Shivam Dhatu Udyog Ltd. Vs DCIT (ITAT Kolkata)
The admitted position is that the assessee is a company and its registered office is at Kolkata (State of West Bengal). For the assessment year (AY 2012-13) a notice u/s. 143(2) of the Act has been issued by DCIT, Circle-2, Gorokhpur (State of U.P.). Thus, we note that the DCIT, Circle-2, Gorokhpur did not enjoy the territorial jurisdiction u/s 124 or by virtue of section 120 of the Act or by transfer as per Section 127 of the Act. It is not disputed that the AO (DCIT, Circle-3(1), Kolkata) who passed the assessment order u/s. 143(3)of the Act had the jurisdiction and he has not issued fresh notice u/s. 143(2) of the Act before framing the assessment u/s. 143(3) of the Act. Now only the legal issue is whether the AO (DCIT, Circle-3(1), Kolkata) would have framed the assessment u/s. 143(3) of the Act without issuing and serving Notice u/s. 143(2) of the Act on the assessee. This legal issue is no longer res-integra. The issuance of notice u/s. 143(2) is mandatory for framing scrutiny notice u/s. 143(3) of the Act as held by the Hon’ble Supreme Court in the case of CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon’ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and in the absence of a valid notice u/s 143(2) the scrutiny assessment u/s 143(3) cannot be framed and omission to issue notice u/s 143(2) of the Act is not a curable defect.
Since the assessee has been able to demonstrate before us that there has been no notice issued u/s. 143(2) of the Act by the AO (DCIT Circle-3(1), Kolkata before he framed to scrutiny assessment u/s. 143(3) of the Act dated 17.03.2015, the assessment order is null in the eyes of law and the assessee succeeds on the legal issue raised before us. Since the AO (DCIT, Circle-3(1), Kolkata did not issue the mandatory notice u/s 143(2) of the Act, he did not enjoy the jurisdiction to frame the assessment u/s. 143(3) of the Act. Therefore, the order passed by the AO (DCIT, Circle-3(1), Kolkata is null in the eyes of law and it has to be quashed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of Ld. CIT(A)-5, Kolkata dated 14.10.2019 for AY 2012-13.
2. At the outset, Ld. AR for the assessee Shri Miraj D. Shah drew our attention to the additional ground raised by the assessee which is as under:
“1. For that the assessing officer issuing the notice u/s.143(2) of the I. T Act, 1961 did not have jurisdiction over the case, of the assessee hence, the notice is bad in law and the assessment order passed on the basis of such notice is bad in law and should be quashed.
2. For that the assessment order .was passed without service of any valid notice u/s. 143(2) of the I.T. Act, 1961 and therefore the assessment order passed is bad in law and should be quashed.
3. That in the facts and circumstances of the case, the assessment order u/s. 143(3) of the IT Act 1961 was without jurisdiction and bad in law and thus the entire assessment order be quashed and or cancelled.”
3. On a perusal of this additional ground it is discerned that the assessee is raising a legal issue in respect of jurisdiction of the AO (DCIT, Circle-3(1), Kolkata) (hereinafter called the ‘AO’) to have passed the scrutiny assessment order u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) on the ground that the AO did not issue the mandatory statutory notice u/s. 143(2) of the Act before framing the assessment order u/s 143(3) of the Act on 17.03.2015.
4. We note that this is purely a legal issue, which has been raised by the assessee for the first time before us, which action of assessee has been opposed by the Ld. DR for admission itself, since according to Ld DR, it was not raised before the Ld. CIT(A). However, we are inclined to admit these grounds of appeal being purely legal in nature and no other documents are required to adjudicate the same. For that we rely on the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. Vs. CIT 229 ITR 383 (SC). Assailing the action of the AO to have framed the assessment u/s. 143(3) of the Act without issuing notice u/s. 143(2) of the Act, the Ld. AR drew our attention to page 1 of the paper book, a perusal of which we note that section 143(2) notice was issued by ITO, Gorakhpur. For ready reference the same is seen as under:
5. From a perusal of the aforesaid Notice u/s. 143(2) of the Act, it is discerned that the same was issued on 08.08.2013 by DCIT, Circle-2, Gorakhpur (State of U. P.). And the assessee duly objected to the jurisdiction of the DCIT, Circle-2, Gorakhpur stating that the assessee company has its registered office at Kolkata i.e. in the State of West Bengal. Realizing the mistake, DCIT, Circle-2, Gorakhpur transferred the case to the AO, Kolkata who admittedly have not issued the mandatory statutory notice u/s. 143(2) of the Act; and has issued only notice u/s. 142(1) of the Act and has framed the assessment u/s. 143(3) of the Act, which according to the Ld. AR is without jurisdiction and bad in law. For that he cited the following case laws i.e. M/s Rungta Irrigation Ltd. vs. ACIT in ITA No. 1224/Kol/2019 order dated 06.09.2019 relevant portion of it is re-produced as under:
“13. For understanding the legal position with regard to the jurisdiction of Income tax authorities, it is pertinent to make reference to provisions of Section 120, 124, 127 and 129 of the Act which are reproduced herein below:
120. Jurisdiction of income- tax authorities
(1) Income- tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.
(2) The directions of the Board under sub- section (1) may authorise any other income- tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income- tax authorities who are subordinate to it.
(3) In issuing the directions or orders referred to in sub- sections (1) and (2), the Board or other income- tax authority authorised by it may have regard to any one or more of the following criteria, namely:-
(a) territorial area;
