2025 (5) TMI 1245 - HC - Income Tax

Validity of notice issued u/s 143(2) - Income Tax Office jurisdiction to issue a notice u/s 143(2) - notice to be issued either of the two authorities - AO or the prescribed income-tax authority - HELD THAT - The impugned notice under Section 143(2) of the Act has been issued by the ACIT/DCIT (International Taxation) Circle-1(1)(1) Delhi. In view of the above the contention that the said ITO did not have the jurisdiction to issue a notice u/s 143(2) of the Act is devoid of any merit. The contention that other than the AO only the authorised Income Tax Officers of the National Faceless Assessment Centre (NaFAC) can issue a notice under Section 143(2) of the Act as the same would be in furtherance of automation of such process is also unmerited. This proposition is not supported by the plain language of Section 143(2) of the Act or Rule 12E of the Rules. Rule 12E of the Rules does not confine the power of the CBDT to authorise only the Income Tax Officers of the NaFAC as the prescribed authority for the purposes of Section 142(1) of the Act. The contention that the prescribed income tax authority can only serve a notice u/s 143(2) of the Act but cannot issue it is insubstantial. We are unable to accept that the AO did not have the jurisdiction to issue the impugned notices dated 10.07.2024 and 06.09.2024 u/s 142(1) of the Act or that the same are beyond the period of limitation. Once it is accepted that the AO has the jurisdiction to issue a notice under Section 143(2) of the Act which is also the contention of the petitioner in this case the AO cannot be faulted for proceeding to complete the assessment.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the notice dated 23.06.2024 issued under Section 143(2) of the Income Tax Act, 1961 (the Act) was validly issued by a 'prescribed income-tax authority' or whether it was issued without jurisdiction.
• Whether the authority issuing the notice under Section 143(2) can only serve the notice or also issue it.
• Whether the notices dated 10.07.2024 and 06.09.2024 issued under Section 142(1) of the Act by the Assessing Officer (AO) are valid or barred by limitation, especially in light of the challenge to the Section 143(2) notice.
• The scope of the power of the Central Board of Direct Taxes (CBDT) under Rule 12E of the Income Tax Rules, 1962, to authorize income-tax officers as 'prescribed income-tax authorities' for issuing notices under Section 143(2) of the Act.
• Whether only the Assessing Officer or also other prescribed authorities, including those outside the National Faceless Assessment Centre (NaFAC), can issue notices under Section 143(2) of the Act.
• Whether the AO's jurisdiction is affected by Section 144B of the Act, which mandates assessments to be completed by NaFAC (though this issue was not urged in the petition).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the notice dated 23.06.2024 under Section 143(2) of the Act and jurisdiction of the issuing authority

Legal framework and precedents: Section 143(2) of the Act empowers either the Assessing Officer or a 'prescribed income-tax authority' to serve a notice to the assessee for verification of the return. The provision states: "Where a return has been furnished ... the Assessing Officer or the prescribed income-tax authority, as the case may be, if considers it necessary ... shall serve on the assessee a notice ..." The proviso restricts issuance beyond three months from the end of the financial year in which the return is furnished.

Rule 12E of the Income Tax Rules, 1962 authorizes the CBDT to designate income-tax officers as 'prescribed income-tax authorities' for purposes of Section 143(2). The CBDT issued notifications dated 12.05.2022 and 28.05.2022 authorizing the Assistant Commissioner of Income Tax/Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1), Delhi, as such prescribed authority.

Court's interpretation and reasoning: The Court rejected the petitioner's contention that only the Assessing Officer can issue the notice under Section 143(2) and that the phrase "as the case may be" excludes concurrent jurisdiction. The Court held that either the Assessing Officer or the prescribed income-tax authority can issue the notice. The Court emphasized the plain language of Section 143(2) and Rule 12E, which expressly empowers the CBDT to authorize income-tax officers to act as prescribed authorities.

Key evidence and findings: The impugned notice was issued by the Assistant Commissioner of Income Tax/Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1), Delhi, who was authorized by the CBDT notification under Rule 12E. This authorization was undisputed and established the jurisdiction of the issuing officer.

Application of law to facts: Since the issuing officer was duly authorized under the CBDT notification, the notice dated 23.06.2024 was validly issued under Section 143(2) of the Act.

Treatment of competing arguments: The petitioner's argument that only NaFAC officers or the Assessing Officer can issue such notices was rejected. The Court noted that Rule 12E does not restrict the CBDT's power to authorize only NaFAC officers and that the petitioner's interpretation was unsupported by the statutory language.

Conclusion: The notice dated 23.06.2024 was validly issued by a prescribed income-tax authority and not without jurisdiction.

Issue 2: Whether the prescribed income-tax authority can only serve but not issue the notice under Section 143(2)

Legal framework and precedents: Section 143(2) uses the phrase "shall serve on the assessee a notice" but does not differentiate between 'issuing' and 'serving' the notice. Rule 12E authorizes certain officers to act as prescribed authorities for issuance of such notices.

Court's interpretation and reasoning: The Court held that the contention that the prescribed authority can only serve but not issue the notice is "insubstantial." The language of the statute and rules contemplate that the prescribed authority has the power both to issue and serve the notice.

Application of law to facts: The Assistant Commissioner of Income Tax, being the prescribed authority, was competent to issue the notice under Section 143(2).

Conclusion: The prescribed income-tax authority can issue and serve the notice under Section 143(2) of the Act.

Issue 3: Validity and limitation of notices dated 10.07.2024 and 06.09.2024 under Section 142(1) of the Act

Legal framework and precedents: Section 142(1) empowers the Assessing Officer to call for information or documents necessary for assessment. The limitation for issuance of notices depends on the validity of the preceding notice under Section 143(2), as the latter triggers the assessment process.

Court's interpretation and reasoning: The petitioner contended that since the Section 143(2) notice was invalid, the subsequent Section 142(1) notices were also invalid or barred by limitation. The Court rejected this argument, holding that since the Section 143(2) notice was validly issued, the AO had jurisdiction to issue the Section 142(1) notices within the limitation period.

Application of law to facts: The AO issued the notices under Section 142(1) after the valid Section 143(2) notice, and therefore the notices were valid and not barred by limitation.

Conclusion: The notices dated 10.07.2024 and 06.09.2024 under Section 142(1) were valid and within limitation.

Issue 4: Scope of CBDT's power under Rule 12E to authorize prescribed income-tax authorities

Legal framework and precedents: Rule 12E allows the CBDT to authorize any income-tax officer not below the rank of Income-tax Officer to act as prescribed authority under Section 143(2).

Court's interpretation and reasoning: The Court observed that the CBDT's power is not confined to authorizing officers of the NaFAC only. The petitioner's argument that only NaFAC officers can be prescribed authorities was rejected as contrary to the plain language of the statute and rules.

Application of law to facts: The Assistant Commissioner of Income Tax/Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1), Delhi was validly authorized by CBDT notification under Rule 12E.

Conclusion: CBDT's power under Rule 12E is broad and not limited to NaFAC officers; the authorization in this case was valid.

Issue 5: Jurisdiction of AO in light of Section 144B requiring assessments by NaFAC

Legal framework and precedents: Section 144B mandates that assessments for certain years be completed by the National Faceless Assessment Centre (NaFAC).

Court's interpretation and reasoning: The petitioner raised this issue but conceded it was not urged in the petition. The Court declined to address this ground as it was not properly pleaded or argued.

Conclusion: The Court did not consider the applicability of Section 144B in this matter.

3. SIGNIFICANT HOLDINGS

"A plain reading of Section 143(2) of the Act clearly indicates that either of the two authorities - either the 'Assessing Officer' or 'the prescribed income-tax authority' - can issue a notice under Section 143(2) of the Act. The expression 'as the case may be' also indicates the same."

"Rule 12E of the Rules expressly provides that the Central Board of Direct Taxes (CBDT) can authorise an Income-tax Officer to act as a 'prescribed authority' under Section 143(2) of the Act."

"The contention that the prescribed income tax authority can only serve a notice under Section 143(2) of the Act but cannot issue it, is insubstantial."

"The impugned notice under Section 143(2) of the Act issued by the Assistant Commissioner of Income Tax/Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1), Delhi, who was authorised by the CBDT notification, is valid and within jurisdiction."

"The notices dated 10.07.2024 and 06.09.2024 issued under Section 142(1) of the Act by the Assessing Officer are valid and not barred by limitation, given the valid Section 143(2) notice."

Core principles established include the recognition of concurrent jurisdiction of the Assessing Officer and prescribed income-tax authorities authorized by CBDT under Rule 12E to issue notices under Section 143(2), and the rejection of restrictive interpretations limiting such authority only to NaFAC officers or the AO alone.

The final determination is that the petitioner's challenge to the jurisdiction and validity of the notices under Sections 143(2) and 142(1) of the Income Tax Act is without merit and the petition is dismissed accordingly.