CA Rohan Sogani & Tanishka Gupta – [2026] 182 taxmann.com 247 (Article)
Imagine receiving an income tax notice, diligently responding to queries, attending hearings, and then discovering – after the assessment is complete – that the officer who assessed you had no authority to do so in the first place. Can the entire assessment be nullified? The answer lies in understanding Section 124 of the Income Tax Act, 1961, and more critically, the timelines prescribed therein for raising such objections. This article examines the significance of jurisdictional challenges, the mechanism provided under the law, and the consequences of failing to act within the stipulated time.
Why Does Jurisdiction of the Assessing Officer Matter?
The validity of any assessment order fundamentally depends on the authority of the officer passing it. An assessment, howsoever meticulously conducted, stands on weak legal ground if the officer lacked the jurisdiction to undertake it in the first place. An assessment order passed by an officer lacking jurisdiction is essentially an act performed without authority.
Section 124(3): The Mechanism for Challenging Jurisdiction
Upon receipt of any notice under the Income Tax Act, the first step for an assessee should be to verify whether the issuing officer has jurisdiction over the case. If there is any doubt regarding the officer’s authority, Section 124(3) provides the mechanism to challenge the same. However, this right is not unlimited – it must be exercised within strict timelines failing which the right is forfeited.
Section 124(3) operates as a statutory bar, prescribing strict timelines beyond which an assessee loses the right to question jurisdictional authority. The legislative intent, as consistently upheld by courts, is to prevent belated challenges that could disrupt the orderly conduct of assessment proceedings. Without such a provision, assessees could potentially raise jurisdictional objections at any stage, including appellate proceedings, thereby rendering the entire assessment machinery inefficient and inconclusive.
Timeline for Challenging Jurisdiction under Section 124(3)
The provision contains three distinct clauses addressing different scenarios:
Clause (a) applies where a return has been filed under Section 139 – the assessee cannot question jurisdiction after the expiry of one month from service of notice under Section 142(1) or 143(2), or after completion of assessment, whichever is earlier.
Clause (b) governs cases where no return has been filed – the bar operates after expiry of time allowed in notice under Section 142(1) or 148, or after notice under the first proviso to Section 144 to show cause why assessment should not be completed to the best judgment of the Assessing Officer, whichever is earlier.
Clause (c), inserted by Finance Act 2016 with effect from 1st June 2016, specifically addresses search cases under Sections 132 or 132A – the bar operates after the expiry of one month from the date of service of notice under Section 153A(1) or Section 153C(2), or after completion of the assessment, whichever is earlier.
Consequences of Not Challenging Jurisdiction in Time
The Hon’ble Supreme Court’s pronouncement in DIT (Exemption) v. Kalinga Institute of Industrial Technology [2023] 151 taxmann.com 434/293 Taxman 493/494 ITR 582 represents the most authoritative exposition of Section 124(3). In this landmark case, the Hon’ble Orissa High Court had set aside assessment notices on jurisdictional grounds, ruling in favour of the assessee. However, the Hon’ble Supreme Court reversed this decision, holding that where an assessee participates in proceedings pursuant to notice under Section 142(1) without questioning the Assessing Officer’s jurisdiction, such participation constitutes implied acceptance of jurisdiction. The Hon’ble Apex Court emphasized that Section 124(3)(a) precludes the assessee from raising jurisdictional objections if not done within thirty days of receiving the notice. This judgment firmly establishes that procedural participation without timely objection amounts to waiver of the right to challenge jurisdiction.
The Hon’ble Karnataka High Court in Adarsh Developers v. DIT [2024] 158 taxmann.com 81 reinforced this principle, holding that where an assessee, after service of notice under Section 143(2), files response and participates in proceedings culminating in an assessment order, they cannot subsequently challenge the Assessing Officer’s jurisdiction. The court observed that if the right to question jurisdiction remained open indefinitely, proceedings would remain perpetually inconclusive, defeating the legislative purpose.
Similarly, in Subhash Chander v. CIT [2008] 166 Taxman 307, the Hon’ble Punjab & Haryana High Court clarified that the mandate under Section 124(4) for reference to higher authorities arises only when a timely objection is raised; absent such objection, the right stands forfeited.
Procedure When Timely Objection is Raised: Section 124(4)
When an assessee does raise a timely jurisdictional objection, Section 124(4) prescribes the procedure to be followed. The Assessing Officer must examine the objection and, if not satisfied with its correctness, refer the matter to the PDGIT, DGIT, PCCIT, CCIT, PCIT, or CIT for determination. Crucially, such reference must be made before the assessment is completed.
In CIT v. S.S. Ahluwalia [2014] 46 taxmann.com 169/225 Taxman 131 (Delhi)(Mag.) , the Hon’ble Delhi High Court held that an assessment order passed without making such reference is not a nullity but an irregularity that can be rectified by remand.
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