2025 (5) TMI 356 - AT - Income Tax

Validity of assessment order passed by AO/ACIT without issuing any notice u/s 143(2) - as argued assessment framed is bad and ab-initio and ex-facie nullity in law - HELD THAT - We note that the assessment order was passed by the ld. ACIT Circle-11(2) Kolkata without issuing the mandatory notice u/s 143(2) of the Act after the case records of the assessee was transferred to him by ACIT Circle-31 Kolkata who issued the notice u/s 143(2) of the Act because he was not having any jurisdiction over the assessee. We note that the case file was transferred from one ACIT circle-31 to another AO i.e. ACIT Circle -11(2) without any administrative order passed by the PCIT having the administrative control over both the AOs. Therefore on this count also the assessment framed cannot be sustained. We note that the assessment order was passed by the ld. ACIT Circle-11(2) Kolkata without issuing the mandatory notice u/s 143(2) of the Act after the case records of the assessee was transferred to him by ACIT Circle-31 Kolkata who issued the notice u/s 143(2) of the Act because he was not having any jurisdiction over the assessee. We note that the case file was transferred from one ACIT circle-31 to another AO i.e. ACIT Circle -11(2) without any administrative order passed by the PCIT having the administrative control over both the AOs. Therefore on this count also the assessment framed cannot be sustained. See Kusum Goyal 2010 (4) TMI 655 - CALCUTTA HIGH COURT Appeal of the assessee is allowed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the assessment order framed by the Assessing Officer (AO) without issuing a mandatory notice under section 143(2) of the Income Tax Act is valid or is a nullity in law.

2. Whether the transfer of the assessment file from one AO to another AO within the same jurisdiction without an administrative order passed by the Principal Commissioner of Income Tax (PCIT) under section 127(3) of the Act is valid.

3. Whether the assessee's failure to object to the jurisdiction of the AO within the prescribed time bars raising the jurisdictional issue at the appellate stage.

Issue 1: Validity of Assessment Without Notice Under Section 143(2)

Legal Framework and Precedents: Section 143(2) of the Income Tax Act mandates issuance of a notice to the assessee before framing an assessment under section 143(3). This notice is a statutory requirement intended to inform the assessee about the initiation of scrutiny assessment and to provide an opportunity to be heard. The absence of such notice renders the assessment order liable to be declared void ab initio.

Court's Interpretation and Reasoning: The Tribunal noted that the original notice under section 143(2) was issued by ACIT Circle-31, Kolkata, who was not the jurisdictional AO for the assessee. Subsequently, the case was transferred to ACIT Circle-11(2), Kolkata, who framed the assessment without issuing a fresh notice under section 143(2). The Tribunal held that the assessment framed without issuing the mandatory notice by the jurisdictional AO is invalid. The statutory requirement of issuing notice under section 143(2) cannot be dispensed with, even if a notice was issued earlier by a non-jurisdictional AO.

Key Evidence and Findings: The record showed that the notice under section 143(2) was issued only by the non-jurisdictional AO and no fresh notice was issued by the jurisdictional AO after transfer of the case.

Application of Law to Facts: Since the jurisdictional AO did not issue the mandatory notice, the assessment order passed by him was held to be without jurisdiction and void ab initio.

Treatment of Competing Arguments: The Revenue argued that the assessee should have objected to the jurisdiction within 30 days of the notice issued by the non-jurisdictional AO, relying on a Supreme Court decision. However, the Tribunal distinguished this precedent on facts, emphasizing that the jurisdictional AO did not issue any notice post-transfer and that the transfer itself was without authority.

Conclusion: The assessment framed without issuance of notice under section 143(2) by the jurisdictional AO is invalid and cannot be sustained.

Issue 2: Validity of Transfer of Assessment File Without Order Under Section 127(3)

Legal Framework and Precedents: Section 127(3) of the Income Tax Act requires that transfer of cases from one AO to another within the same jurisdiction must be effected by an order of the PCIT who has administrative control over the concerned AOs. The transfer must be recorded by an official order on the records. Precedents from the Calcutta High Court have held that intra-city transfer without such an order is illegal and renders subsequent proceedings void.

Court's Interpretation and Reasoning: The Tribunal observed that the assessment file was transferred from ACIT Circle-31 to ACIT Circle-11(2) without any administrative order from the PCIT. The Tribunal relied heavily on the Calcutta High Court decision in Kusum Goyal Vs. ITO, which held that intra-city transfer without an order under section 127(3) is invalid. The Tribunal noted that no such order was produced on record despite being called for.

Key Evidence and Findings: Absence of any order by the PCIT authorizing the transfer was a critical finding. The transfer was effected without compliance with the statutory mandate.

Application of Law to Facts: The transfer being unauthorized, the subsequent assessment framed by the AO who received the file was without jurisdiction. The assessment order was thus a nullity.

Treatment of Competing Arguments: The Revenue contended that jurisdictional objections should have been raised earlier. The Tribunal rejected this argument, emphasizing the fundamental requirement of an order under section 127(3) for valid transfer.

Conclusion: The transfer of the case without a PCIT order under section 127(3) is illegal, rendering the assessment order passed by the transferee AO void.

Issue 3: Waiver of Jurisdictional Objection Due to Delay

Legal Framework and Precedents: The Revenue relied on the Supreme Court decision in Deputy Commissioner of Income (Exemption) Vs. Kalinga Institute of Industrial Technology, which held that objections to jurisdiction must be raised within the prescribed time frame, failing which they are deemed waived.

Court's Interpretation and Reasoning: The Tribunal distinguished the facts of the present case from the cited precedent. The key distinction was that the notice was issued by a non-jurisdictional AO, and the jurisdictional AO framed the assessment without issuing any notice. The Tribunal held that such a fundamental jurisdictional defect cannot be cured by the assessee's failure to object within the stipulated time.

Key Evidence and Findings: The absence of any notice by the jurisdictional AO and the invalid transfer of the case were critical to this conclusion.

Application of Law to Facts: The Tribunal held that the jurisdictional defect goes to the root of the assessment and is not a mere procedural irregularity that can be waived.

Treatment of Competing Arguments: The Tribunal rejected the Revenue's contention that the assessee was estopped from raising jurisdictional objections at the appellate stage.

Conclusion: The assessee's failure to object to the jurisdictional defect within 30 days does not validate an assessment order passed without jurisdiction.

Significant Holdings

"The assessment framed by the ACIT, Circle-11(2), Kolkata is bad in law and nullity in the eyes of the law on the ground that the case has been transferred from ACIT, Circle-31 to ACIT 11(2) without order u/s 127(3) of the Act."

"It is imperative on part of the respondents to issue order under section 127(3), the letters/notices under challenge are set aside and quashed."

"The assessment framed without issuing notice u/s 143(2) of the Act by the jurisdictional AO is invalid and cannot be sustained."

"The jurisdictional defect goes to the root of the assessment and is not a mere procedural irregularity that can be waived by failure to object within the prescribed time."

The Tribunal conclusively held that the assessment order passed by the AO who did not issue the mandatory notice under section 143(2) and who received the case by an unauthorized transfer without an order under section 127(3) is void ab initio. The appeal was allowed, and the assessment order was quashed accordingly.