Case Law Details
Soma Roy Vs ACIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata, considered an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals), Durgapur, for Assessment Year 2015-16. The assessee had originally declared total income of ₹18,35,410, while the assessment under Section 143(3) determined income at ₹31,05,410 after making an addition of ₹12,70,000 under Section 68 on account of unexplained cash deposits. The assessee challenged the addition and also sought permission to raise an additional legal ground questioning the validity of the assessment on jurisdictional grounds.
The Tribunal admitted the additional ground, holding that it raised a pure legal issue relating to jurisdiction that did not require further investigation of facts. The assessee contended that under CBDT Instruction No. 1/2011 dated 31 January 2011, jurisdiction over her case vested with the Assistant Commissioner of Income Tax (ACIT) because she was a non-corporate assessee whose returned income exceeded ₹15 lakh. However, the statutory notice under Section 143(2) had been issued by the Income Tax Officer (ITO), Ward-1(1), Durgapur, who, according to the assessee, lacked jurisdiction. Although the assessment order was eventually passed by the ACIT, no notice under Section 143(2) had been issued by the jurisdictional Assessing Officer within the statutory time.
The Revenue argued that the ITO and the ACIT had concurrent jurisdiction and therefore the assessment could not be annulled merely because the notice under Section 143(2) had been issued by the ITO while the assessment was completed by the ACIT. It was also contended that the assessee had not objected to the notice before the jurisdictional authority and that Section 292BB of the Income-tax Act cured any defect.
The Tribunal examined the facts and found that the notice under Section 143(2) had been issued by the ITO and that the case was subsequently transferred to the ACIT. However, after the transfer, the ACIT, who had jurisdiction over the assessee, did not issue a notice under Section 143(2) within the prescribed period before completing the assessment under Section 143(3).
The Tribunal relied upon its earlier decision in Shri Sukumar Ch. Sahoo, which held that CBDT Instruction No. 1/2011 allocates pecuniary jurisdiction based on returned income and that issuance of a valid notice under Section 143(2) by the jurisdictional Assessing Officer is a mandatory prerequisite for a valid assessment. The Tribunal also referred to Krishnendu Chowdhury, where a notice issued by an officer lacking jurisdiction was held invalid, and to the Calcutta High Court decision in West Bengal State Electricity Board, recognising that a jurisdictional issue can be raised for the first time before the Tribunal. It further relied on the Supreme Court decision in CIT vs. Laxman Das Khandelwal, which held that Section 292BB cures only defects in service of notice and does not cure the complete absence of a valid statutory notice.
Applying these principles, the Tribunal held that the Assessing Officer having jurisdiction over the assessee had not issued the mandatory notice under Section 143(2). A notice issued by an officer lacking jurisdiction was held to be null and void, and Section 292BB was held to be inapplicable in such circumstances. Having concluded that the assessment was invalid for want of a valid jurisdictional notice, the Tribunal allowed the assessee’s appeal without adjudicating the remaining issues on merits.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) – Durgapur, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 25/01/2019, for the Assessment Year 2015-16.
2. The assessee is an individual and has filed her return of income for the Assessment Year 2015-16 on 31/10/2015, declaring total income of Rs.18,35,410/-. The assessment was completed u/s 143(3) of the Act on 26/01/2017 determining total income of Rs.31,05,410/- interalia making an addition of Rs.12,70,000/-, on the ground that the cash deposits in the bank account were not explained. Hence these cash credits and added u/s 68 of the Act. Aggrieved the assessee carried the matter in appeal without success.
3. Further aggrieved the assessee is in appeal before me, disputing the addition made u/s 68 of the Act.
4. The assessee filed an additional ground of appeal. The application for admission of additional ground, reads as follows:-
“1. That your appellant had preferred the instant appeal being aggrieved by the appellate order passed by the Ld, Commissioner of Income Tax (Appeals) Durgapur who was pleased to uphold the purported action of the Ld. Assistant Commissioner of Income Tax, Circle 1, Du gapur in the assessment order framed u/s. 143(3 of the Income Tax Act, 1961 on erits.
2. That though verbal arguments on the validity of the assessment order fra ed ujs. 143(3) of the Act were advanced before the Ld. Commissioner of Inco me Tax (Appeals) Durgapur. However in the Grounds of Appeal, no specific ground behalf was urged up befo re him for adjudication. Accordingly, your appella the leave of your Honour wishes to raise the following grounds as under: –
“1. FOR THAT in the facts and circumstances of the instant case, Commissioner of Income Tax (Appeals) Durgupur acted unlawfully in not appreciating that the conditions precedent for issuance o notice u/s. 143(2) of t e Income Tax Act; 1961 was not complied with and/or fulfilled for the Ld Assistant Commissioner of Income Tax, Circle 1, Durgapur in passing the assessment order u/s. 143(3) of the ncome Tax Act; 1961 and his purported findings 011 that beh lf are absolutely is ab initio void ultra vires and null in law”
3. That due to lack of legal opinion, the aforesaid ground was raised before the Ld. Commissioner of Income Tax (Appeals) Durgapur. In fact, the aforesaid Ground is purely legal in nature an goes to the root of the matter and as such. leave to argue the ground may please be granted in this regard.
4.That your appellant h strongly favours your ap ground. Your appellant was a strong prima facie case. The balance of convenience ellant in passing an order of admission of the additional ll suffer irreparable injury if the prayer is refused.”
5. After hearing rival co ntentions, I admit this additional ground s it is a legal ground, raising a jurisdictio nal issue and does not require any inves tigation into the facts. The ld. Counsel for the assessee submitted that as per Board Instruction No. 1/2011 [F. No. 187/12 2010-IT(A-I)], dt. 31/01/2011, the juris iction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non-corporate assessee and the income return ed is above Rs.15,00,000/- and whereas , the statutory notice u/s 143(2) of the Ac t, was issued on 29/09/2016, by the In come Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He s ACIT, Circle-1(1), Durgapur, not issued the notice u/s 14 under the Act. Thus, he sub
5.1. On merits, he rebutt for the assessee relied on c when necessary.
6. The ld. D/R, on the vests with the ITO as wel ubmitted that the assessment order was p assed by the who had the jurisdiction over the assesse e, but he had 3(2) of the Act, within the statutory perio d prescribed its that the assessment is bad in law. the findings of the lower authorities. Th e ld. Counsel ertain case-law, which I would be referri ng to as and annulled simply because th e statutory notice u/s 143(2) of the Act, was issued by the ITO and the assessment was completed by the ACIT. He further su bmitted that the assessee did not object t o the issue of notice before the jurisdictio al Assessing Officer and even otherwise, Section 292BB of the Act, comes into play and the assessment cannot be ann lled. On merits, he relied on the orders of the lower authorities.
7. I have heard rival c ontentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, o ders of the authorities below as well as case law cited, I hold as follows:-
8. I find that there is no dispute in the fact that the notice u/s 143 (2) of the Act ssued by the ITO, Wd-1(1), Durgapur. Later, the case sdiction of the ACIT on 11/08/2017. T ereafter, no was issued by the Assessing Officer having jurisdiction completed the assessment on 26/12/2017 i.e., ACIT, er these circumstances, the question is whether the Act.
9. This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in ITA No. 2073/Kol/2016 order dt. 27.09.2017, held as follows:-
“5. From a perusal of he above Instruction of the CBDT it is eviden t that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect t the ‘non corporate returns’ filed where income declared is only upto Rs.15 lacs ; and theITO doesn’t have the ju risdiction to conduct assessment if it is above R 15 lakhs. Above Rs. 15 lacs inco e declared by a non- corporate person i.e. lik assessee,the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individua (non corporate person) who undisputedly declared income of Rs.50,28,040/- in his return of income cannot be assessed y the ITO as per the CBDT circular (supra). From a perusal of the assessment order, it reveals that the statut ry notice u/s. 143(2) of the Act was issued b the then ITO, Ward-1, Haldia on 06.09.2013 and the same was served on the assessee on 19.09.2013 as noted by the AO. The AO noted that since the returned income is more than Rs. 15 lacs the case was transferred from the ITO, Ward-1, Haldia to ACIT, Circle-27 and th same was received by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of the Act on the same day. From the aforesaid facts the following facts emerged:
i) The assessee had filed return of income declaring Rs.50,28,040/-. The ITO issued notice under sec ion 143(2) of the Act on 06.09.2013.
ii. The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014
iii. On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle 27,Haldia.
6. We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total i come of Rs.50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an ind vidual which falls under the category of ‘non corporate returns’ the ITO’s increased monetary limit was upto Rs.15 lacs; nd if the returned income is ab ve Rs. 15 lacs it was the AC/DC. So, since th returned income by assessee an individual is above Rs.15 lakh, then the jurisdiction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only he AC/DC had the jurisdiction to assess the assessee. It is settled law that servin of noticeu/s. 143(2) of the Act isa sine qua non for an assessment to be made u/s. 143(3) notice u/s. 143(2) of the Act was issued on 06.0 9.2013 by en he did not have the pecuniary jurisdiction t o assume otice. Admittedly, when the ITO realized that he did not diction to issue notice he duly transferred the file to the on 24.09. 2014 when the ACIT issued statut ory notice ime limit prescribed for issuance of notice u/s. 143(2) of the ACIT by assuming the jurisdiction after the time of notice u/s. 143(2) of the Act notice becam e qoarum non judice after the limitation prescribed by the statute was crosse d by him. Therefore, the issuance of notice by the ACIT, Circle-27, Haldia after the limitation period for iss uance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law and consequential assessment order passed u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law. Therefore, the legal issue raised by the ass essee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.
7. In the result, appeal f assessee is allowed.
9.1. This Bench of the T ribunal in the case of Krishnendu Chow hury vs. ITO reported in [2017] 78 taxma nn.com 89 (Kolkata-Trib.) held as follows:-
“Return of income o assessee was Rs. 12 lakhs – As per CBD T instruction, jurisdiction for scrutiny assessment vested in Income-tax Offic r and notice under section 143(2) must be issued by Income-tax Officer, Ward-I, Haldia and none other – But, notice was issued by Asstt. Commissioner, Circle Haldia muchafter CBDT’s instruction and knowing fully well that he had n over assessee – Whet er, therefore, notice issued by Asstt. Como jurisdiction issioner was invalid and consequently assessment framed by Income-tax Officers becomes void since issue of n tice under section 143(2) was not done by Income-tax Officers as specified i CBDT instruction No. 1/2011.”
9.2. The Hon’ble High ourt of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range – I, reported in [2005] 278 ITR 218 (Cal.) has held as follows:-
“Section 254 of the Income-tax Act, 1961 – Appellate Tribunal – Powers f – Assessment years 1983-84 to 1987-88 – Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for fi st time beforeonce a particular jurisdiction is created, same must be prospective and cannot beof action but on date when it is initiated – Held,dependent on yes – WhetherTribunal – Held, yesWh date of accrual of cause retrospective and it has to be interpreted having regard to manner in which it has been sought to be creat d – Held, yes – Assessee”
9.3. The Hon’ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal[2019] 108 taxmann.com 18 (SC), held as follows:-
“7. A closer look at Sec tion 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be serve upon was duly served and the assessee ould be precluded from taking any objections tha the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Adv cate, since the Respondent had participa ted in the proceedings, the provisions of Section 292BB would be a complete answer.
On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further sub mitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
8.The law on the point s regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon’s case (s upra). The issue that however needs to be considered is the impact of Section 292BB of the Act.
9. According to Section 292BB of the Act, if the assessee had participated in he proceedings, by way of legal fiction, n otice would be deemed to be valid even if there b e infractions as detailed in said Section. The scope of the provision is to make service of notic having certain infirmities to be proper a nd valid if there was requisite participation on part of the assessee.
from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further sub mitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absen e of such notice, the entire proceedings would be in alid.
8. The law on the point s regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon’s case (s upra). The issue that however needs to be considered is the impact of Section 292BB of the Act.
9. According to Section 2 2BB of the Act, if the assessee had participated in he proceedings, by way of legal fiction, n otice would be deemed to be valid even if there b e infractions as detailed in said Section. The scope of the provision is to make service of notic having certain infirmities to be proper a nd valid if there was requisite participation on part of the assessee.
On the other hand, Mr. A submitted that the notice Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. T e Section is not intended to cure complete absence of notice itself.”
10. Respectfully followin law and applying the same order is bad in law for the over the assessee, has not i statute. Notice issue by the void. When a notice is issue g the propositions of law laid down in al to the facts of the case, we hold that th reason that the Assessing Officer havin sued a notice u/s 143(2) of the Act as re fficer having no jurisdiction of the assess the Act, does not comes into play. Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, i a of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Office r makes the assessment bad in law. Un der these circumstances, we allow this a ppeal of the assessee.
11. In the result, appeal f the assessee is allowed.
Kolkata, the 8th day of January, 2020.
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