Case Law Details
Jigna Chetan Mehta Vs ACIT (ITAT Kolkata)
ITAT Kolkata case, Jigna Chetan Mehta Vs ACIT, delves into the necessity of a valid notice under section 143(2) of the Income-tax Act, 1961, for subsequent assessment proceedings. The case examines whether the absence of such notice could lead to the quashing of these proceedings.
This appeal, filed by the assessee, opposes the order by the CIT(A), NFAC, and the assessment order by ACIT, Kolkata under section 143(3) r.w.s. 147 of the IT Act. The grounds for this appeal include lack of jurisdiction, failure to apply mind, ignoring transaction nature, among others. The assessee’s primary contention is that the ACIT lacked jurisdiction over the assessee, given that the total income was below Rs. 20 lakhs, which should have ideally fallen under the jurisdiction of an Income Tax Officer. It was further contended that the issuing of notices under section 148 and 143(2) by ACIT was invalid, rendering the subsequent assessment liable to be quashed.
Upon examining the arguments and facts, the ITAT agreed with the assessee. The authorities highlighted the essentiality of a valid notice under section 143(2) for subsequent proceedings. The revenue department failed to provide any contrary evidence to refute this claim. As the ACIT had no valid jurisdiction at the time of issuing the notice, the assessment proceedings were consequently quashed. The ruling was consistent with the jurisprudence set by the jurisdictional High Court in the case of PCIT Vs. Shree Shoppers Ltd.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Deli vide Order No. ITBA/NFAC/S/250/2022-23/ 1046206309(1) dated 07.10.2022 passed against the assessment order by ACIT, Circle-33, Kolkata u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 24.12.2019 for AY 2012-13.
2. Grounds raised by the assessee are reproduced as under:
“1. That, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) – NFAC [hereinafter referred to as CIT(A)] erred in confirming the addition made by the Ld. Assessing Officer [hereinafter referred to as A O] for the reason of lack of jurisdiction.
2. That, on the facts and in the circumstances of the case, the Ld. CIT(A) ignored the fact that the Ld. AO failed to apply his mind in reopening the case and hence, the reopening u/s. 147 of the Income Tax Act, 1961 is illegal and the assessment proceeding is void-ab-initio.
3. That, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was wrong in ignoring the fact that the Honourable CIT(A) has given approval u/s 151 of the Act in mechanical manner and hence, the reopening is bad in law and the assessment proceedings is void-ab-initio,
4. That, on the facts and in the circumstances of the case, the Ld. CIT(A) was wrong in ignoring the fact that the Ld. AO completely ignored the nature of transaction of short-term capital gain/ intra-day settlement profit while passing the order.
5. That, on the facts and in the circumstances of the case, the Ld. CIT(A) was wrong in ignoring the fact that the Ld. AO was of pre-conceived notion and ignored the actual facts relating the transaction entered by the assessee for the reason as per reason recorded suspicion was raised related to LTCG/STCL/Business Loss.
6. That, on the facts and in the circumstances of the case, the Ld. CIT(A) was wrong in ignoring the fact that the Ld. AO erred in making addition of Rs. 4,52,242/- u/s 68 of the Act the towards the entire sale proceedings of the alleged scrip despite of the reason that the transactions entered into were out of the purview of the reason recorded for reopening the case and hence, the addition is liable to be deleted.
7. That, on the facts and in the circumstances of the case, the Ld. CIT(A) was wrong in ignoring the fact that the Ld. AO erred in making addition of Rs. 15,767/ – u/ s 69 of the Act alleging commission has paid at the rate of 3 percent of the turnover is totally baseless and liable to be deleted.
8. That the appellant craves to leave, adduce additional grounds and/ or to amend or withdraw any of the foregoing grounds before, or at the time of hearing of appeal.”
3. Assessee has taken additional grounds vide application dated 26.05.2023 placed on record. Additional ground taken by the assessee are reproduced as under:
“1. That, on the facts of the case and in law, the AO lacks jurisdiction over the assessee for the reason the total income of the assessee is below 20 Lakhs and hence, the Assistant Commissioner lacks jurisdiction over the assessee.
2. That the notice u/s. 143(2) of I. T Act, 1961 dated 28.08.2019 issued by the ACIT, Circle 31, Kolkata, without assuming the jurisdiction as per CBDT Instruction No. 1/11, dated 31.1.2011. As per the CBDT Instruction No. 1/11 dated 31.1.2011 the “NON-CORPORATE RETURNS” upto Rs. 20 lacs Income for ITOs in Metro Cities areas from 1.4.2011. The notice u/s. 143(2) of the IT Act, 1961 should/must be issued by the jurisdictional ITO. The action of the ACIT, Circle 31, Kolkata, for issuing the notice u/s. 143(2) is illegal, bad-inlaw and liable to be quashed.”
4. Through the above stated additional grounds taken by the assessee, jurisdiction of the AO to pass assessment order has been challenged in view of the pecuniary limits prescribed for the Income-tax Authorities under CBDT Instruction No. 1/11 dated 31.01.2011. According to the assessee, jurisdictional issue goes to the root of the matter and, therefore, it can be raised at any stage as held by Hon’ble Supreme Court in the case of National Thermal Power Corporation Ltd. 229 ITR 383. On confrontation of these submissions to the Ld. Sr. DR, no objections were raised. Accordingly, we take up the additional grounds for adjudication before considering the grounds taken by the assessee in Form 36.
5. Brief facts of the case are that a notice u/s. 148 dated 03.20 19 was issued on the assessee. Assessee filed its return in response to notice u/s. 148 on 30.04.2019 reporting a total income of Rs.1,38,370/-. Subsequently, notice u/s. 143(2) and 142(1) along with questionnaire were issued and served on the assessee. Reasons to believe for issuing notice u/s. 148 were recorded by the ACIT, Cicle-31, Kolkata and a proposal for approval u/s. 151 of the Act was sent to the concerned Ld. PCIT-11, Kolkata for which approval was received on 30.03.20 19, copy of the same is placed in the paper book at page 15. Subsequently, assessment was framed by Ld. ACIT, Circle-33, Kolkata by passing an order u/s. 143(3) read with section 147 of the Act on 24.12.2019 by assessing total income at Rs.6,04,179/-.
5.1. On the above facts, Ld. Counsel for the assessee, by taking up the additional grounds, submitted that Ld. ACIT lacked jurisdiction over the assessee to take up the assessment proceeding for the reason that the total income of the assessee is below Rs. 20 lakhs and, therefore, ought to have been assessed by the Income Tax Officer and not the Assistant Commissioner of Income Tax. According to him, it is an undisputed fact that returned income of the assessee is Rs.1,38,370/- which is below the threshold of Rs. 20 lakhs as prescribed in CBDT Instruction No. 1/2011 dated 31.01.2011. According to Ld. Counsel, action of ACIT, Circle-31, Kolkata of issuing notice u/s. 148 and 143(2) is bad in law and, therefore, the assessment completed thereafter is liable to be quashed.
6. We have heard the rival contentions and perused the material available on record and find that the issue raised by the Ld. Counsel on the jurisdictional aspect in respect of notice issued u/s. 148 and 143(2) is no longer res integra. It is a settled position of law that for carrying out an assessment proceedings u/s. 143(3) of the Act, statutory requirement of serving a valid notice u/s. 143(2) of the Act is a must and in absence of which the subsequent proceedings become invalid. In the present case before us, it is a fact that assessee has reported total income of Rs.1,38,370/- which is below the threshold of Rs. 20 lakhs prescribed in the CBDT Instruction no. 1/2011 read with revised monetary limit for issuing notice by ITO/DCs/ACs. Through this instruction, it stated that in case of metro cities, in case of non-corporate assessees, declared income up to Rs. 20 lakh, the jurisdiction of such corporate assessee will lie with the Income Tax Officers (ITOs). It is not in dispute that as on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was less than Rs. 20 lakhs and the same was lying with the ITOs but the notice u/s. 143(2) of the Act has been issued by ACIT, Circle-31, Kolkata. It is also a fact that subsequently the assessment has also been framed by ACIT, Circ1e-33, Kolkata. The point in dispute is that on the date of issuing a notice u/s. 143(2) of the Act, whether the ACIT, circle-31, Kolkata was having a valid jurisdiction to issue such notice u/s. 143(2) of the Act. We find that Hon’ble jurisdictional High Court in the recent judgment in the case of PCIT Vs. Shree Shoppers Ltd. in ITAT/39/2023 in IA No.GA/1/2023, dated 15.03.2023 has decided identical issue in favour of the ass essee which is reproduced as under:
“We have heard Ms. Smita Das De, learned standing counsel for the appellant/revenue. Though the respondent has been served and affidavit of service filed, none appears for the respondent:
The short issue which falls for consideration in the instant case is whether there is valid notice issued under Section 143(2) of the Act for commencing the scrutiny assessment. The Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny, the authority who issued the notice namely, the Income Tax Officer, Ward No.9 (4), Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax. The following factual finding has been recorded by the Tribunal :
“Therefore, the legal ground stands to be admitted and the same relates to invalid notice issued u/s. 143(2) of the Act. It is a settled position of law that for carrying out the assessment proceedings u/s. 143(3) of the Act, the statutory requirement of serving of valid notice u/s. 143(2) of the Act is must and in absence thereof the subsequent proceedings become invalid. In the case of assessee, the facts are that the assessee has declared income of Rs.48,47,180/- in the e-return filed on 26.09.2012. For selecting the case for scrutiny notice u/s. 143 (2) of the Act was issued by ITO, Ward-9(4), Kolkata dated 23.09.2013. The Central Board of Direct Taxes (CBDT vide Instruction No.1/2011 supra) revised the monetary limit for issuing notice by ITO/DCs/ACs. Through this instruction it stated that in case of metro cities in case of corporates declare income above Rs.30 lakh the jurisdiction of such corporate assessee wi11 lie with the DCs/ACs. It is not in dispute that as on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs.30 lakhs and the same was lying with the DCs/ACs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward-9 (4), Kolkata. It is true that subsequently the assessment has been framed by DCIT, Circle-9 (2), Kolkata but the point in dispute is that on date of issuing a notice u/s. 143(2) of the Act, whether the ITO, Ward- 9(4), Kolkata was having a valid jurisdiction to issue such notice u/s. 143(2) of the Act.”
The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee’s appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable s it goes to the root of the matter.
Thus, we find no ground to differ with the findings recorded by the learned Tribunal.
In the result, the appeal filed by the revenue (ITAT/39/2023) is dismissed and the substantial questions of law are answered against the revenue.”
7. Thus, from the perusal of the findings given by Hon’ble jurisdictional High Court and from the examination of facts of the present case, we find that the aforesaid judgment of the Hon’ble High Court is squarely applicable on the facts of the present case. We thus, unhesitatingly hold that ACIT, Circle-31, Kolkata had no valid jurisdiction over the assessee on the date of issuing notice u/s. 143(2) of the Act. Revenue has not controverted this fact by placing any other contrary material on record to indicate otherwise. Since a valid notice u/s. 143(2) has not been issued, the assessment proceedings carried thereafter deserves to be quashed. We, therefore, respectfully following the ratio laid down by Hon’ble jurisdictional High Court in the case of PCIT Vs. Shree Shoppers Ltd. (supra), allow the additional grounds raised by the assessee and quash the assessment proceedings completed u/s. 143(3) r.w.s 147 of the Act.
Since we have quashed the assessment proceedings, the grounds relating to the merits of the case are rendered mere academic in nature and are, therefore, not adjudicated upon. Accordingly, the appeal of the assessee is allowed.
6. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 23rd June, 2023.
