INCOME TAX ACT, 1961

Section 143(2) Section 124(3)

Assessment - Validity - Section 143(2) notice issued by AO not having jurisdiction over assessee -

ITO, Ward-1, Shillong issued notice under section 143(2) and it was objected to by the assessee before ITO. Assessee's case was that since its principal place of business as envisaged under section 124(1) was at Gauhati (i.e., the assessee's territorial jurisdiction) jurisdiction to assess lied with IT Authorities at Gauhati and not at Shillong, ITO understanding his mistake transferred file to Addl. CIT, Range-3, Gauhati, and AO framed assessment under section 143 (3), however, without issuing notice under section 143(2). Revenue's case was that since assessee had not objected to notice issued under section 143(2) by ITO, Shillong assessee was estopped from questioning jurisdiction in terms of sub-section (3) of section 124 and since assessee also participated in proceeding before Addl. CIT-Gauhati, there was no prejudice caused to assessee. Held: It is true that when a question of jurisdiction arises in the event an AO assumes jurisdiction under section 124 by virtue of jurisdiction vested by direction or order issued by CBDT and/or other authorities under sub-section (1) or (2) of section 120 respectively, then assessee is estopped from raising an objection to jurisdiction, after time period prescribed under sub-section (3) of section 124 lapses. This however is not the fact of assessee's case. Admittedly, AO at Gauhati had enjoyed jurisdiction under section 124 since its place of business was at Ulubari at Gauhati and the Shillong AO did not enjoy jurisdiction under section 124 or under section 127. Therefore, as far as assessee's case was concerned, section 124(3) did not come into play since Shillong AO never had jurisdiction under section 124. AO before framing assessment under section 143(3) had to follow the law as prescribed by the Act. It is settled law that issuance of notice in sub-section (2) of section 143 is mandatory before AO passes order under section 143(3) and omission to do so makes the order null in the eyes of law. Since no valid notice under section 143(2) was issued by AO having jurisdiction over case of assessee consequent order passed under section 143(3) was legally unsustainable even though assessee had participated in assessment proceeding before ITO, Guwahati.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

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