Assessment Void if 143(2) Notice Issued by Wrong AO: ITAT Mumbai Quashes Order in Vinod Ramnath Rao Case

 

In a significant ruling on jurisdictional validity of scrutiny assessments, the Mumbai Bench of the Income Tax Appellate Tribunal has held that an assessment under Section 143(3) cannot survive where the statutory notice under Section 143(2) was issued by an officer lacking jurisdiction and no valid notice was issued by the competent Assessing Officer within the limitation period.

In Vinod Ramnath Rao vs ITO (ITA No. 1987/Mum/2025, AY 2013-14), the Tribunal declared the entire assessment void ab initio, reiterating that issuance of a valid notice under Section 143(2) by the correct jurisdictional officer is a foundational requirement for a lawful scrutiny assessment.

Facts of the Case

The assessee’s address fell within the jurisdiction of ITO-28(3)(4), Navi Mumbai.

However, the only notice under Section 143(2) was issued on 03.09.2014 by ITO-21(3)(2), Mumbai, who did not have jurisdiction over the assessee. Subsequently, the records were transferred to the correct Assessing Officer, confirming that the earlier officer lacked authority.

The statutory deadline for issuing a valid notice for AY 2013-14 expired on 30.09.2014. The jurisdictional officer did not issue any fresh notice within this time.

Despite this defect, the assessment was completed under Section 143(3).

Issue Before the Tribunal

The key question before the Tribunal was:

Can an assessment survive where the only 143(2) notice was issued by a non-jurisdictional officer and no valid notice was issued within limitation by the competent AO?

The Tribunal answered this firmly in favour of the taxpayer.

Tribunal’s Findings

The ITAT held that the requirement of issuing a valid notice under Section 143(2) by the competent Assessing Officer is mandatory and goes to the root of jurisdiction.

The Bench observed:

• The notice issued by the Mumbai officer was without authority
• Subsequent transfer of the case confirmed the lack of jurisdiction
• No valid notice was issued by the jurisdictional AO within limitation
• Participation of the assessee does not cure the defect
• A scrutiny assessment without a valid notice is legally unsustainable

Accordingly, the Tribunal quashed the entire assessment as void from inception.

Section 124(3) Cannot Save the Assessment

The department argued that the assessee had not raised jurisdictional objection earlier and therefore Section 124(3) should apply.

The Tribunal rejected this argument, clarifying that Section 124(3) deals with territorial jurisdiction disputes and cannot validate an assessment where the foundational statutory notice itself is invalid.

In absence of a valid 143(2) notice, the assessment lacks legal authority altogether.

Legal Principle Emerging from the Ruling

The decision reinforces a settled but often litigated principle:

A valid 143(2) notice from the correct Assessing Officer within limitation is the foundation of scrutiny jurisdiction.

If this requirement fails:

• The entire assessment collapses
• Participation of the assessee does not validate proceedings
• Transfer of jurisdiction later does not cure the defect
• Merits of additions become irrelevant

This makes jurisdictional review the first step in defending scrutiny cases.

Why This Ruling Matters for Taxpayers and Professionals

Such situations frequently arise where notices are issued by one officer and later transferred to another. Many assessments proceed without examining whether the original notice itself was valid.

This ruling confirms that:

• Correct jurisdiction at notice stage is essential
• Limitation period is strictly enforced
• Administrative transfer cannot substitute a valid notice
• Jurisdictional defects remain one of the strongest litigation grounds

For professionals, checking the issuing authority of the 143(2) notice should be standard practice in scrutiny cases.

Conclusion

The ITAT Mumbai decision in Vinod Ramnath Rao vs ITO reaffirms that scrutiny assessments stand on the strength of a valid statutory notice.

Where the only notice is issued by an officer lacking jurisdiction and the competent AO fails to issue a valid notice within time, the assessment cannot survive in law.

In tax proceedings, authority to act must exist from the very beginning — because without a valid notice, there is no valid assessment.

 

 

The copy of the order is as under:

1769084470-fvUqtb-3-TO