Returned Income Above Rs. 20 Lakh Puts Case Beyond ITO Jurisdiction: ITAT Mumbai

Mayur Govindbhai Patel Vs ITO (ITAT Mumbai)

Summary: ITAT Mumbai quashed the reassessment of Mayur Govindbhai Patel for AY 2011-12 after holding that the Income-tax Officer lacked the requisite pecuniary jurisdiction under CBDT Instruction No. 01/2011. The assessee, a non-corporate taxpayer in Mumbai, had returned income exceeding Rs.20 lakh. Under the CBDT Instruction governing allocation of jurisdiction in metropolitan cities, an ITO could exercise assessment jurisdiction over a non-corporate assessee only where returned income did not exceed Rs.20 lakh; cases above that threshold were assigned to ACIT/DCIT. Since the notice and reassessment proceedings were initiated by an ITO, the Tribunal held that the defect went to the root of jurisdiction and the reassessment could not survive.

The reassessment under sections 143(3) read with 147 had resulted in, inter alia, an addition of Rs.14,02,96,481 under section 68, disallowance of interest of Rs.46,09,124 under section 24(b), disallowance of unrealized rent of Rs.2,83,290 and disallowance of municipal taxes. The CIT(A) partly allowed the assessee’s appeal, including deletion of the section 68 addition and unrealized rent disallowance, while upholding the interest disallowance. Both the assessee and Revenue therefore approached the Tribunal.

On jurisdiction, the assessee relied principally upon CBDT Instruction No. 01/2011 and several judicial precedents. The Tribunal examined the Instruction and noted that for non-corporate returns in metropolitan cities, ITO jurisdiction extended only up to Rs.20 lakh, whereas cases exceeding Rs.20 lakh fell within ACIT/DCIT jurisdiction. It relied upon, among others, Principal Commissioner of Income Tax v. Raghvendra Mohta, Principal Commissioner of Income Tax v. Shree Shoppers Ltd., ACIT v. Khadamat Integrated Solutions Private Ltd., ITO v. Svadeshi Enterprises and Amarjeet Singh Bhatia v. ACIT. The Tribunal also observed that the proceedings were not in conformity with the principles laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO & Ors., while the notice under section 143(2) had been issued by an AO not having valid jurisdiction over the assessee.