Income Tax Jurisdiction Defect: ACIT Cannot Issue 148 Notice Below ITO’s Prescribed Monetary Limit

Chinmoy Mondal Vs ACIT (ITAT Kolkata)

ACIT Playing in ITO’s Playground? Reassessment Sent Back for Being ‘Overqualified’- ITAT Kolkata Quashes Reassessment for Wrong Officer Issuing Notice – Jurisdictional Defect is Fatal

Assessee had originally filed return declaring income of ₹14,09,760/- for AY 2014-15, & the original assessment u/s 143(3) accepted the returned income. Later, the case was reopened u/s 147 by issuing notice u/s 148 on 27.07.2022. The crucial fact was that this notice was issued by the ACIT, Circle-1, Burdwan, & the reassessment order u/s 147/144 was also passed by the ACIT, despite the returned income being only ₹14.09 lakh.

Assessee argued that as per CBDT Instruction No. 1/2011 dated 31.01.2011, in non-corporate cases, if income is up to ₹15 lakh (mofussil areas) or up to ₹20 lakh (metro cities), jurisdiction lies with the ITO, & only where income exceeds such limit can the AC/DC assume jurisdiction. Therefore, ACIT was not the correct authority to issue notice u/s 148 or to complete the assessment. This made the entire proceeding void ab initio. To support this, reliance was placed on the Bombay High Court judgment in Ashok Devichand Jain v. UOI (2023) 452 ITR 43, where the Court held that a notice u/s 148 issued by an officer lacking jurisdiction is invalid & incurable, & such reassessment must be quashed. The High Court clarified that jurisdictional defect is not a mere irregularity, & even administrative inconvenience cannot justify bypassing CBDT instructions.

Department argued that the issue was not raised before lower authorities & suggested remand. However, the Tribunal observed that jurisdiction goes to the root & can be raised at any stage, & since CBDT instructions are binding under section 119, any violation thereof renders the assessment illegal.

Tribunal noted that Assessee’s returned income being only ₹14.09 lakh, only the ITO had jurisdiction, & ACIT had no authority to issue notice u/s 148 or frame reassessment. Therefore, the notice & the reassessment order were held invalid & without authority of law. Accordingly, ITAT quashed the reassessment in entirety for lack of inherent jurisdiction, following the binding Bombay High Court decision. The appeal of Assessee was allowed in full.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 25.02.2025 for the AY 2014-15.

2. During the course of hearing the assessee pressed ground no.2, which is extracted below: –

“2. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-NFAC erred in upholding the validity of the impugned notice dated 27-07-2022 issued u/s. 148 of the Income Tax Act, 1961 and the consequential assessment order framed u/s. 147/144 of the Income Tax Act, 1961 by the Id. Assistant Commissioner of Income Tax, Circle 1. Burdwan in absolute infringement of the C.B.D.T. Instruction No. 1/2011 dated 31-01-2011 and the purported action on that behalf is altogether unfounded, unjustified and untenable in law.”

3. The facts in brief are that the assessee filed the return of income on 31.10.2014, declaring total income of ₹14,09,760/-. The assessment was framed in this case u/s 143(3) of the Income-tax Act, 1961 (the Act) vide order dated 30.12.2016, accepting the returned income. Thereafter, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 27.07.2022, which was apparently after 01.04.2021. The said notice was treated as issued notice u/s 148A(b) of the Act in accordance with the decision of the Hon’ble Apex Court in the case of Ashish Agarwal (Civil appeal No. 305/2022). Thereafter, the order u/s 148A(d) of the Act was also passed. However, the assessee did not file any return of income during the year as stated above. The assessee declared total income of ₹14,09,760/-and the case was in the jurisdiction of the ITO, whereas the notice dated 27.07.2022, has been issued by ACIT, Circle-1, Bardhaman, copy of which is available at page no.18 of the Paper Book. The assessment was also framed by the ld. ACIT, Circle-1, Bardhaman.

4. The assessee challenged the said issuance of notice by the ACIT, Circle-1, Bardhaman and consequently passing the order by the same authority on the ground that same is in violation of CBDT instruction no.1/2011 (F.No.187/12/2010-IT(A-1), dated 31.01.2011, which provides that assessment shall be framed by the learned AO in accordance with aforesaid CBDT instruction.

5. Therefore, notice issued by the ld. JCIT is bad in law and so is the assessment framed u/s 147 read with section 144 of the Act. In defense of his argument the ld. AR relied on the decision of Ashok Devichand Jain vs. Union of India [2023] 151 taxmann.com 70 (Bombay)/[2023] 452 ITR 43 (Bombay)[08-03-2022], wherein a similar issue has been decided in favour of the assessee by the court by observing and holding as under:-

“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.

9. No order as to costs.”

6. The ld. DR on the other hand submitted that the issue was not raised before the ld. AO and the appeal was also ex-parte before the ld. CIT (A). Therefore, the same may be restored to the file of the ld. lower authorities for making decision on the issue.

7. After hearing the rival contentions and perusing the materials available on record, we find that in this case, the assessee declared total income at ₹14,09,760/- as per the return file don 30.10.2014. Thus, the jurisdiction to issue notice u/s 148 of the Act apparently lies with the ld. ITO and not with the ld. ACIT as provided in the CBDT instruction no.1/2011 (F.No.187/12/2010-IT(A-1), dated 31.01.2011. The said instruction is extracted below:

““Instruction No.1/2011 [F.No.187/12/2010-ΙΠ(A-1), DATED 31-1-2011 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 ITOs 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.”

8. The case of the assessee find support from the decision of Hon’ble Bombay High Court in case of Ashok Devichand Jain vs. Union of India (supra). Therefore, we squarely following the decision of the Hon’ble Bombay High Court, quash the assessment framed by the ld. AO for lack of inheritance jurisdiction.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 15.10.2025.