under section 143(2), and treated the absence of such valid notice as fatal to the assessment's sustainability.

Interpretation and reasoning: Having concluded that the section 143(2) notice was issued by a non-jurisdictional officer, the Tribunal held that the assessment framed under section 143(3) was "dehors" the mandatory notice and could not be sustained. The Tribunal relied on decisions it considered supportive on the point that a scrutiny notice issued without valid jurisdiction vitiates the consequent assessment, and applied that approach to the present facts.

Conclusion: The assessment framed under section 143(3) was held invalid and was quashed; the appeal was allowed on this jurisdictional ground.

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