Reassessment Order against NRI Quashed; Regular ITO lacks Jurisdiction over Non-Resident

Issue

Whether a reassessment order passed against a Non-Resident Indian (NRI) is valid if the initial notice under Section 148 was issued by a regular/local Income Tax Officer (ITO) instead of the ITO (International Taxation) who holds the specific jurisdiction over non-residents.

Facts

Assessee Status: Individual, Non-Resident (NRI) for AY 2016-17.
The Action: The ITO, Ward 1(1), Thane (a local jurisdictional officer) observed income escapement of Rs. 64.18 Lakhs.
The Proceedings:
- The Thane ITO issued the show-cause notice under Section 148A(b).
- The assessee replied, explicitly stating his Non-Resident status and furnishing passport details.
- Despite this, the Thane ITO passed the order under Section 148A(d) and issued the reopening notice under Section 148.
The Transfer: Later, the case was transferred to the correct officer, ITO (International Tax), Mumbai, who passed the final assessment order.
The Challenge: The assessee challenged the validity of the proceedings, arguing that the initiation (Section 148 notice) was done by an officer (Thane ITO) who lacked jurisdiction over NRIs.

Decision

Jurisdiction is Fundamental: The Tribunal held that under Section 120/124, jurisdiction over Non-Residents is specifically vested in International Taxation officers. A regular local ITO has no authority to issue notices to an NRI once the status is known or established.
Notice by Wrong Officer: The crucial document—the Section 148 notice—was issued by the Thane ITO. Since he had no jurisdiction over the assessee, the notice was void ab initio.
Uncurable Defect: The fact that the final order was passed by the correct officer (International Tax) does not cure the initial jurisdictional defect of the notice. Section 292BB (deemed service) does not save a notice issued by an officer with no authority.
Ruling: The reassessment proceedings and the final order were quashed in favour of the assessee.

Key Takeaways

Jurisdiction Matters: If you are an NRI, always check who issued your tax notice. If it’s from a local Ward officer (e.g., “ITO Ward 3, Pune”) instead of an “International Taxation” circle, you have a strong ground to challenge the validity of the entire proceeding.

Raise Objection Early: The assessee correctly flagged his NRI status during the 148A proceedings. Ignorance of this objection by the AO proved fatal to the Revenue’s case.

IN THE ITAT MUMBAI BENCH ‘I’

Haseeb Mohammed Iqbal Shaikh

Income-tax Officer(International Taxation)^*

SAKTIJIT DEY, Vice President
and Girish Agrawal, Accountant Member

IT Appeal No. 235 (MUM) of 2025
[Assessment year 2016-17]

NOVEMBER 11, 2025

Nishant Thakkar, Rajesh Poojary and Ms. Jasmin Amalsadwala, Advs. for the Appellant. Krishna Kumar, Sr. DR for the Respondent.

ORDER

Girish Agrawal, Accountant Member.- This appeal filed by the assessee is against the assessment passed under the directions of Dispute Resolution Panel-1, Mumbai, vide order no. ITBA/DRP/F/144C(5)/2024-25/1070521602(1), dated 21.11.2024, passed u/s. 144C(5) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), for Assessment Year 2016-17.

2. Grounds taken by the assessee are reproduced as under:

“1. REASSESSMENT PROCEEDIGNS:

1.1 The Income tax Officer 1 (1), Thane (“the J.A.O.”) erred in passing the order u/s. 148A(d) of the Income tax Act, 1961 (hereinafter referred to as “the Act”) dated 28th March 2023 and issuing notice u/s. 148 of the Act on 29th March 2023 in violation of the provisions of section 151A of the Act read with e-Assessment of Income Escaping Assessment Scheme, 2022.

1.2 It is submitted that in the facts and in the circumstances of the case, and in law, the order passed by the J.A.O u/s. 148A(d) of the Act as well as the notice issued u/s. 148 of the Act by J.A.O. are bad in law and liable to be quashed and set aside.

1.3 The Income tax Officer International Taxation Wd. 4 (2) (1), Mumbai hereinafter referred to as “the A.O”) erred in passing the reassessment order dated 17th December 2024 u/s. 147 read with section 144 C (13) of the Act.

1.4 It is submitted that in the facts and the circumstances of the case, and in law, the reassessment order so passed by the A.O is bad, illegal and void, as mandatory conditions for initiation as well as completion thereof were not fulfilled.

1.5 It is prayed that the reassessment being bad in law ought to be held as null and void.

WITHOUT FURTHER PREJUDICE TO THE ABOVE:

2. ADDITION U/S. 69 OF THE ACT:

2.1 The Hon’ble Dispute Resolution Panel (hereinafter referred to as “the DRP”) erred in directing the A.O. to confirm the addition of Rs. 4,41,000/-to the income of the Appellant u/s. 69 of the Act.

2.2 While doing so, the DRP failed to appreciate that addition was made by the A.O merely on the bases of suspicion, surmises and conjecture

2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.

3. ADDITION U/S. 69A OF THE ACT:

3.1 The DRP erred in not interfering in the findings arrived by the AO in his draft assessment order wherein the AO made an addition of Rs. 22,00,000/- to the income of the Appellant u/s. 69A of the Act.

3.2 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.

4. ADDITION U/S. 56 (2) (vii) (b) OF THE ACT:

4.1 The DRP erred in directing the AO to confirm the addition of Rs. 19,18,104/- as proposed in his draft assessment order to the income of the Appellant u/s. 56(2)(vii)(b) of the Act being the difference between the stamp duty valuation and the valuation as per the agreement for the property purchased by him.

4.2 The DRP while doing so failed to appreciate that the addition made u/s.56(2)(vii)(b) of the Act amounted to double addition, as addition of Rs. 22,00,000/- was made u/s. 69A of the Act alleging that the Appellant had paid Rs. 22,00,000/- in cash for purchase of the property.

4.3 The DRP erred in directing the AO to confirm the addition of Rs. 19,18,104/- as proposed in his draft assessment order to the income of the Appellant u/s. 56(2)(vii)(b) of the Act while doing so the DRP failed to appreciate that the provisions of section 56 (2)(vii)(b) of the Act were not attracted in the facts of the Appellant’s case.

4.4 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.”

3. Assessee has also moved an application dated 13.08.2025 for raising additional grounds which goes to the root of the matter relating to jurisdiction of the officer assumed for invoking the assessment proceeding and passing the assessment order thereafter. Hence, they are admitted. The additional grounds so raised are reproduced for ready reference:

The impugned notice u/s. 148 dated 29^th March, 2023 is time barred and officer has no jurisdiction to issue the notice.

The officer issuing the Impugned notice dated 29^th March, 2023 has no jurisdiction over assessee and therefore the entire proceedings including Impugned notice is bad in law and without jurisdiction.

Final assessment order dated 17^th December, 2024 is barred by limitation.

4. From the draft order passed u/s. 144C(1), it is noted that ld. AO recorded the factual position of assessee being an individual with nonresident status and thus held that he is an eligible assessee within the meaning of section 144C(15)(b)(ii) of the Act. He proposed certain variation in respect of the income returned by him and thus passed the draft order for consideration of the assessee to exercise his option as provided in section 144C(2). Matter went before the ld. Dispute Resolution Panel (DRP) who after taking into consideration the submissions, took note of certain undisputable facts based on the material on record which is reproduced in para 10.1 of the final assessment order dated 17.12.2024 passed in conformity with the directions given by ld. DRP. In the said para 10.1, the undisputable fact recorded are that assessee is a NRI that is non-resident Indian during the year under consideration. He had not filed his return for the year under consideration. Ld. AO resorted to reopening action by issuing notice u/s. 148 dated 21.04.2023 against which assessee filed his return of income and replied in pursuance to show cause notice issued which were considered in the assessment proceedings. In the cause title of the impugned assessment order, the status of the assessee is mentioned as “non-resident”. Since there was escapement of income from assessment to the tune of Rs.64,18,104/- case of the assessee was reopened by applying the provisions of section 147 r.w.s.148 for which a notice was issued u/s. 148A dated 11.02.2023. After completing the requirements of section 148A, order u/s. 148A(d) was passed dated 29.03.2023, culminating into issuance of notice u/s. 148 dated 29.03.2023.

5. The issue raised by the assessee by filing additional ground no. 2 is that notice issued u/s. 148 dated 29.03.2023 is without jurisdiction since the officer who issued the said notice is Income-tax Officer-Ward 1, Thane who had no jurisdiction over the assessee and therefore the entire proceedings including the impugned notice and the assessment order are bad in law and without jurisdiction. In this respect, from the perusal of the notice issued u/s.148A(b) dated 11.02.2023, it is noted that it is from the office of Income-tax Officer-Ward 1(1), Thane. Copy of the same is placed in the paper book at page 1. In response to the said notice, assessee made a written submission dated 09.03.2023 wherein he categorically mentioned in para-1 that his residential status is that of “non-resident” in terms of section 6 of the Act for the year under consideration. He also mentioned his current address being at Unit 2604, A 560 Lonsdale Street, Melbourne, Victoria 3000 Australia. Along with this letter, assessee also furnished copies of his passport giving details of entry and exit dates. Subsequent to this, order u/s. 148A(d) was passed considering the case to be a fit case for taking proceedings u/s. 148 r.w.s.147. Thereafter notice u/s. 148 dated 29.03.2023 was issued which is again from the office of Income-tax Officer-Ward-1(1), Thane. Copy of the said notice is placed in the paper book at page 57. Contention of the ld. Counsel for the assessee is that the reopening proceedings have been initiated by an officer who did not have jurisdiction over the assessee.

6. Subsequent to the invoking of reopening proceedings by issuing notice u/s. 148, the assessment proceedings were completed and the impugned assessment order was passed by the Income-tax Officer (International Tax), Ward 4(2)(1), Mumbai, vide order dated 17.12.2024. It is asserted that the jurisdiction over the assessee was always with International Tax, Ward 4(2)(1), Mumbai who could have issued the notice u/s. 148 by complying with the requirements of section 148A. For this, reference was made to the jurisdictional details downloaded from the portal of the Income-tax Department from the page “know your jurisdictional Assessing Officer” which mentions the jurisdictional details whereby the ‘taxpayer jurisdiction’ specifies ‘International Tax, Ward 4(2)(1), Mumbai‘. Thus, according to the ld. Counsel at the very inception, while assuming jurisdiction for reopening the case of the assessee, the notice has not been issued by the officer having jurisdiction over the assessee, leading to the proceedings and the assessment so made thereunder bad in law and liable to be quashed ab initio. On this legal issue relating to jurisdiction, ld. Counsel placed reliance on the decision of Hon’ble Jurisdictional High Court of Bombay in the case of Nimir Kishore Mehta v. ACIT (Bombay)/[2025] 482 ITR 46 (Bombay) whereby it was held that where an assessee was a nonresident, jurisdiction would lie with Income-tax Officer (International Taxation) and the Income-tax Officer had no jurisdiction to issue notice u/s. 148A(b). He also referred to the decision of Coordinate Bench of ITAT Mumbai in the case of Sanand Sankar Das in Sanand Sankardas v. ITO [IT APPEAL No.1102 (Mum) OF 2025, dated 27-6-2025]/ITA No.1102/Mum/2025 dated 27.06.2025 where on similar factual pattern, the reassessment proceedings initiated by issue of notice u/s. 148 by an officer not having jurisdiction over the assessee was quashed and held in favour of the assessee.

7. Per contra, ld. Sr. DR referred to provisions contained in section 124 to submit that assessee did not raise any objection in the entire reassessment proceedings and hence is precluded from raising this legal issue at the appellate stage.

8. We have heard both the parties and perused the material on record. We have given our thoughtful consideration to the legal issue raised by the assessee through additional ground. The factual position as discussed above is undisputed. Assessee is a non-resident and the jurisdiction was with Income-tax Officer (International Tax) Ward-4(2)(1)1, Mumbai. The impugned assessment order has also been passed by the same officer having jurisdiction over the assessee which is dated 17.12.2024 u/s. 147 r.w.s. 144C(13). In the said impugned assessment order, ld. AO has reproduced the discussion and directions of ld. DRP which mentions about undisputed facts relating to the status of the assessee being non-resident. However, the factual position states that the notice u/s. 148A(b) was issued by the office of Income-tax Officer, Ward-1(1), Thane against which assessee had made his submissions specifying his status as non-resident and also furnished copies of passport along with entry and exit dates. After completing the compliance requirements of section 148A, the same officer, that is, Income-tax Officer, Ward-1(1), Thane issued notice u/s. 148 dated 29.03.2023 after which the assessment proceedings were undertaken and the impugned assessment order was passed not by the said officer but by the officer having jurisdiction over the assessee, that is, Incometax Officer(International Tax),Ward-4(2)(1), Mumbai. We thus note that it is not a case of the Revenue where the Assessing Officer was not aware of the correct status of the assessee being non-resident.

8.1. With regard to applicability of provisions of section 124 for assessee to file an objection, we note that only the Assessing Officer vested with jurisdiction shall have the authority to invoke the proceedings u/s. 148 r.w.s. 147 and in the present case the jurisdiction was with Income-tax Officer (International Taxation) and not the Income-tax Officer, Ward-1(1), Thane. There was no requirement for the assessee to file an objection as contemplated u/s. 124(3) of the Act. We also take note of the provisions contained in section 292BB whereby the said section deals with service of and not the jurisdictional aspect of issuing of notice by the Assessing Officer. Accordingly, where an assessee is in receipt of notice from an officer who was not vested with the jurisdiction over the case of the assessee either u/s. 124(1) or u/s. 127 by way of notification or circular or instruction of Central Board of Direct Taxes (CBDT) then, no obligation would be cast upon assessee to call in question his jurisdiction as per the mandate of subsection (3) of section 124 of the Act.

8.2. We perused the decision of High Court of Bombay in the case of Nimir Kishore Mehta (supra) whereby on similar fact pattern the Hon’ble Court held in favour of the assessee and observed in para 14 that “in the circumstances the fact that petitioner has been filing returns as a nonresident cannot be disputed. The fact that the Income-tax Officer (International Taxation) would be the Assessing Officer who had jurisdiction over the petitioner, cannot be disputed”. While holding in favour of the assessee in para 12, Hon’ble Court referred to decision of Hon’ble High Court of Allahabad in the case of CIT v. M.I. Builders (P.) Ltd. (Allahabad)/[2012] 349 ITR 271 (Allahabad) which held that a notice issued by an officer who did not have jurisdiction over assessee would be invalid.

8.3. Considering the factual matrix as discussed above and the judicial precedence including that of Hon’ble Jurisdictional High Court of Bombay and that of Hon’ble High Court of Allahabad the impugned notice issued by u/s. 148 is without jurisdiction and therefore, is bad in law and liable to be quashed.

8.4. Since the very inception of assuming jurisdiction is held to be bad in law, the impugned assessment proceedings and the subsequent assessment order passed thereafter are also bad in law and liable to be quashed. Accordingly, additional ground raised by the assessee in this respect is allowed. Since we have already held in favour of the assessee by quashing the impugned assessment order itself, all the other grounds raised by the assessee on the merits of the case are rendered academic and therefore not adjudicated upon.

9. In the result, appeal of the assessee is allowed.