Bharat Bhushan Verma Vs ITO (ITAT Raipur)
ITAT Raipur held that AO having jurisdiction over the case passed the order u/s 143(3) of the Income Tax Act without issuing notice u/s 143(2). Accordingly, the matter quashed for want of valid assumption of jurisdiction as notice u/s 143(2) was issued by non-jurisdictional AO.
Facts- The assessee, who is engaged in the business as that of a transporter and mining contractor, had e-filed his return of income for A.Y.2015-16 on 28.09.2015. Subsequently, the case of the assessee was selected for scrutiny assessment. Notice u/s. 143(2) of the Act was issued by the ACIT, Raipur.
During assessment proceedings, it was, inter alia, observed by the A.O that the assessee had in his “balance sheet” for the immediately preceding year, i.e. A.Y.2014-15 showed Chhattisgarh Ware Housing Corporation (CGWHC) as a debtor. On a perusal of the records, it was observed by the A.O. that the assessee had raised a bill. However, the A.O. observed that in the assessee’s balance sheet for the year under consideration, the party mentioned above i.e. CGSWC was not reflected as a debtor.
The A.O concluded that the difference in the amounts i.e. Rs. 20,82,777/-, was the unaccounted/short receipt of the assessee for the year under consideration. Accordingly, the A.O. passed order u/s. 143(3) dated 28.11.2017 determining income of assessee as Rs. 27,39,600/-.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that as the A.O i.e., ITO-1(2), Raipur having jurisdiction over the case of the assessee, had framed the assessment vide his order passed u/s. 143(3) of the Act dated 28.11.2017 without issuing notice u/s. 143(2) of the Act; therefore, the same cannot be sustained and is liable to be quashed at the very threshold for want of valid assumption of jurisdiction for framing the said impugned assessment.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 11.05.2023, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 28.11.2017 for the assessment year 20 15- 16. The assessee has assailed the impugned order on the following grounds of appeal:
“1. On the facts and circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs.20,82,777/- on account of short receipt shown in ITR, is liable to be deleted.
2. The assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at the time of hearing of the appeal.”
Also, the assessee has raised additional ground of appeal, which reads as follows:
“Additional Gr.No. 1
1. On the facts and circumstances of the case and in law, assessment made u/s.143(3) dt.28-11-17 by ITO-1(2) would be invalid; notice issued u/s.143(2) by ACIT-1(1) on 19-9-16 who was not having pecuniary jurisdiction to issue such statutory notice for making assessment as returned income was Rs.6,56,820; CBDT Instruction No.1/2011 dt.31-1-11 & No.6/2011 dt.8-4-1 1 is binding on the IT authorities u/s.1 19; in absence of a valid statutory notice issued u/s 143(2) by the correct jurisdictional AO u/s.2(7A) & sec120; the consequential assessment order passed would be invalid and is liable to be quashed.”
2. As the assessee, by raising the aforesaid additional ground of appeal, had raised a legal issue that involves purely a question of law, and the same would not require looking any further beyond the facts available on record; therefore, I have no hesitation in admitting the same. My view above that where an assessee had raised, though for the first time, an additional ground of appeal before the Tribunal which involves purely a question of law and requires no further verification of facts, then the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
3. Succinctly stated, the assessee, who is engaged in the business as that of a transporter and mining contractor, had e-filed his return of income with the ITO-1(3), Raipur for A.Y.2015-16 on 28.09.2015 declaring an income of Rs.6,56,820/-. Subsequently, the case of the assessee was selected for scrutiny assessment. Notice u/s. 143(2) of the Act dated 09.20 16 was issued by the ACIT-1(1), Raipur.
4. During assessment proceedings, it was, inter alia, observed by the A.O that the assessee had in his “balance sheet” for the immediately preceding year, i.e. A.Y.2014-15 shown Chhattisgarh Ware Housing Corporation (CGWHC) as a debtor for Rs.80,12,198/-. On a perusal of the records, it was observed by the A.O. that the assessee had raised a bill of Rs.22,98,843/- during the year under consideration on the party mentioned above i.e., CGSWC. However, the A.O. observed that in the assessee’s balance sheet for the year under consideration, the party mentioned above i.e. CGSWC was not reflected as a debtor. Based on the facts above, the A.O was of the view that the entire amount of Rs.1,03,11,041/- [Rs.80,12,198/- (+) Rs.22,98,843/-] was received by the assessee during the year under consideration. Referring to the “Form 26AS” of the assesseee, the A.O. observed that the same revealed a payment to the assessee of Rs.1,23,93,818/-. Backed by the facts mentioned above, the A.O concluded that the difference in the aforementioned amounts, i.e., Rs.20,82,777/- [Rs.1,23,93,818/- (-) Rs.1,03,11,041/-] was the unaccounted/short receipt of the assessee for the year under consideration. Accordingly, the A.O. vide his order passed u/s.143(3) dated 28.11.2017 determined the assessee’s income at Rs.27,39,600/-.
5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success.
6. The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal before me.
7. As the Ld. Authorized Representative (for short “AR’) has assailed the validity of the jurisdiction that was assumed by the A.O, i.e. ITO-1(2), Raipur, for framing the impugned assessment u/s. 143(3) dated 28.11.2017; therefore, I shall first deal with the same.
8. At the very threshold of hearing, it was the claim of the Ld. AR that as the assessee had filed his return of income for the year under consideration, i.e. A.Y.2015-16 declaring an income of Rs.6,56,820/-, therefore, the pecuniary jurisdiction over his case remained vested with the ITO- 1(3), Raipur with whom the return of income was filed. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that pursuant to the CBDT Instruction No.1/2011 dated 31.01.2011 r.w. CBDT instruction No.6/2011 dated 08.04.2011, the jurisdiction in case of non-corporate assessees residing in the mufassil areas and declaring income up to Rs. 10 lacs was exclusively vested with the ITOs. The Ld. AR drew my attention to the CBDT Instructions (supra), Pages 6 to 8 of APB. Carrying his contention further, it was submitted by the Ld. AR that as the jurisdiction over the case of the assessee remained with ITO- 1(3), Raipur, therefore, the impugned assessment framed u/s.143(3) dated 28.11.2017 by the ITO-1(2), Raipur based on notice u/s. 143(2) dated 19.09.2016 issued by the ACIT-1(1), Raipur, i.e. non-jurisdictional officer, could not be sustained and was liable to be struck down for want of valid assumption of jurisdiction for framing the assessment. It was, thus, the claim of the Ld. AR that as the ITO-1(2), Raipur, i.e. A.O having jurisdiction over the case of the assessee, had not issued any notice u/s. 143(2) of the Act, therefore, the assessment thereafter framed by him u/s. 143(3) dated 28.11.2017 could not be sustained and was liable to be quashed. To sum up, it was the claim of the Ld. AR that in the absence of notice u/s. 143(2) of the Act having been issued by the ITO-1(2), Raipur, i.e. the A.O having jurisdiction over the case of the assessee, the assessment framed by him was liable to be quashed for invalid assumption of jurisdiction. In support of his aforesaid claim, the Ld. AR had relied on a host of judicial pronouncements as follows:
(i) Ravi Sherwani Vs. ACIT, ITA No.64/RPR/2020 dated 29.05.2023
(ii) Mata Road Carriers Vs. DCIT, ITA No.79/RPR/2016 dated 07.2023.
(iii) Mickey Shrivastava Vs. ACIT, ITA No. 122/RPR/2019 dated 07.2023
(iv) Sudhir Kumar Agrawal Vs. ITO, ITA No. 158/RPR/2017 dated 10.2022
(v) Durga Manikanta Traders Vs. ITO, ITA No.59/RPR/2019 dated 12.2022
(vi) Bhagyalaxmi Conclave P. Ltd., ITA No.2517/Kol/2019 dated 02.2021
(vii) Ashok Devichand Jain Vs. UOI, 452 ITR 43 ( Bom HC)
(viii) Pankajbhai Jaysukhlal Shah Vs. ACIT (2020) 425 ITR 70 (Guj HC)
9. Per contra, the Ld. Departmental Representative (for short, ‘DR’) relied on the orders of the lower authorities. The Ld. DR took me through the “Written submissions” filed by the ITO- 1(2), Raipur, dated 11.09.2023. For clarity, the written submissions of the ITO- 1(2), Raipur as had been relied upon by the Ld. DR are culled out as follows:
“4.1 Comments on jurisdiction over the case in view of section 124, 120, and 2(7A) of the Act:- The AO has proper jurisdiction over the assessee in view of the section 124, 120 and section 2(7A) of the Act due to the following reasons:-
4.1.1 It is also pertinent to mention here that notice u/s 143(2) of the Act was issued to the assessee on 19.09.2016 by ACIT Circle 1(1), Raipur. Further, the assessment was completed by the AO i.e. ITO1(2), Raipur and assessee has not raised any objection in respect of issuance of notice u/s 143(2) by the Jurisdictional AO i.e. by the ITO1(2), Raipur. Thus, the assessee is not entitled to call in question the jurisdiction as per provision of section 124(3) of the Act. For sake of convenience, the said section is reproduced below:-
“Section: 124(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return under sub- section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 142 or subsection (2) of section 143 or after the completion of the assessment, whichever is earlier”
In the present case, the assessee has not raised objection in respect of issuance of notice by jurisdictional assessing officer during assessment proceeding, therefore, the assessee has no right to call in question of jurisdiction of the AO in respect of issuance of notice u/s 143(2) after completion of assessment proceeding for a long time.
4.1.2 It is important to mention here that the assessee is well informed for the jurisdictional assessing officer of his case as he is filing his ITR for past many years. Further, he attended assessment proceedings through the authorized representative. The authorized representatives are very experienced and have through knowledge of income tax law and procedure. He is well aware of the jurisdiction over the case and remedial action for correction and rectification of jurisdictional issue. During the entire assessment proceedings, the assessee as well as the learned counsel for the reasons best known to them, have also not objected the validity of the notice and assessment proceedings in the case. The Act has protected the liberty of choosing his jurisdiction or furnish objection on jurisdictional issues under section 124 of the Act. He has sufficient opportunities and time to object validity of proceedings and issuance of statutory notices. Therefore objection on jurisdictional issue furnished after completion of assessment proceedings and after 263 proceeding at this stage cannot be said out of omission or ignorance of law and procedure.
4.1.3. In the present, the case the assessment proceeding u/s 143(3) was completed as on 28.11.2017. The assessee had neither challenged the jurisdiction before AO during the assessment proceeding and also it appears that the same was not challenged before the id. CIT(A) during the appeal proceeding. Thus, it is evident that the assessee has challenged the jurisdiction only in order to escape from tax liability on account of issue arisen during review proceeding. Further, the provisions of Section 124(3) are very clear. Where the appellant is of the view that the jurisdiction is not justifiable, the appellant is free to challenge the same before the AO. If the assessee was in the opinion that notice u/s 143(2) was not issued by the jurisdictional AO, the same was also to be objected during assessment proceeding. But where the appellant does not exercise such an option, it cannot be questioned later on. The same observation was made by the Hon’ble High Court of Delhi in the case of Abhishek Jain vs Income Tax Officer, Ward – 55(1), New Delhi (WRIT PETITION (CIVIL) No. 11844/2016) that “As far as territorial or pecuniary jurisdictions are concerned, objection should be taken at the earliest possible opportunity and /or before the settlement of issues and not at the subsequent stage. Jurisdiction as to the subject matter is distinct and stands on a different footing.” Thus, the ground of the assessee regarding jurisdiction at this junction are infructuous and to be dismissed.
4.1.4 The issue of jurisdiction was also considered by the various appellate courts in various cases which are discussed as under:- 4.1.4.1 In the case of Hindustan Transport Co vs IAC, 189 ITR 326 (Allahabad), the Hon’ble HC dealt extensively with the various provisions of the Act and held that the allocation of jurisdiction is a measure of administrative convenience. In such a situation, the concept of jurisdiction cannot be imported and, certainly, not in the sense of invalidating the resultant action on account of the defect in the exercise of functions. The Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture.
4.1.4.2 In the case of CIT vs Siri Paul Oswal, [2007] 293 ITR 273 (Punjab &, Haryana), it was held by Hon’ble HC that a distinction has to be made between a situation when there is inherent lack of jurisdiction and a situation where jurisdiction is irregularly assumed and plea of want of jurisdiction can be waived by a party. In the latter situation, the question arises whether party who could waive the plea of jurisdiction, raised such a plea and whether such a party had been prejudiced on account of erroneous assumption of jurisdiction. The present case, the assessee participated in assessment proceedings by the Assessing Officer to whom assessment proceedings under the Income-tax Act were transferred and who exercised jurisdiction to assess wealth-tax also with the participation of the assessee without any objection by the assessee. If the assessee had raised an objection, the proceedings could have been transferred back to the concerned Wealth-tax Officer. The Assessing Officer having proceeded further and assessment having been finalized, plea of lack of jurisdiction could not be raised for the first time in appeal, without showing error in the order on the merit and without showing any prejudice to the assessee by exercise of jurisdiction by the Assessing Officer.”
4.1.4.3. In the case of CIT vs All India Children Care 85 Educational Development Society, [2013] 357 ITR 134 (Allahabad), the Hon’ble Allahabad HC has held that Tribunal is not a competent authority to adjudicate upon jurisdiction of Assessing Officer when it is not raised before Assessing Authority. Such a decision has been arrived at after looking at various judicial precedents and provisions of law including 5.124. Similar view had been held in various judicial decisions including (i) Subhash Chander v. CIT [2008] 166 Taxman 307, P86H HC,(ii) 25 taxmann.com 464 (Jodhpur ITAT), Vaishali Builders 86 Colonizers vs Addl.CIT[2012], (iii) ACIT vs Punjab Urban Development Authority, Mohali, [2014] 42 taxmann.com 160 (Chandigarh – Trib.) and various other decisions.
4.1.4.4. On the contrary, the case of CIT vs SS Ahluwalia, [2014] 46 taxmann.com 169 (Delhi), is more appropriate and relevant. In this case, the Hon’ble Delhi HC has laid down several propositions including (i) Sections 120, 124 and 127 recognize flexibility and choice, both with the assessee and the authorities i.e., the Assessing Officer before whom return of income could be filed and assessment could be made. The Assessing Officer within whose area an assessee was carrying on business, resided or otherwise income had accrued or arisen, has jurisdiction. Similarly, the Assessing Officer also has authority due to class of income or nature and type of business. The Act, therefore, recognized multiple or concurrent jurisdictions. (ii) Provisions of section 124 ensure and prevent two assessments by different assessing officers, having or enforcing concurrent jurisdiction. There cannot be and the Act does not envisage two assessments for the same year by different officers. (Reassessment order can be by a different officer). (iii) Each year is separate and distinct year and in case the assessee shifts his residence or place of business or work etc. Assessing Officer of place where the assessee has shifted or otherwise, will have jurisdiction and it is not necessary that an order under section 127 should be passed. This, however, does not mean that the Assessing Officer where the returns of income were earlier filed ceases to have jurisdiction, provided the assessee has residence in his area, place of business, class, income etc. Residence can mean permanent residence as well as current or temporary residence of some permanence. (iv) The question of jurisdiction or the place of filing has to be examined each year with reference to provisions of section 124. Section 124 provides flexibility and postulates multiple and concurrent jurisdiction including filing of return and where the assessee has permanent or current residence or where he has sole/only source of income. (v) An assessment order passed without making reference to Commissioner/Commissioners under section 124 is not a nullity for want of jurisdiction but it results in irregularity which can be rectified by order of remit and directing the Assessing Officer to continue with the proceedings from the stage where the error had occurred.
4.1.5. In the present case, the assessee not challenged the issue of issuance of notice by jurisdictional AO before the AO during the course of assessment proceedings. Even the assessee was having sufficient opportunity during assessment proceeding as well as during the appeal proceeding. Thus, it clearly indicates that the assessee had not come with clean hands for raising an additional issue of challenging jurisdiction before the Hon’ble ITAT. Thus, the assessee has suppressed the fact before the AO and also it appears that the same was not challenged before the ld. CIT (A) during the appeal proceeding. It indicates that the assessee has not approached to the Hon’ble ITAT on the issue of jurisdiction over the case with clean mind, clean heart and clean objective therefore, the this ground is liable to be dismissed in limine. The Hon’ble High Court of Karnataka in the case of Ratnachudamani s. Utnal Vs. Income Tax Officer (2004) 269 ITR 272 dismissed the writ as the petitioner had not approached the Court with clean hands and held that the petitioner has intentionally and deliberately suppressed the material facts. If the petitioner wants any relief at the hands of this court, he has to approach the court with clean hands and it is duty cast on the petitioner to state the true facts and make out a case. Similarly the Indore Bench of the Madhya Pradesh High Court in the case of Ajit Kumar Pitaliya v. Income Tax Officer (2008) 318 ITR 0182 dismissed the appeal of the assessee in limine for failure to come with clean hands and held that he must come to the court with clean hands. The Doctrine of Clean Hands is not only applicable to the High Court and Apex Court but also before other courts and judicial forum. The Hon’ble Apex Court in the case of Ramjas Foundation v. Union of India & others in Civil Appeal No. 6662 of 2004 removed the misconception that these principles (Doctrine of Clean Hands) are only applicable to Writs & SLPs before the Apex Court and High Courts. The Phrase “but also to the cases instituted in others courts and judicial forums” This judgment lays down the principle that it is obligatory for a petitioner /appellant/applicant to approach any court or judicial forum with clean hands or face the ire of the courts/judicial forums who will not hesitate in applying the doctrine of clean hands and rejecting his appeal/revision.”
10. I have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and material available on record as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
11. I have thoughtfully considered the issue above and find substance in the claim of the Ld. AR. As stated by the Ld. AR and, rightly so, I find that the multi-facet issues pertaining to the assumption of jurisdiction by the O in light of the pecuniary/monetary limits contemplated in CBDT Instruction No.1/2011 (supra) r.w. CBDT Instruction No.6/2011 (supra) was exclusively looked into by the Division Bench of the Tribunal, Raipur, in the case of Durga Manikanta Traders Vs. ITO, ITA No.59/RPR/2019 dated 12.12.2022. Also, the objections that the A.O has raised as regards valid assumption of jurisdiction of the A.O i.e. ITO- 1(2), Raipur within the stipulated period in the backdrop of the mandate of Section 124(3)(a) of the Act had also looked into at length in the order mentioned above. For the sake of clarity, the relevant observations of the Tribunal are culled out as follows:
“13. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
14. Admittedly, it is a matter of fact borne from record that the CBDT vide Instruction No. 1/2011, dated 31.01.2011 had, inter alia, revised the existing monetary limits for assigning cases to ITOs and DCs/ACs. For the sake of clarity, we deem it fit to cull out the CBDT Instruction No.1 / 2011 dated 31.01.2011 ,Page 1 of APB, which reads as under:
“INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], 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:
