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Facts
The assessee filed an income return, and the Income Tax Officer-3(1)(4), Vadodara, issued a notice under section 143(2). Later, the case was transferred to the jurisdictional AO at Sitapur. The Sitapur AO issued notices under section 142(1) but not under section 143(2). The assessment was completed under section 144 due to non-compliance.
Held
The Tribunal held that the assessment order was void ab initio because the jurisdictional AO did not issue the statutory notice under section 143(2) of the Act, which is a prerequisite for assuming jurisdiction. Reliance was placed on jurisdictional High Court judgments.
Key Issues
Whether the assessment order is void ab initio due to the non-issuance of a notice under section 143(2) by the jurisdictional Assessing Officer before commencing assessment proceedings.
Sections Cited
143(2), 142(1), 144, 44AD, 115BBE, 271AAC, 270A, 271A, 271B, 148, 147, 292BB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 Ishrat Beg v. The Income Tax Officer S/o Akhtar Beg Sitapur Katra Astal, Laharpur Sitapur (U.P) TAN/PAN:AOYPB5773P (Appellant) (Respondent) Appellant by: Shri K. R. Rastogi, C.A. Respondent by: Shri Saurabh Dubey, D.R. O R D E R
This appeal has been preferred by the assessee against order, dated 12.10.2023, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.
2.0 The brief facts of the case are that the assessee e-filed his return of income for the year under consideration on 25.03.2018, declaring a total income of Rs.3,32,040/-. In this case, the Income Tax Officer-3(1)(4), Vadodara issued notice under section 143(2) of the Income Tax Act, 1961 (hereinafter called “the Act’) to the assessee for compliance on 20.08.2018. In response to this notice, the assessee filed reply and furnished copy of bank statement on 27.11.2018. Subsequently, the case was transferred to the Income Tax Officer, Sitapur (New), who issued notice dated 03.04.2019 under section 142(1) of the Act to the assessee for compliance on 15.04.2019. However, there was no compliance from the side of the assessee. Thereafter, the Income Tax Officer, Sitapur (New) issued notice dated 26.09.2019 under section 142(1) of the assessee fixing the date for compliance on 04.10.2019, in response to which the assessee complied on 28.1.2019 submitting a write up along with bank statement. The Income Tax Officer, Sitapur (New) again issued a notice dated 14.12.2019 under section 142(1) of the Act along with a proposed assessment order for compliance on 18.12.2019. However, the assessee did not comply with this notice issued by the ITO (AO). Since the assessee failed to furnish documentary proof of his claim, the AO proposed draft assessment order invoking the provisions of section 144 of the Act. Subsequently, the AO obtained details of bank account statements relating to the assessee from the State Bank of India, Signapur Branch, Sitapur and Axis Bank, Laharpur Branch, Sitapur. From the bank account statements so obtained from the aforementioned banks, the AO noticed that the assessee had made cash deposits of Rs.12,21,800/- during the demonetization period, which was treated as unexplained cash deposits and was added to the income of the assessee. The AO further noticed from the analysis of bank accounts that apart from cash deposits during the demonetization period, there were balance cash/credits deposits of Rs.1,31,10,253/-, which was treated as business income of the assessee. The AO, after applying rate of 8% under section 44AD of the Act, calculated the business income of the assessee for the year under consideration at Rs.10,48,820/-. After subtracting net profit of Rs.3,32,040/- declared by the assessee from the business income estimated by the AO (Rs.10,48,820 – Rs.3,32,040), which came to Rs.7,16,780/-, the AO added the same to the income of the assessee. The AO completed the assessment under section 144 of the Act, computing the total income of the assessee at Rs.22,70,620/-.
2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271AAC, 270A, 271A and 271B of the Act, separately.
2.2 Aggrieved, the assessee preferred an appeal before the NFAC and placed reliance on the order of the ITAT, Lucknow Bench in the assessee’s own case for assessment year 2012-13. However, the appeal of the assessee came to be dismissed.
3.0 Now, the Assessee has approached this Tribunal challenging the impugned order of the NFAC by raising the following grounds of appeal:
That the Learned Courts Below are not justified in assessing the Income at Rs.22,70.620/-U/s. 144.
That the addition of Rs.12,21,800/- on account of unexplained Cash Deposit in Bank is also not valid, legal and proper and is highly excessive.
That taxing the above Income U/s. 154BBE is also not valid, legal & proper. 4. That Learned Courts Below are not justified in adding Rs.7,16,780/- on account of Business Profit by applying Net Profit Rate of 8% U/s. 44AD. 5. That the Income Assessed is highly excessive. 6. That the order passed by the Assessing Officer is bad in law and beyond jurisdiction. 7. That the findings of the Learned Courts Below are contrary to law and facts of the case. 8. That the Tax assessed at Rs.15,30,032/- is also not valid, legal and proper. 9. That the Assessing Officer be directed to accept the Income as shown in my Income Tax Return. 4.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the order passed by the AO was bad in law and beyond jurisdiction, inasmuch as that the assessee was assessed to tax by the Income Tax Officer, Sitapur (New). It was further submitted that in the present case the initial notice under section 143(2) of the Act dated 08.08.2018 was issued by Income Tax Officer-3(1)(4), Vadodara which was evident from the copy of notice placed at pages 22 to 25 of the paper book filed by the assessee. It was further submitted that subsequently, on realizing that the Income Tax Officer-3(1)(4), Vadodara was not the jurisdictional AO, the assessee’s case was transferred to the jurisdictional AO at Sitapur and this fact was also evident from the body of the assessment order. The Ld. A.R. further submitted that on receiving the case records from the AO at Vadodara, the jurisdictional AO at Sitapur, thereafter, issued notices under section 142(1) of the Act and, thus, the chronology of events would show that the jurisdictional AO at Sitapur never ever issued any notice under section 143(2) of the Act which was a statutory requirement and, therefore, the assessment order passed by the AO at Sitapur was void ab initio and was liable to be quashed. The Ld. A.R. placed reliance on various case laws placed in the paper book and submitted that the jurisdiction of the AO was the first requirement for assuming jurisdiction and, thereafter, concluding the assessment proceedings. The Ld. A.R. prayed that the legal ground of the assessee be allowed and the assessment order be quashed.
5.0 Per contra, the Ld. Sr. D.R. submitted that the assessee had not raised any objection to the notice not having been issued by the jurisdictional AO under section 143(2) of the Act during the course of assessment proceedings. It was submitted that the assessee had, in fact, not even made any compliance during the course of assessment proceedings and as the assessment order would show, the same was passed under section 144 of the Act due to reason of non-compliance by the assessee. The Ld. Sr. D.R. also submitted that in the immediately preceding year, the Tribunal had set aside the case of the assessee to the office of the AO and likewise in this year also, the case may be restored to the file of the AO.
6.0 I have heard the rival submissions and have also perused the material on record. It is an undisputed fact that notice under section 143(2) of the Act was issued by the Income Tax Officer-3(1)(4), Vadodara, a fact which is even apparent from the copy of the assessment order itself. It is also an admitted fact that after the issuance of notice under section 143(2) of the Act dated 08.08.2018 by the Income Tax Officer-3(1)(4), Vadodara, the case was transferred to Income Tax Officer, Sitapur (New) who in fact was the jurisdictional AO over the assessee. Thereafter, the AO at Sitapur issued notices under section 142(1) of the Act to the assessee on 03.04.2019, 17.09.2019, 26.09.2019 and 14.12.2019. Thus, undoubtedly, the jurisdictional AO only issued notices under section 142(1) of the Act and did not issue any notice under section 143(2) of the Act. A perusal of the return of income also shows that the assessee’s jurisdiction for the case was lying with Ward-1, Sitapur. Thereafter, after issuance of various notice under section 142(1) of the Act, the AO proceeded to complete the assessment under section 144 of the Act due to the assessee being non-compliant. However, the fact remains that the jurisdictional AO did not issue the statutory notice under section 143(2) of the Act which was the first step for assuming jurisdiction over the case of the assessee. Therefore, I agree with the contention of the Ld. A.R. that the assessment in the case of the present assessee was framed without jurisdiction, inasmuch as the assessment proceedings were initiated by a non- jurisdictional AO.
6.1 The Jurisdictional High Court in the case of PCIT-II, Lucknow vs. Mohd. Rizwan in Income Tax Appeal No.100 of 2015 and judgment dated 30.03.2017 has discussed an identical issue at length, wherein the question before the Hon'ble Allahabad High Court was that if a notice under section 148 of the Act was issued by an incompetent Officer, i.e., one who had no jurisdiction, mere fact that subsequently on the objection of the assessee with regard to jurisdiction, the matter is transferred to another AO, can valid assessment be made by him without issuing a fresh notice under section 148 of the Act? The Hon'ble Jurisdictional High Court, while referring to another case of CIT vs. Rajeev Sharma reported in [2011] 336 ITR 678, observed that the reason for issuance of notice by competent AO is quite obvious inasmuch as, such notice could have been issued only when the concerned AO has reason to believe that some income has escaped assessment and reassessment/assessment is needed. The Hon'ble Court further observed that such satisfaction can be of that AO only who has jurisdiction in the matter and not of any third party. The Hon'ble Court went on to hold that where no valid notice under section 148 of the Act was issued by the jurisdictional AO before making assessment/ reassessment, the proceedings of reassessment pursuant to notice issued under section 148 of the Act by an incompetent Officer are void ab initio. The Hon'ble Court further observed that when a notice under section 147/148 of the Act is a jurisdictional step, it cannot be treated to be mere irregularity curable under section 292BB of the Act. In fact, section 292BB of the Act has no application to a case where no valid notice has been issued by a competent AO. Therefore, I am of the considered view that the judgment in the case of PCIT-II, Lucknow vs. Mohd. Rizwan (supra) would be applicable in the present case, as the issue of jurisdiction under section 143(2) of the Act is para materia with notice to be issued under section 148 of the Act and respectfully following the same, I allow the legal ground raised by the assessee and hold that the assessment was void ab initio and quash the same.
6.2 Since relief has already been allowed to the assessee on the legal issue and no arguments were made by either of the sides on merits of the case, grounds raised on merits are dismissed as not pressed.
7.0 In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 25/08/2025.