Orissa High Court Quashes Section 143(2) Notice for Lack of Jurisdiction — Kalinga Institute of Industrial Technology Vs DCIT

Background and Overview

A significant ruling from the Orissa High Court addresses a fundamental principle of tax administration — that jurisdictional competence is a prerequisite for the valid exercise of assessment powers under the Income Tax Act, 1961. The case of Kalinga Institute of Industrial Technology Vs DCIT serves as a clear reminder that even where an assessment may otherwise be substantively defensible, a notice issued by an authority lacking proper jurisdiction cannot be sustained in law.

The assessee, Kalinga Institute of Industrial Technology, approached the High Court by way of a writ petition challenging multiple proceedings initiated against it for Assessment Year 2014-15, including an assessment order, a demand notice, and a notice under Section 143(2) of the Income Tax Act, 1961.

Facts of the Case

The Impugned Proceedings

The assessee placed the following documents under challenge before the Orissa High Court:

  • Annexure-1 — The assessment order dated 30.12.2016 passed for Assessment Year 2014-15
  • Annexure-2 — The consequential demand notice issued under Section 156 of the Income Tax Act, 1961
  • Annexure-13 — The notice issued under Section 143(2) of the Income Tax Act, 1961

The assessment order in question raised an additional tax demand of ₹24,96,42,960, which the assessee contended was illegal, passed without jurisdiction, and in violation of principles of natural justice.

Grounds of Challenge

The assessee's primary contentions before the Court were threefold:

  1. The entire assessment proceeding was without jurisdiction, as the officer who issued the Section 143(2) notice had no authority over the assessee
  2. The assessment order and the resulting demand were illegal and contrary to law
  3. The proceedings were conducted in violation of natural justice principles, thereby rendering them void

Revenue's Stand and the Affidavit Filed

The Joint Commissioner of Income Tax (OSD) (Exemption), Bhubaneswar, filed an affidavit dated 08.01.2018 in response to the writ petition. The relevant extract from paragraph 9 of the said affidavit reads as under:

"…. Therefore, jurisdiction over the assessee is validly vested with the Circle. Accordingly, having proper jurisdiction over the assessee, the assessment u/s. 143(3) of the IT Act for the Asst. Yr.2014-15 was completed on 30.12.2016 as per provisions of Income Tax Act, 1961 basing on the materials available on record."