ORDER
Vimal Kumar, Judicial Member. – The appeal filed by the Assessee is against order dated 18.03.2019 of Learned Commissioner of Income Tax (Appeals)-28, New Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961, [hereinafter referred to as ‘the Act’] arising out of assessment order dated 26.12.2017 of Ld. Assessing Officer/Assistant Commissioner of Income Tax, Circle-70(1), New Delhi for Assessment Year 2015-16.
2. Brief facts of the case are that assessee filed return of income on 30.08.2015 declaring total income of Rs.99,47,310/-. The case was selected under Limited Scrutiny through CASS. Notice u/s 143(2) of the Act dated 19.09.2016 was issued. Notice u/s 142(1) dated 08.08.2017 along with questionnaire was issued to the assessee. Sh. Rajat Barnwal, FCA & AR of the assessee attended the assessment proceedings and filed submissions. On completion of proceedings, Ld. AO vide order dated 26.12.2017 made addition of Rs. 3,92,00,000/- as LTCG. Against order dated 26.12.2017 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was dismissed vide order dated 18.03.2019.
3. Being aggrieved appellant assessee preferred present appeal on following grounds
“1. (i) That the order of the Ld. Commissioner of Income Tax Appeals 28 (hereinafter called CIT (A)) dismissing the appeal is illegal, unjust, opposed to facts and suffers from the vice of arbitrariness.
(ii) That each ground of appeal is an independent ground, without prejudice to each other.
2. That on the facts and circumstances of the case and in law, the Same as order of the CIT (A) is bad in the eyes of law, since, Ld. AO in-spite of being informed that the value assessed by the stamp valuation authority is far in excess of fair market value, did not refer the valuation, in terms of section 50C(2) of the IT Act. The Assessment so framed is illegal and the same be annulled.
3. That on the facts and circumstances of the case and in law, the order of the CIT (A) is bad in the eyes of law, since Ld. AO has adopted the fair market value of stamp valuation authority of Union Territory of Delhi whereas section 50C refers to the value assessed by the authority of State Government and not of Union Territory.
4. That on the facts and circumstances of the case and in law, the order of the Ld. AO and confirmation by CIT A are both bad in the eyes of law, since the assessment has been made under a wrong jurisdiction whereas the assessee being a director of a company, the jurisdiction of the appellant lies with the assessing officer of the company.
5. That on the facts and circumstances of the case and in law, the order of the Ld. AO is bad in the eyes of law, since sufficient opportunity to file explanation against show cause notice dt. 18.12.2017 was not provided. It is a case of miscarriage of justice.
6. That the net income of the appellant be reduced by Rs.3,92,00,000/-.”
4. Through application dated 10.01.2024, assessee pleaded following additional grounds:
“1) That the assessment made by ACIT Circle-70(1) New Delhi is without issue of any valid notice u/s 143(2) is an illegal assessment and the same be annulled. Notice u/s 143(2) dated 19.09.2016 issued by nO Ward-7(1) Kolkata is a notice issued by a non-jurisdictional AO who had no jurisdiction to assess income of Rs. 99,47,310/-.
2) i. That the assessment made u/s 143(3) by ACIT Circle – 70(1) is made by a non-jurisdictional AO. The correct jurisdiction of the appellant falls under the Corporate Charge with ACIT Circle-5 (2) having jurisdiction over the company Crown Timber and Foods Pvt. Ltd. in which the appellant is a director and has drawn salary of Rs. 6,30,000/-.
ii. As per the report of DCIT Circle 70(1), it is confirmed that the jurisdiction was transferred from ITO Ward 7(1) Kolkata, which is also a Corporate Charge and the file was required to be transferred to a Corporate Charge only at Delhi. The assessment made by non-corporate charge ACIT is void-ab-initio and the same be annulled.”
5. Ld. Authorized Representative submitted that Notice u/s 143(2) dated 19.09.2016 (Page No.9 of PB) was issued by the ITO, Ward-7(1), Kolkata who had no jurisdiction over the assessee. As per jurisdictional details page No.25 & 26 of PB. Return of income was filed by the assessee by mentioning address at New Delhi and designation of AO is Ward -7(1), Kolkata. Assessment Order dated 26.12.2017 was passed by Ld. AO/Assistant Commissioner of Income Tax, Circle-17(1), New Delhi. No notice regarding transfer of case from Kolkata to Delhi was given to the assessee.
6. Ld. Departmental Representative submitted that Contentions of DR for Ground No. 2:
1. Validity of Notice Issued Under Section 143(2):
1.1. The notice under Section 143(2) dated 19.09.2016 was issued by the erstwhile AO, ITO, Ward-7(1), Kolkata, within the prescribed time limit as per the Income Tax Act, 1961.
1.2. The issuance of this notice fulfilled the statutory requirement for initiating scrutiny proceedings and provided the foundation for a valid assessment under Section 143(3).
2. No Requirement for Fresh Notice Upon Transfer: [Section 129]
2.1.1. There is no provision in the Income Tax Act mandating the issuance of a fresh notice under Section 143(2) when the jurisdiction of the case is transferred to another AO.
2.1.2. The initial notice remains valid throughout the assessment process, irrespective of the change in jurisdiction or the AO conducting the proceedings.
3. Sufficient Compliance with Procedural Requirements:
3.1. The issuance and service of the initial notice ensured procedural compliance for scrutiny assessment.
3.2. The appellant’s claim of illegality in the assessment process due to non-issuance of a fresh notice is misplaced and has no basis in law.
Contentions of DR for Ground No.3:
1. Compliance with Legal Procedure:
1.1. The procedural requirements under Section 127, including providing an opportunity to the appellant and obtaining all necessary consents, were duly fulfilled
1.2. The order explicitly mentions the details of compliance, ensuring its legality and validity.
2. No Violation of the Appellant’s Rights:
2.1. The appellant was informed about the transfer process and given an opportunity to comply with the procedural requirements.
2.2. Any delay or lapse in filing a signed application by the appellant does not invalidate the legally executed transfer order.
3. Reliance was placed on the judgment of Hon’ble Madras High Court in case of
Advantage Strategic Consulting (P.) Ltd. v.
Pr. CIT [2021] ITR 1 (Mad).
7. From examination of record in light of aforesaid contention, it is crystal clear that Notice u/s 143(2) dated 19.09.2016 was issued by ITO, Ward-7, Kolkata, Page -9 of PB. ITO, Ward-7(1), Kolkata having pecuniary jurisdiction to assess income/loss about Rs.30 Lacs Only.
7.1 A Co-ordinate Bench in case of YKM Holdings (P). Ltd. v. Asstt. CIT [IT Appeal No. 1020 (Delhi) of 2019, dated 29-4-2024] held as under:
“4. We have heard the rival submissions and perused the material available on record. At the outset, we find that the additional grounds raised by the assessee go to the root of the matter challenging the jurisdictional per se. All the facts relevant for its adjudication are placed on record. Hence, in the light of decision of Hon’ble Supreme Court in the case of NTPC Ltd. reported in
229 ITR 383, we are inclined to admit the additional grounds and take up the same for its adjudication.
5. We find that assessee’s returned income for the A.Y. 2015-16 was Rs.37,78,510/ hence, the jurisdiction of the assessee should lie with ACIT/DCIT since the returned income had exceeded Rs.30,00,000/-, in view of the CBDT Instruction No.1/2011 dated 31.01.2011. For the sake of convenience, the said Instruction No.1/2011 [F. No.187/12/2010-IT(A-1)] dated 31.01.2011 is hereby reproduced:-
“SECTION 119 OF THE INCOME-TAX ACT, 1961-INCOME-TAX A UTHORITIES-INSTRUCTIONS TO SUBORDINATE A UTHORITIES
INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-TT(A-T)), DATED 31-1-2011
|
Income Declared |
|
Income Declared (Metro cities) |
|
(Mofussil areas) |
|
|
|
ITOS |
ACS/DCS |
ITOS |
DCS/ACS |
| Corporate returns |
Upto Rs.20 lacs |
Above Rs. 20 lacs |
Upto Rs.30 lacs |
About Rs.30 lacs |
| Noncorporate returns |
Upto Rs.15 lacs |
About Rs. 15 lacs |
Upto Rs.20 lacs |
Above Rs.20 lacs |
References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to IT’Os and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship.
An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under.
Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune.
The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.”
6. In the instant case, the notice under section 143(2) of the Act stood issued to the assessee on 12.04.2016 by ITO Ward 27(4),
Delhi. In July, 2016, the ITO transferred the jurisdiction of the assessee from him to DCIT since the returned income for A.Y. 2015-16 is more than 30,00,000/-. Copy of the said transfer memo is enclosed in page 5 of the paper book. After the transfer of jurisdiction from ITO to DCIT, no fresh notice under section 143(2) of the Act was issued by ACIT, Circle 4(1), Gurgaon. The assessment was ultimately framed under section 143(3) of the Act for A.Y. 2015-16 on 14.12.2017 by ACIT, Circle 4(1), Gurgaon. It is pertinent to note that assessment for the A.Y. 2014-15 of the assessee was completed under section 143(3) of the Act on 30.11.2016 by DCIT, Circle 27(2), New
Delhi. Hence, it was argued that the notice under section 143(2) of the Act dated 12.04.2016 issued by the ITO selecting the return of assessee for A.Y. 2015-16 for scrutiny is without jurisdiction and consequently, the assessment framed under section 143(3) of the Act dated 14.12.2017 required to be quashed as void ab initio. When this was confronted to learned DR, he pointed out to the provisions of section 124(3) of the Act wherein it was mentioned that assessee should challenge within one month about the jurisdiction of the AO on receipt of the notice. In the instant case, nowhere up to learned CIT(A), the assessee has challenged the jurisdiction of the learned AO. In our considered opinion, this argument of the learned DR is wrong in as much as section 124(3) of the Act talks only about territorial jurisdiction, whereas the issue involved here is pecuniary jurisdiction. Further, the provisions of section 124(3) of the Act could be taken shelter by the Revenue only when legal valid notice under section 143(2) of the Act has been issued by the Revenue. In the instant case, notice issued under section 143(2) of the Act on 12.04.2016 by ITO is not legal as he did not possess jurisdiction over the assessee for A.Y. 2015-16 in as much as the returned income for A.Y. 2015-16 had exceeded Rs.30,00,000/-. We find that the issue in dispute is no longer res integra by the decision of Hon’ble
Delhi High Court in the case of
Ashok Devichand Jain v.
UOI reported in
452 ITR 43 (Bom). In this case, very same issue was addressed in the light of CBDT Instruction No.1/2011[F. No.187/12/2010-IT(A-I)] Dated 31.01.2011. For the sake of convenience, the entire order is reproduced hereunder:
“1. Petitioner is impugning a notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2012-13 and order passed on 18th November, 2019 rejecting Petitioner’s objection to reopening on various grounds.
2. The primary ground that has been raised is that the Income Tax Officer who issued the notice under section 148 of the Act, had no jurisdiction to issue such notice. According to Petitioner as per instruction No. 1/2011 dated 31st January, 2011 issued by the Central Board of Direct Taxes, where income declared/returned by any Non-Corporate assessee is up to Rs. 20 lakhs, then the jurisdiction will be of ITO and where the income declared returned by a Non Corporate assessee is above Rs. 20 lakhs, the jurisdiction will be of DC/AC.
3. Petitioner has filed return of income of about Rs. 64,34,663/-and therefore, the jurisdiction will be that of DC/AC and not ITO. Mr. Jain submitted that since notice under section 148 of the Act has been issued by ITO, and not by DC/AC that is by a person who did not have any jurisdiction over Petitioner, such notice was bad on the count of having been issued by an officer who had no authority in law to issue such notice.
4. We have considered the affidavit in reply of one Mr. Suresh G. Kamble, ITO who had issued the notice under section 148 of the Act. Said Mr. Kamble, ITO, Ward 12(3)(1), Mumbai admits that such a defective notice has been issued but according to him, PAN of Petitioner was lying with ITO Ward (12)(3)(1), Mumbai and it was not feasible to migrate the PAN having returned of income exceeding Rs. 30 lakhs to the charge of DCIT, Circle 12(3)(1), Mumbai, as the time available with the ITO 12(3)(1) was too short to migrate the PAN after obtaining administrative approval from the higher authorities by 31st March, 2019.
5. The notice under section 148 of the Act is jurisdictional notice and any inherent defect therein is not curable. In the facts of the case, notice having been issued by an officer who had no jurisdiction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law.
6. In the circumstances, we have no hesitation in setting aside the notice dated 30th March, 2019.
7. Consequently the order dated 18th November, 2019 rejecting Petitioner’s objection is also quashed and set aside.
8. Petition disposed.”
7. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation to hold that the assessment framed under section 143(3) of the Act deserves to be quashed in the instant case as the initial scrutiny notice issued under section 143(3) of the Act dated 12.04.2016 by ITO was without jurisdiction as he did not possess jurisdiction over the assessee for the A.Y. 2015-16. Consequently, assessment framed under section 143(3) of the Act is hereby quashed as void ab initio. The additional ground no.2 is hereby allowed.
8. Since, the entire assessment is quashed the adjudication of original grounds of appeal and other additional grounds become academic in nature and no opinion is hereby rendered thereon and they are left upon.”
7.2 In view of above material facts by following judicial precedents, it is held that assessment order u/s 143(3) dated 26.12.2017 is illegal void ab initio. Accordingly, additional grounds of appeal No.1 & 2 are allowed.
8. Since, grounds of appeal No.1 to 6 have become academic in nature, are left open.
9. In the result, the appeal filed by the assesse is allowed.
