Assessment Quashed as Section 143(2) Notice Issued by Non-Jurisdictional Officer: ITAT Delhi

The Tribunal held that the assessment was invalid because the mandatory notice under Section 143(2) was issued by an officer who had no jurisdiction at that time, so the entire assessment order was quashed, and the assessee’s appeal was allowed.

Background of the case

The present case relates to the cross-appeals filed by the revenue and the assessee, challenging the order dated October 17, 2024, of the CIT(A) for the assessment year 2019-20.

The Revenue had challenged the relief granted by the CIT(A), particularly the deletion of an addition of Rs 7,770,091 made under Section 69 of the Act. According to the department, the CIT(A) wrongly relied on CBDT Instruction No. 1916 relating to jewellery found during search operations. The department argued that the instruction only deals with the non-seizure of jewellery during a search and does not automatically mean that such jewellery is examined. It further contended that the CIT(A) wrongly extended the benefit of the instruction to all family and extended family members, even though the locker belonged only to the assessee.

However, during the hearing of the cross-appeal filed by the assessee, the assessee argued that the assessment order itself was invalid because no valid notice under Section 143(2) of the Income Tax Act had been issued by a competent assessing officer. According to the assessee, the CIT(A) incorrectly held that a notice dated September 30, 2020, had been issued, even though the officer who issued the notice did not have jurisdiction over the case on that date.

Tribunal’s Ruling

After hearing both sides and examining the records, the tribunal noted that the notice under Section 143(2) was claimed to have been issued on September 30, 2020. However, the jurisdiction over the assessee’s case was transferred to the DCIT, New Delhi, only on October 15, 2020.

The Tribunal observed that on the assessee’s e-filing portal, instead of the proper statutory notice under Section 143(2), the first page of an appraisal report had been attached. During appellate proceedings, the assessee had specifically raised this issue. Although the CIT(A) sought a remand report from the assessing officer, the officer only repeated that the notice dated September 30, 2020, had been issued and did not address the jurisdiction issue.

The Tribunal emphasised that issuing a valid notice under Section 143(2) by a jurisdictionally competent AO is a compulsory requirement for completing an assessment under Section 143(3). If such notice is not properly issued, the entire assessment becomes invalid. The Tribunal also clarified that Section 292BB of the Act only cures defects related to the service of notice and cannot cure the complete absence of a valid notice.

The tribunal also relied on an earlier decision of the Supreme Court in the case of ACIT vs Hotel Blue Moon (324 ITR 372). The tribunal held that if no valid notice under Section 143(2) is issued, the assessment order cannot survive. Since the notice in the present case was issued by an officer who did not have jurisdiction at the relevant time, the requirement of law was not fulfilled.

Accordingly, the tribunal held that the assessment order dated March 1, 2021, was void ab initio and liable to be quashed. As a result, it allowed the assessee’s appeal and dismissed the revenue’s appeal as infructuous.