Case Law Details
K.A. Wires Ltd Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal, Kolkata Bench, considered the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2012-13. The assessee, engaged in the business of zinc manufacturing, had filed its return declaring a loss. The Assessing Officer completed the assessment under Section 143(3) of the Income-tax Act, 1961, determining positive income after making an addition under Section 68 in respect of share capital and share premium received from three associate companies. The Commissioner (Appeals) upheld the assessment, leading to the present appeal.
Before the Tribunal, the assessee sought admission of an additional ground challenging the validity of the assessment on the basis that no valid notice under Section 143(2) had been issued by the Assessing Officer having jurisdiction over the assessee within the prescribed time. The assessee submitted that its jurisdiction had always remained with ITO, Ward-8(3), Kolkata, while the notice under Section 143(2) dated 06.08.2013 had been issued by ITO, Ward-33(1), Kolkata, who did not have jurisdiction over it. The assessee further contended that there had been no change in its address, PAN details or jurisdiction during the relevant and surrounding assessment years, and that all returns had been filed before the jurisdictional officer. On merits, it was also submitted that all investments were made by group companies and documents establishing identity, creditworthiness and genuineness had been furnished.
The Revenue argued that the assessee ought to have challenged jurisdiction within the period prescribed under Section 124(3) of the Act after receipt of the notice. It also relied upon the transfer of the case to ITO, Ward-8(3) and submitted that matters involving additions under Section 68 were generally remanded for fresh adjudication. The assessee replied that Section 124(3) applies only where the officer issuing the notice already possesses jurisdiction and not where the officer inherently lacks jurisdiction, rendering the proceedings void ab initio.
The Tribunal examined the record and found that the assessee’s address and jurisdiction had remained unchanged throughout the relevant years and that the jurisdiction always vested in ITO, Ward-8(3), Kolkata. It noted that although ITO, Ward-33(1), Kolkata had issued the notice under Section 143(2), the file was subsequently transferred to ITO, Ward-8(3), who completed the assessment without issuing a fresh notice under Section 143(2). The Tribunal identified the principal issue as whether failure of the Assessing Officer having jurisdiction to issue the mandatory notice under Section 143(2) rendered the assessment invalid.
After examining Sections 120 and 124 of the Income-tax Act and the CBDT notification governing territorial jurisdiction, the Tribunal held that jurisdiction is conferred only through notifications or orders issued under Section 120. It observed that the assessee’s case fell within the jurisdiction of ITO, Ward-8(3), Kolkata under the applicable CBDT notification and that concurrent jurisdiction could exist only where specifically conferred under Sections 120(4) and 120(5). Since no such notification or order conferred jurisdiction on ITO, Ward-33(1), that officer could not validly issue notice under Section 143(2). The Tribunal further held that the Department’s internal processing or transfer of returns could not confer jurisdiction where none existed under the Act.
The Tribunal rejected the Revenue’s contention based on Section 124(3), observing that the provision concerns challenges to jurisdiction where jurisdiction has already been vested in the officer, whereas in the present case the officer issuing the notice had never been vested with jurisdiction. It also observed that transfer of the file from ITO, Ward-33(1) to ITO, Ward-8(3) demonstrated that the former did not possess jurisdiction. The Tribunal referred to decisions including Rungta Irrigation Ltd., Smriti Kedia, Indorama Software Solutions Ltd., Mahalchand Motilal Kothari & Co., and other authorities while examining the issue of jurisdiction.
The Tribunal ultimately held that the Assessing Officer having jurisdiction, namely ITO, Ward-8(3), Kolkata, had not issued the mandatory notice under Section 143(2). Consequently, the assessment framed under Section 143(3) was held to be bad in law and was quashed. Having quashed the assessment on this legal ground, the Tribunal declined to examine the merits of the addition under Section 68, observing that doing so would be academic. The assessee’s appeal was allowed.
Cases Discussed:
- ACIT & Anr. Vs. Hotel Blue Moon, 321 ITR 362 (SC).
- Rungta Irrigation Ltd., ITA No. 1224/Kol/2019 dated 06.09.2019.
- Smriti Kedia, Calcutta High Court, 339 ITR 37.
- Indorama Software Solutions Ltd., Mumbai Bench, ITA Nos. 5211 & 5290 (Mum) of 2011 dated 07.09.2012.
- Mahalchand Motilal Kothari & Co., ITA Nos. 1851/1852/Kol/2002, ITAT Kolkata, dated 28.07.2006.
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