ITAT Kolkata Quashes Assessment in K.A. Wires Ltd. Vs ITO: Mandatory Section 143(2) Notice by Jurisdictional Officer is Non-Negotiable

Overview of the Dispute

The Income Tax Appellate Tribunal (ITAT), Kolkata, delivered a significant ruling in K.A. Wires Ltd. Vs ITO (ITAT Kolkata), holding that an assessment completed under Section 143(3) of the Income Tax Act, 1961, was legally unsustainable because the mandatory notice under Section 143(2) was issued by an officer who had no jurisdiction whatsoever over the assessee. The Tribunal allowed the assessee's appeal in its entirety, quashing the assessment and declining to enter into the merits of additions made under Section 68.

This ruling carries far-reaching implications for assessees across India, reinforcing the foundational principle that jurisdictional authority in income tax proceedings is a creature of statute and cannot be assumed, waived, or informally conferred.

Background Facts

The assessee, K.A. Wires Ltd., a company engaged in the manufacture of zinc products, filed its return of income electronically for Assessment Year 2012-13 on 07/09/2012, declaring a loss of Rs.(-)Rs.37,99,257/-. Following scrutiny, the Assessing Officer framed an assessment under Section 143(3) on 30/03/2015, determining taxable income at Rs.1,02,00,743/-.

Among the key additions made were:

  • An addition of Rs.1.40 crore under Section 68 of the Income Tax Act, 1961, representing share capital and share premium received from three associate companies
  • A protective addition of Rs.40,00,000/- made in the hands of intermediary companies

The Commissioner of Income Tax (Appeals) upheld the assessment order in its entirety, and the assessee thereafter approached the Tribunal.

Before the Tribunal, the assessee pressed an additional legal ground — one that cut to the root of the entire assessment proceedings:

"For that the assessment is bad in law since no valid notice u/s 143(2) was issued by the Assessing Officer, who was vested with the jurisdiction to issue notice within due time allowed under the law and as such the entire proceedings are bad in law and the assessment is liable to be quashed."

The Factual Matrix on Jurisdiction

The undisputed facts placed before the Tribunal were as follows:

  • The assessee's address had remained entirely unchanged across Assessment Years 2010-11, 2011-12, 2012-13, and 2013-14
  • Returns for all years — prior, relevant, and subsequent — were filed before ITO, Ward-8(3), Kolkata
  • The PAN Card of the assessee reflected the same address throughout
  • The notice under Section 143(2) dated 06/08/2013 was issued by ITO, Ward-33(1), Kolkata — an officer who never had jurisdiction over the assessee company
  • The file was thereafter transferred from ITO, Ward-33(1) to ITO, Ward-8(3), Kolkata on 03/02/2014
  • ITO, Ward-8(3), Kolkata, upon receiving the file, issued notice under Section 143(1) on 10/10/2014 and completed assessment under Section 143(3) on 30/03/2015 — without ever issuing a fresh notice under Section 143(2)

Arguments Advanced by Both Sides

Assessee's Contentions

The assessee's counsel argued the following:

  1. Jurisdiction was never vested in ITO, Ward-33(1), Kolkata, over the assessee company at any point in time
  2. ITO, Ward-8(3), Kolkata was the sole jurisdictional officer in accordance with CBDT notifications issued under Section 120 of the Income Tax Act, 1961
  3. Since the jurisdictional officer never issued a notice under Section 143(2), the assessment itself was void ab initio
  4. Section 124(3) of the Income Tax Act, 1961, which prescribes a time limit for challenging jurisdiction, applies only where an officer already possesses jurisdiction — not where inherent jurisdiction is absent altogether
  5. Any act performed by an officer lacking inherent jurisdiction cannot be ratified, waived, or condoned, regardless of the assessee's participation in proceedings

Revenue's Contentions

The Departmental Representative advanced the following arguments: