MEENA SWARUP,NEW DELHI vs. DCIT CIRCLE-3(1)(2), NEW DELHI

In first appeal, Ld.CIT(A) confirmed the addition made by the AO thus, the assessee is in appeal before the Tribunal by taking following grounds of appeal:-

Before us, assessee has raised following additional grounds of appeal:- 1. “That the captioned appeal has been filed impugning the Order of Ld. CIT (A) dated 14.12.2018 passed u/s 250 if the Income Tax Act, 1961. 2. That Ld. CIT (A) in its Order upheld the additions made u/s 68 of the Income Tax Act. 1961 by the Ld. DCIT Cir 3(1)(2). International Taxation dated 31.12.2016. 3. That on going through the case file, the AR of the Assessee has realized that in the present case, the 143(2) notice was issued by the AO ward 30(2), who admittedly was not having juri iction over the Assessee since the Assessee was an NRI, evident from her ITR for AY 2013-14, 2014-15 & 2015-16, and juri iction over the Assessee lies with International Taxation. Therefore, the notice issued by an officer who did not have juri iction over the Assessee is invalid, as held in various judgments.

It is a matter of record that the case file was transferred to the International Taxation only at the behest of the AR of the Assessee. However, the Ld. DCIT, Cir 3(1)(2), International Taxation did not issued a notice u/s 143(2), which is mandatory to assume juri iction for completing an Assessment.

It is a settled legal position that non-issuance of notice u/s 143(2) invalidates the complete assessment as void-ab-initio.

Also, the Ld. DCIT Cir 3(1)(2), International taxation, in page number 7 of the Assessment Order, proceeded on a completely incorrect fact, which also evidences the Non-application of mind and the justifies that the Assessment Order was passed on application of wrong facts.

Therefore, in view of the above factum, the Assessee craves for leave of the Hon'ble Tribunal to raise the following grounds, which are purely legal goes to the root of the matter:

Before us, Ld.AR for the assessee submits that the additional grounds taken are purely legal in nature and therefore, same deserves to be admitted.

After considering the arguments of both the parties and looking to the nature of the additional ground taken being purely legal we hereby admit the same for adjudication.

The Additional Ground No.1 is with respect to the validity of notice u/s 143(2) issued by the AO having no juri iction and the consequent assessment order passed by other AO without assuming juri iction by issue of notice u/s 143(2) of the Act.

Before us, Ld.AR submits that assessee filed her return of income with ITO, Ward, 22(4), New Delhi in terms of the acknowledgement dt. 31.07.2024 who was having territorial juri iction over the assessee. The notice for scrutiny u/s 143(2) was issued by ITO, Ward-28(4), Delhi which is evident from the report of the AO dated 24.04.2025 submitted before us wherein notice issued u/s 143(2) dated 21.09.2015 issued by ITO, Ward- 28(4), Delhi is enclosed. In the said report, it is further observed that case of the assessee was transferred from ITO ward 30(2) Delhi to the DCIT, International Taxation 3(1)(2), New Delhi. Ld. AR further submits that assessee was a non-resident and this facts was duly disclosed in the return of income as well as accepted by the Department in the intimation order passed u/s 143(1) of the Act and therefore, the correct juri iction over the assessee lies with DCIT, Circle-3(1)(2), International Taxation, New Delhi who completed the assessment. It is submitted by Ld.AR that notice u/s 143(2) was issued by ITO, Ward-28(4), New Delhi without having any juri iction in terms of section 120(1) or 120(2) of the Act as the territorial juri iction was with ITO, Ward-22(4), Delhi with whom return of income was filed. Since the assessee is non-resident therefore, the correct juri iction lies with DCIT, Circle-3(1)(2), International Taxation, New Delhi. Thus, the notice issued u/s 143(2) of the Act by ITO, Ward-28(4), Delhi is without juri iction and consequent assessment order passed by DCIT, Circle-3(1)(2), International Taxation, New Delhi without assuming juri iction by issue of notice u/s 143(2) is bad in law and therefore, same is liable to be quashed. He prayed accordingly.

Ld.AR also placed reliance on the judgement of Hon’ble Supreme Court in the case of ACIT vs Hotel Blue Moon [2010] 321 ITR 362 (SC) and the judgement of Hon’ble Calcutta High Court in the case of PCIT vs Nopany & Sons [2022] 136 taxmann.com 414 (Calcutta). Ld.AR also filed detailed written submission on the additional grounds taken which is reproduced as under:-

That the Impugned Assessment proceedings are void ab initio as the Notice u/s 143(2) of the IT Act, 1961 was issued by the Assessing Officer who was not having juri iction and the Assessing Officer to whom the file was transferred at the request of the AR of the Assessee, did not assume juri iction by issuing a Notice u/s 143(2) as required under Section 143 of the Income Tax Act, 1961. The Impugned Assessment may please be quashed on this ground alone.

The short issue which falls for consideration is whether the assessing officer, who had juri iction over the assessee at the relevant time had issued notice under section 143(2) of the Act before taking up the scrutiny assessment under section 143(3). Before we go into the facts, we take note of the legal position as laid down by the Hon'ble Supreme Court in Asstt. CIT v. Hotel Blue Moon [2010] 188 Тахmann 113/321 ITR 362, wherein the Hon'ble Supreme Court held that omission on the part of the assessing officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with. Further, we also take note of the decision in the case of CIT v. Gitsons Engineering Co. [2015] 53 taxmann.com 108/231. Taxman 506/370 ITR 87 (Mad.), wherein it was held that the word 'shall' employed in section 143(2) of the Act, contemplates that the assessing officer should issue notice to the assessee so as to ensure that the assessee has not understated income or has not computed excessive loss or has not under paid the tax in any manner. It was further held that when the assessing officer considers it necessary and expedient to ensure that tax is paid in accordance with law, he should call upon the assessee to produce evidence before him to ensure that the tax is paid in accordance with law. The section makes it clear that service of notice under section 143(2) of the Act within the time limit prescribed is mandatory and it is not a mere procedural requirement. At this juncture, it would be relevant to take note of the definition of assessing officer as defined in section 2(74) of the Act. The said provision defines 'assessing officer' to mean the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer, who is vested with the relevant juri iction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of the Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, who is directed under clause (b) of sub-section (4) of section 120 to exercise or perform all or any of the powers and functions conferred on, or assigned to, an assessing officer under this Act. In the instant case, the order of assessment was challenged on several grounds and, particularly, on the ground that no notice under section 143(2) of the Act was issued within the time prescribed by the assessing officer, who had juri iction over the assessment file of the assessee at the relevant time. The Commissioner of Income-tax (Appeals)-XXXVII, Kolkata, (CIT(A)) did not agree with the contentions raised by the assessee that there is failure to comply with the mandatory statutory requirement. The CIT(A) opined that the assessing officer, who originally dealt with the e-return filed by the assessee had issued notice under section 143(2) of the Act. With regard to the merits of the matter, the CIT(A) held it in favour of the assessee. Therefore, the revenue was on appeal before the Tribunal and cross- objection was filed by the assessee questioning that portion of the order of the CIT(A) which held that there is no procedural irregularity committed by the assessing officer. The Tribunal considered the correctness of the finding of the CIT(A) and, on facts, found that both the assessing officers, namely, the assessing officer, who had juri iction over the assessee till 6-4-2009 and the assessing officer, who had juri iction post the said date had not issued notice under section 143(2) of the Act within the prescribed period of six months from the end of the financial year in which the return was filed. This factual position could not be controverted by the revenue before us. As pointed out by the Hon'ble Supreme Court in the case of Hotel Blue Moon (supra), non-issuance of notice under section 143(2) is not a procedural irregularity and, therefore, it is not curable. Thus, on facts, it having been established that no notice was issued under section 143(2) of the Act, the order passed by the Tribunal was perfectly legal and valid. The revenue also sought to rely upon section 292BB of the Act to justify their stand that notice is deemed to be valid and sought to bring the assessee's case under the circumstances mentioned in section 292BB. This question was considered by the Tribunal and it was pointed out that section 292BB provides that where an assessee has appeared in any proceedings or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any of the provision of the Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of the Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. This amendment to the Act was introduced with effect from 1-4-2008 and the assessment year under consideration is AY 2007-08. In any event, the Tribunal examined as to whether at all the revenue can rely upon section 292BB of the Act and noted that the assessee has filed an objection vide letter dated 16-11-2009 objecting to the issuance of notice under section 142(1) of the Act without valid service of notice under section 143(2) of the Act. Taking note of the said letter the Tribunal, in our view, rightly held that the proviso to section 292BB would not stand attracted and the said section cannot be made applicable to the assessee's case. The Tribunal, thereafter, analysed as to the correctness of the submission of the revenue seeking to sustain their stand by referring to a notice issued by the assessing officer, who at the relevant point had no juri iction over the assessee and, on facts, found that there is no valid compliance of section 143(2) of the Act as the notice issued under section 143(2) of the Act by the assessing officer/Income Tax Officer, Ward-3(1) had no juri iction over the assessee at the relevant time. The Tribunal to support its conclusion placed reliance in the case of CIT v. Mukesh Kumar Agrawal [2012] 25 taxmann.com 112/345 ITR 29 (Allahabad), wherein it was held that the assessing officer did not have juri iction to proceed further and make assessment since notice under section 143(2) of the Act was admittedly not issued. As in the case on hand, the revenue sought to take coverage under section 292BB of the Act which was rejected on the ground that the very foundation of the juri iction of the assessing officer was on the issuance of notice under section 143(2) of the Act and the same having been complied with, the revenue cannot take shelter under the provisions of section 292BB of the Act.

Thus, we are of the clear view that the Tribunal was right in rejecting the revenue's appeal. In the result, this appeal is dismissed and the substantial question of law is answered against the revenue.

On the other hand, Ld. Sr. DR supports the order of lower authorities and submits that assessee has not challenged the juri iction within one month from the service of notice u/s 143(2) of the Act and therefore, in terms of provision of section 124(3) of the Act, notice issued by ITO, Ward-28(4), New Delhi [wrongly mentioned as ITO, Ward-30(2), New Delhi] in the report submitted by AO dated 24.04.2025 cannot be challenged now after the expiry of one months period. Ld. Sr.DR placed reliance on the judgment of Hon’ble Juri ictional Delhi High Court in the case of Abhishek Jain vs ITO [2018] 94 taxmann.com 355 (Delhi).

Heard the contentions of both the parties and perused the material available on record. The sole issue raised in this ground of appeal for our consideration is whether the AO who issued notice u/s 143(2) of the Act, has the valid juri iction over the assessee as provided in section 120(1) or 120(2) of the Act and further the assessment order passed by AO without assuming the juri iction u/s 143(2) of the Act is valid or liable to be quashed?

From the perusal of notice issued u/s 143(2) as filed by the Revenue alongwith the report of AO dated 24.04.2025, it is seen that the same was issued by ITO, Ward-28(4), New Delhi. The said notice is reproduced as under:- 13. It is further seen that assessee filed her return of income on 31.07.2014 with ITO, Ward-22(4), New Delhi who was having territorial juri iction over the case of assessee. It is further seen that return of income for the immediately preceding year was filed with DDIT, Circle-2(2)2, International Taxation, New Delhi on 21.02.2014. The claim of assessee is that she is a non-resident and this fact was duly disclosed in the return of income filed and accepted by the Revenue in the order passed u/s 143(1) of the Act. Further from the perusal of para 2 of the order, AO observed that assessee is a non-resident. It is also seen that assessee during the course of assessment proceedings, objected the proceedings carried out by ITO ward 30(2) Delhi and stated that juri iction lies with AO, International Taxation. In the instant case, first notice u/s 142(1) alongwith query letter was issued by the ITO, Ward-30(2), New Delhi with whom details were filed by the assessee in terms of letter dated 08.11.2016 when the assessee has requested the AO for transfer of the case to the correct juri iction.

As observed above, there are 04 AOs in the case of the assessee, First, ITO, Ward-22(4), New Delhi with whom return was filed having territorial juri iction. Second, the ITO, Ward-28(4), New Delhi who issued notice u/s 143(2) of the Act; (it is not clear whether ITO, Ward-28(4), New Delhi is having any juri iction over the assessee or not); Third, the ITO, Ward-30(2), New Delhi from whose juri iction case of the assessee was transferred to DCIT, International Taxation, Circle-3(1)(2), New Delhi and Fourth the DCIT, International Taxation, Circle-3(1)(2), New Delhi who completed the assessment. 15. Section 124(3) of the Act referred by Ld. Sr.DR, relates to the case where territorial juri iction is challenged however, it not for the cases where the very subject matter of juri iction is challenged as has been done in the present case. Thus the provisions as contained in section 124(3) of the Act are not applicable to the facts of the present case, and as such assessee can challenge the very subject matter of the juri iction at any stage. Hon’ble Delhi High observed that “…… As far as territorial juri iction or pecuniary juri iction are concerned, objection should be taken at the earliest possible opportunity and / or before the settlement of issues and not at the subsequent stage. Juri iction as to the subject matter is distinct and stand at a different footing. Therefore, territorial juri iction cannot be equated with lack of subject matter of juri iction.

Further it is evident from the facts that AO who had completed the assessment i.e. DCIT, International Taxation, Circle-3(1)(2), New Delhi assumed the juri iction without issue of notice u/s 143(2) of the Act. In the instant case, as observed above, notice issued u/s 143(2) by ITO, Ward-28(4), New Delhi who even was not having territorial juri iction over the assessee and since the assessee is Non-resident, it is question of subject matter of juri iction and thus the ratio laid down by hon’ble Delhi high court in the case Abhishek Jain (supra) as relied by revenue is not applicable rather the observation of Hon’ble High Court in para 22, favors the case of the assessee. It is further seen that proceedings taken up by ITO, Ward-30(2), New Delhi were without juri iction and subsequent transfer of case to DCIT, International Taxation, Circle-3(1)(2), New Delhi is subject matter of juri iction which is to be examined separately.

In view of these facts, we find that assessee’s case is covered by the judgement of Hon’ble Calcutta High Court in the case of PCIT vs Nopany & Sons (supra) wherein Hon’ble High Court held that notice issued u/s 143(2) by the AO who at that relevant point, had no juri iction over the assessee, thus, the notice issued u/s 143(2) of the Act had no juri iction.

Further, the Hon’ble Supreme Court in the case of ACIT vs Hotel Blue Moon (supra) has held that omission on the part of the AO to issue notice u/s 143(2) cannot be a procedural irregularity and the same is not curable. The Hon’ble Allahabd High Court in the case of CIT vs M.I.Builders (P) Ltd. [2012] 349 ITR 271 (Allahabad) held that the notice issued by non-juri ictional AO is invalid.

In case where the juri iction is transferred from AO who is not having juri iction over the assessee to the AO having juri iction, the same could be done through an order for transfer of juri iction u/s 127(2) of the Act which has not been done in the instant case. Transfer order is statutorily required to be passed by the prescribed authority u/s.127 of the Act, and an A.O cannot on his own transfer an income tax file to another officer. 20. Even otherwise, transfer of proceedings u/s. 127 of the Act cannot be retrospective so as to confer juri iction on a person who does not have it. Section 127 of the Act does not empower the authorities under the Act to confer juri iction on a person who does not have juri iction with retrospective effect. Section 127 does not validate notices or orders issued without juri iction, even if they are transferred to a new officer by an order u/s. 127. In the instant case, the DCIT, International Taxation, Circle 3(1)(2) assumed juri iction in terms of the notice issued u/s 143(2) on 21.9.2015 by ITO ward 28(4) who was not having any juri iction. The Co-ordinate Bench in the case of Gaurav Singhal in ITA No.5786/Del/2018 held that “without a valid assumption of juri ictional u/s 127, the assessment order would be rendered illegal and invalid”.

In view of the above facts, in our considered opinion, notice issued u/s 143(2) by ITO, Ward-28(4), New Delhi dated 21.09.2015 is without juri iction and consequent assessment order passed by DCIT, International Taxation, Circle-3(1)(2), New Delhi is hereby, quashed.

Since we have already allowed the legal ground taken by the assessee, the other grounds of appeal become academic hence, not adjudicated. 23. In the result, appeal of the assessee is allowed.