Assessment Quashed: ITAT Kolkata Holds Section 143(2) Notice by Non-Jurisdictional AO as Invalid

Case Overview

Rungta Irrigation Limited Vs ACIT (ITAT Kolkata)

In a significant ruling touching upon foundational principles of jurisdictional competence under the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT), Kolkata bench examined whether a scrutiny notice issued by an Assessing Officer (AO) who had been divested of jurisdiction through a prior transfer order could sustain a subsequent assessment. The matter arose from the assessee's challenge to the appellate order of CIT(A)-21, Kolkata dated 22.04.2019, concerning Assessment Year 2015-16.

Background and Factual Matrix

The registered headquarters of the assessee company was located at 101, Pragati Towers, 26 Rajendra Place, New Delhi-110007. Originally, the assessee fell under the jurisdiction of DCIT, Circle-15(1), New Delhi. However, by virtue of an order passed under Section 127(1) by CIT-V, New Delhi dated 08.10.2008, the jurisdiction over the assessee's case was formally transferred to DCIT, Central Circle-1, Ranchi. From that date onward, all income tax assessments from AY 2007-08 onwards were conducted by the Ranchi officer.

For AY 2015-16, the assessee electronically filed its return of income on 30.09.2015, declaring total income of Rs. 1,27,03,820/-. Despite the existence of the earlier transfer order, ACIT, Circle-21(1), New Delhi issued a notice under Section 143(2) dated 28.07.2016, followed by a notice under Section 142(1) dated 30.06.2017. Upon receiving the Section 142(1) notice, the assessee filed a letter dated 17.07.2017 specifically objecting to the competence of the New Delhi officer to exercise jurisdiction.

Subsequently, Pr. CIT-7, New Delhi issued a show cause notice dated 07.08.2017 proposing to centralize the assessee's case with ACIT, Central Circle-3(1), Kolkata. The assessee raised objections to this proposal as well vide letter dated 16.08.2017. Recognizing the force of these objections, Pr. CIT-7, New Delhi dropped the centralization proceedings. The matter was then taken up by Pr. CIT, Central Patna, who issued a fresh show cause notice dated 24.10.2017 and thereafter passed a transfer order under Section 127 dated 03.11.2017, centralizing the assessee's case with ACIT, Central Circle-3(1), Kolkata.

Following this transfer, ACIT, Central Circle-3(1), Kolkata issued a notice under Section 142(1) and subsequently framed the assessment order under Section 143(3) dated 29.12.2017 — without issuing any fresh notice under Section 143(2).

Chronological Sequence of Key Events

Legal Issues Framed by the Tribunal

The Tribunal identified the following core legal questions for adjudication:

1. Whether the notice under Section 143(2) issued by ACIT, Circle-21(1), New Delhi — an officer whose jurisdiction had been extinguished by the earlier transfer order dated 08.10.2008 — could be treated as a valid notice in law.
2. Whether the Kolkata AO, who subsequently acquired jurisdiction through the transfer order dated 03.11.2017, could lawfully rely upon such a notice to frame the assessment under Section 143(3).
3. Whether the saving provisions under Section 124(5), Section 127(4), and Section 129 could be invoked to validate the assessment.
4. Whether Section 292BB had the effect of curing the jurisdictional defect in the issuance of the Section 143(2) notice.