Assessment Void Without Jurisdictional 143(2) Notice: ITAT Quashes ₹1.11 Cr Share Premium Addition u/s 68 [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) ruled that an assessment framed without issuance of a mandatory notice under Section 143(2) of the Income Tax Act, 1961 by the jurisdictional Assessing Officer (AO) is invalid in law, and consequently, quashed an addition of ₹1.11 crore made towards alleged unexplained share capital and share premium under Section 68 of the Act.

The appeal was filed by Riddhiman Realcon LLP against the order passed by the National Faceless Appeal Centre, Delhi, for the A.Y. 2012-13. The assessee had filed its return of income declaring a nominal loss, following which the case was selected for scrutiny under the Computer Assisted Scrutiny Selection mechanism on account of large share premium receipts.

A notice under Section 143(2) of the Income Tax Act, 1961 was initially issued by an AO who did not have jurisdiction over the assessee. Upon objection by the assessee regarding jurisdiction, the case was transferred to the correct AO, who proceeded to complete the assessment under Section 143(3) of the Income Tax Act, 1961 and made an addition of ₹1,11,77,957 under Section 68 of the Actwithout issuing a fresh notice under Section 143(2). The appellate authority upheld the assessment, leading to the present appeal before the Tribunal.

The appellant contended that the assessment order was void ab initio as the mandatory notice under Section 143(2) of the Income Tax Act, 1961 had not been issued by the AO who framed the assessment. It was argued that issuance of a valid jurisdictional notice is a condition precedent for assumption of jurisdiction under Section 143(3) of the Act. Since the notice was issued by a non-jurisdictional officer and no fresh notice was issued after transfer of the case, the entire assessment proceedings stood vitiated.

The Revenue argued that the transfer of jurisdiction between AOs within the same city was an administrative exercise and did not invalidate the notice already issued. The Revenue submitted that the assessee had participated in the assessment proceedings and therefore could not challenge the validity of the assessment at a later stage.

The bench comprising Rajesh Kumar, Accountant Member and Pradip Kumar Choubey, Judicial Member, allowed the appeal, ruling that issuance of a notice under Section 143(2) of the Income Tax Act, 1961 by the AO who frames the assessment is mandatory and not a procedural formality.

The tribunal observed that the notice had been issued by a non-jurisdictional officer and no fresh notice was issued after the case was transferred to the jurisdictional AO. In the light of precedents, the Tribunal held that the failure to issue a valid jurisdictional notice rendered the assessment framed under Section 143(3) of the Act void and unenforceable.

Accordingly, the Tribunal quashed the assessment and set aside the addition of ₹1.11 crore made under Section 68 of the Income Tax Act, 1961.

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