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A show cause notice issued by an Authority lacking jurisdiction is invalid

In M/s Indira Industries vs. PCIT, the assessee filed a return for the year 2012-2013 under Section 139 of Income Tax Act, 1961. Subsequently, the revenue issued a notice to the assessee under Section 148 of IT Act. The revenue wanted to open a re-assessment for the said year, on the grounds that the interest on loan amount shown to be paid to the bank was diverted by the assessee to its partners. The assessee challenged the re-assessment contending that the notice was issued after expiry of 2 years, which was not permissible.

The High Court considered the submissions made on behalf of the parties and perused Section 148 of the IT Act. The Court noted that read with Section 263(2), a notice of re-assessment under Section 148 could have been issued only within a time period of two years from the date of the scrutinization of the original assessment. Holding the said notice to be a show cause notice, the High Court observed, principles and grounds available for assailing a show cause notice are well settled. It the authority issuing the show cause notice lacks jurisdiction and if it is clearly barred by law, it renders the show cause notice invalid in law. The Court held that the show cause notice issued in this case was issued beyond the statutory period of two years which was clearly barred by law. Accordingly, the writ appeal was allowed. 

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