2026 (2) TMI 359 - AT - Income Tax

Validity of notice under Section 143(2) and AO jurisdiction; notice found invalid and resulting assessment quashed.

Whether a notice issued under the incometax assessment procedure was valid depends on whether the issuing assessing officer had jurisdiction. The note ... Validity of notice issued under Section 143(2) - jurisdiction of Assessing Officer - transfer of records versus transfer under Section 127 - Whether issuance of notice u/s 143(2) of the Act made by the correct AO having jurisdiction over the assessee? HELD THAT:- We find that for A.Y 2017-18, the time limit for issuing notice u/s 143(2) was 30.09.2018. ITO Ward 6[1], Chandigarh issued notice u/s 143(2) within the time limit on 08.08.208. However, it is to be seen as to whether the ITO Ward 6[1], Chandigarh had jurisdiction over the assessee’s case. We find that immediately after receipt of notice u/s 143(2) of the Act from the ITO Ward 6[1], Chandigarh, the assessee raised objection regarding assumption of jurisdiction on 24.08.2018. The department still had time till 30.09.2018 to issue notice u/s 143(3) of the Act by the jurisdictional office being ACIT, Circle 40(1), New Delhi. We find that the record/scrutiny folder was handed over to the correct office having jurisdiction over the assessee only on 06.08.2019. Here also, we note that it was merely the records which were transferred from ITO Ward 6[1], Chandigarh to ACIT, Circle 40(1), New Delhi. We do not find any transfer order u/s 127 of the Act which indicates that all throughout, the jurisdiction over the assessee lied with the ACIT, Circle 40(1), New Delhi. We also note that since the case records were handed over to the ACIT, Circle 40(1), New Delhi on 06.08.2019, he had no occasion to issue fresh notice u/s 143(2) of the Act as the date of issuance of valid notice u/s 143(2) expired on 30.09.2018. No hesitation to hold that the purported notice u/s 143(2) issued on 08.08.2018 was without jurisdiction and cannot be held as a valid notice. ACIT, Circle 40(1), New Delhi having jurisdiction over the assessee never issued any notice u/s 143(2) of the Act and in any case, he could not have issued notice within time u/s 143(2) of the Act as he himself received the records on 06.08.2019. We are fortified in our decision by the decision of Sunworld Infrastructure [P] Ltd. [2015 (3) TMI 572 - DELHI HIGH COURT] wherein in identical facts, the Hon'ble High Court held that the issuance of notice u/s 143(2) was not from jurisdictional AO and hence quashed the notice/assessment. Thus impugned notice has been issued by the AO having no jurisdiction over the assessee and therefore, the same is invalid rendering the resultant assessment order u/s 143(3) as bad in law. Validity of revision proceedings u/s 263 - We are of the considered view that once the assessment order for AY 2017-18 has been quashed herein above, the same has become non-est and void order which cannot become subject matter for revisionary proceedings u/s 263 of the Act. The cases relied upon in the case of Nirmal Gupta [2021 (6) TMI 945 - ITAT DELHI] and WSP Consultants India (P.) Ltd. [2024 (4) TMI 256 - ITAT DELHI] fortifies the view taken by us. Issues: (i) Whether the notice issued under Section 143(2) of the Income-tax Act, 1961 on 08.08.2018 by ITO Ward 6(1), Chandigarh was issued by the Assessing Officer having jurisdiction; (ii) Whether the assessment order passed under Section 143(3) dated 27.12.2019, founded on the said notice, is valid; (iii) Whether revisionary proceedings under Section 263 and the order giving effect to Section 263 can be sustained when the assessment order under Section 143(3) is void.Issue (i): Whether the notice under Section 143(2) dated 08.08.2018 was issued by a jurisdictional Assessing Officer.Analysis: The notice was issued on 08.08.2018 by ITO Ward 6(1), Chandigarh. The assessee objected to jurisdiction on 24.08.2018. The scrutiny records were transferred as records only to ACIT, Circle 40(1), New Delhi on 06.08.2019. No transfer order under Section 127 was recorded. The time for issuing a valid Section 143(2) notice for AY 2017-18 expired on 30.09.2018, and no fresh notice was issued by the jurisdictional office within that period.Conclusion: The notice dated 08.08.2018 was issued by an officer without jurisdiction and is invalid.Issue (ii): Whether the assessment order under Section 143(3) dated 27.12.2019 is valid when founded on the invalid notice.Analysis: The assessment order flowed from the invalid Section 143(2) notice. Prior judicial authority establishes that a notice issued by a non-jurisdictional AO cannot validate subsequent assessment, and transfer of records without a Section 127 transfer does not cure lack of jurisdiction.Conclusion: The assessment order dated 27.12.2019 is quashed as void ab initio.Issue (iii): Whether proceedings and order under Section 263 and the consequential order giving effect to Section 263 survive where the underlying assessment is void.Analysis: Section 263 revisional power presupposes a valid assessment order. Where the assessment is non est and void, revisionary proceedings based on that assessment lack foundation. The tribunal relied on applicable precedents holding that nullification of the assessment nullifies consequent Section 263 proceedings and orders giving effect thereto.Conclusion: The order under Section 263 and the order giving effect to it are quashed.Final Conclusion: The appeals are allowed; the notice under Section 143(2) is invalid, the assessment under Section 143(3) is quashed, and the Section 263 order and consequential giving-effect order are set aside, resulting in complete relief to the assessee in the consolidated appeals.Ratio Decidendi: A notice issued under Section 143(2) by an Assessing Officer lacking jurisdiction renders any subsequent assessment under Section 143(3) void ab initio; transfer of records without an order under Section 127 does not transfer jurisdiction, and a void assessment cannot be the subject of valid revision under Section 263.