Statutory notice issued by an Officer who had no valid jurisdiction for the assessee is invalid

Issue before tribunal:

• Whether assessment made can be sustained in eye of law when statutory notice issued by an officer who has no jurisdiction over assessee.

Brief facts:

• Assessee is an individual having its place of residence in Delhi and consistently filing its income-tax returns at Delhi.
• A notice u/s 148 was issued by ITO, Ward 3, Gurgaon based on some information from investigation wing.
• In response to the said notice assessee replied that he was regularly assessed to income-tax at Delhi by ITO Ward 27 (2) and he did not fall in the jurisdiction of ITO, Ward 3, Gurgaon.
• After this ITO, Ward 3, Gurgaon transferred this case to ITO, Ward 27 (2), New Delhi who completed the assessment and made additions as per information received.
• On appeal before CIT (A) assessee contested the legality of assessment on ground of jurisdiction apart from the additions on merit.

Contention of the revenue:

• Revenue contested that assessee did not raise any legal ground of jurisdiction before AO and he cannot raise the same at appellate stage and relied upon the order of CIT (A).

Contention of the Assessee:

• The reassessment proceedings were invalid, inasmuch as, the notice under Section 148 was issued by the Income Tax Officer, Ward -3, Gurgaon, who is not vested with the jurisdiction over the appellant.
• Assessee relied upon the decision of the Hon’ble Calcutta High Court in the case of Smt. Smriti Kedia Vs. Union of India and Others, [2011] 339 ITR 37 (Cal.) and on the decision of a co-ordinate bench of Mumbai in the case of Indorama Software Solution Ltd. Vs. Income Tax Officer, [2013] 29 taxmann.com 78 (Mumbai)

Held by the Court:

• Notice u/s 148 was issued by the officer who did not assign jurisdiction over the assessee and it was evident from the fact that case was transferred from ITO, Ward 3, Gurgaon to ITO, Ward 27 (2), New Delhi who completed assessment without issuing any fresh notice.
• It was held by the Hon’ble Allahabad High Court in the case of CIT Vs. M/s MT Builders Pvt. Ltd., (2012) 349 ITR 271 (All.) that the notice issued by an Officer who had no valid jurisdiction for the assessee is invalid.
• Notice u/s 148 did not attain legality in the eye of law as issued by officer having no jurisdiction to issue such notice. Neither he has territorial jurisdiction as notified under section 124 not he can transfer case as per provision of section 127.
• The issue of valid jurisdiction is a condition precedent to the validity of any assessment under Section 147 of the Act. Therefore, the assessment made pursuant to such notice is bad in law.

Conclusion:

While quashing the reassessment proceeding tribunal examined that the notice is issued by an officer who is not authorised by law to issue such notice. After transfer of case to officer having jurisdiction proceeding was completed without issuing any fresh notice. It is seen that proceedings are started without following procedure prescribed by law. Such an activity is not maintainable in the eye of law.