ARJUN RISHI,SAINIK FARMS vs. ITO WARD 28(1), ITO OFFICE CIVIC CENTRE
Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI S. RIFAUR RAHMANArjun Rishi, vs.
PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 01.09.2023 for Assessment Year 2017-18 raising following grounds of appeal :- “1. i) That the order of Ld. CIT (A) NFAC Delhi confirming the addition of Rs.9,81,173/- made by Ld. AO ward 28(1) Delhi is illegal, unjust, opposed to facts and suffers from the vice of arbitrariness.
ii)
That all grounds of appeal are independent and without prejudice to each other.
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2
i)
That on the facts of the case in law the order of Ld. CIT
(A) confirming the addition made by Ld. AO is an illegal order, since; a)
The assessment is made by ITO ward 28(1), without issue of any valid notice u/s 143(2).
b)
The notices issued u/s 143(2) by ITO ward 31(4) dated
16.08.2018 and by ACIT, Cir.31(1) dated 12.09.2018 are notices by non-juri ictional AO's.
c)
There is no order u/s 127 for transfer of juri iction between various AOs ultimately, confining the juri iction to a non- juri ictional AO ward 28(1).
d)
As per CBDT notification ward ITO can assess incomes upto
Rs. 30 lacs. AO Ward - 28(1) had no juri iction to assess income of Rs. 91.05 lacs declared by the Appellant.
ii)
That the assessment made by a non-juri ictional AO, even without valid notice u/s 143(2) is an illegal assessment which is to be quashed.
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i)
That the correct juri iction to assess the income of Rs.
91.05 lacs of a director of a company (One World Realtech Pvt Ltd.) lies with the ACIT corporate charge with Pro CIT Delhi-7. ii)
That the assessment made by a non-corporate charge, non- juri ictional AO be annulled.
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That on the facts of the case and in law Ld. CIT (A) has grossly erred in dismissing the additional grounds for invalid notice u/s 143(2) by referring to section 124(3), ignoring the fact that the issue goes to the root cause of the matter and the assessment is to be annulled.
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That on the facts of the case and in law, Ld. AO and Ld. CIT (A) have both erred in making and confirming addition u/s 68, which is not applicable in case of deposits in bank account, out of opening balance of cash in hand, since there is no credit in the books of account and the Appellant is not required to maintain any books of account being a salaried employee.
3
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i)
That on the facts of the case and in law Ld. CIT (A) has erred in upholding the contentions of the Ld. AO that cash In hand of Rs. 10,98,327/-was not mentioned in the assessment order of AY
2016-17, without appreciating that cash in hand is never reported in the assessment order u/s 143(3).
ii)
That the Rule for reporting assets and liabilities was introduced for the first time in AY 2016-17. iii)
That the Ld. CIT (A) and Ld. AD have both grossly erred in ignoring the cash book filed and accepted during AY 2016-17 - limited scrutiny for verification of cash deposits.
iv)
That the inadvertent typing error in providing the information in the ITR for the first time for AY 2016-17 whereby Rs.10,98,327/-was typed as 1,08,327/-
(third digit 9 was omitted) is an erroneous dismissal of appellant submission.
v)
That the illegal addition on account of clerical error be deleted.
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That Ld. AD has grossly erred on facts of the case and in law in making addition since Appellant did not file revised return in respect of the reporting of cash in hand in AY 2016-17, knowing fully well that the error did not have an impact on the income declared and revised return could not be filed after a specified period. The addition so made be deleted.”
Ground No.1 is general in nature, hence does not require any adjudication. 3. With regard to Ground Nos.2 & 3, assessee has raised legal grounds challenging the assessment order. The relevant facts are, assessee filed his original return of income on 31.03.2018 declaring income of Rs.91,05,020/-. The case was selected under CASS for scrutiny in the limited category. Subsequently, notice under section 143 (2) of the Income-tax Act, 1961 (for short ‘the Act’) was for examination on (a) cash d (b) capital (c) investm 4. Subsequently, noti through e-portal. assessee has raise hereunder. 5. At the time of heari
S.
No.
C
1
In the 2016-17
and imp so not a 2
If you feeding
2016-17
not filed
3 On acc 9,81,17 assessm Deposit Less op Additio If corre additio 4 IT s issued and served on the assessee. Th the following reasons :- deposit and transaction in property; l gains/loss on sale of property; and ment in immovable property. ice u/s 142(1) was issued and serv In response, assessee filed relevant d various legal grounds, we shall d ing, ld. AR of the assessee submitted a Contentions of Ld. AO Submiss assessment order for AY 7, closing balance of cash prest account is not stated– accepted Closing balanc imprest accou in the assessm the income as additions mad had noticed the error in of A&L schedule for AY 7, why revised return was d? There was no return as th know of th pointed out by 2017-18, by th 2016-17 alr 143(3), could n count of the above inadvertent error, Ld 73/- in following manner, as unexplained ca ment order on Pg. 2: t during demonetization period pening balance of cash in hand n made ect balance of cash in hand of Rs. 10,98 n is warranted since the deposits are out of o TA No.3020/DEL/2023
he case was selected ed on the assessee details. Since the deal with the same as under :- sions of Appellant ce of cash in hand and unt are never reported ment order, which gives ssessed as per ITR and de, if any with reasons.
occasion to file revised e appellant came to he error only when y the Ld. AO during AY hat time, return for AY ready assessed u/s not be revised.
d. AO has added Rs.
ash as per last para of Rs. 10,89,500/-
Rs. 1,08,327/-
Rs. 9,81,173/-
8,327/- is adopted, no opening balance.
4 Withou were fi was fou a) Cash bo balance b) Imprest
5 Comple account observe deposit period.
6 In view facts of mistake way of ……
2
Legal G
-
Assessm
30 Lac appellan
-
No vali
-
There i various juri ic
89).
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Not onl to be m compan
Ward /
1 The law has to Authori terms o
2 When a only that statutory 5 IT ut prejudice to the above, complete copies led during the course of assessment for A und: ook Pg. 102 to 105 – Opening Balance Rs. 1 e Rs. 5,30,470/-. t account – Arjun Rishi Pg. 100 to 101. ete summary of cash accounts as per copies t and bank ledger accounts filed is enclose ed from the said statement that there was e t of Rs. 10,89,500/- in the bank account dur Date wise detail of deposits in bank account w of above submissions, addition of Rs. 9,8 f the case and the Ld. AO has attempted to ca e - feeding error of the appellant, when eno cash book and balance sheet was already on r Grounds No. 2 to 4 ment made by a non-juri ictional Ward AO cs. Ld. AO did not have the pecuniary jur nt’s income above Rs. 90 Lacs. id notice u/s 143(2) issued by the juri ictiona is no order of Pr. CIT u/s 127 for transfer AOs and ultimately confining it to a Ward I ction to assess declared income of Rs. 91,05 ly the assessment was to be made by ACIT/D made under a corporate charge, since the ap ny, drawing remuneration and the assessmen Circle of the company paying directors remu w laid down by the parliament in respect of be strictly followed by all Assessing O ities during the course of assessment / ap of the Income Tax Act. statue prescribes the authority with whom th t authority which can exercise that power. By y prescription cannot be waved nor vested wi TA No.3020/DEL/2023
s of following accounts
AY 2017-18, no mistake
10,98,327/- and closing s of cash book, imprest ed at Pg. 98. It will be nough cash balance for ing the demonetization ts is given at Pg. 97. 1,173/- is not based on apitalize the inadvertent ough other evidence by record.
O for income above Rs.
ri iction to assess the al AO.
of juri iction between
TO – 28(1) who had no 5,020/- (please refer Pg.
DCIT Circle, but it was ppellant is a director of nt is to be made in the uneration.
Section 143(2) and 127
Officers and Appellate ppellate proceedings in he power is vested, it is y consent of parties, the th another authority. As 6
held in Vijay Nathulal Sharma Vs. DCIT (2025) 472 ITR 535 (AP) – this is the law as already settled under various Apex Court decisions.
3 Thus, the circulars, directions and guidelines issued u/s 119, 120 and others, being a delegated legislation, are to be strictly followed by the Assessing In support of above legal and technical grounds, we rely upon the case laws referred in the Paper Book under Sr. No. 1 to 10, Pg. No. 1 to 88 and following case laws:
-
Rajeev Goel Vs. ACIT ITA No. 1184 / Del / 2019 AY 2014-15 order dated
26.09.2019. -
-
-
CIT Vs. Laxman Das Khandelwal (2019) 108 taxmann.com 183 (SC)/417
ITR 325 (SC) (13.08.2019) holding that assessment made without notice u/s 143(2) is invalid – Hotel Blue Moon relied upon – in the instant case, issue of invalid notice by a non-juri ictional Ward – ITO is as good as non-issue of valid notice.
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Book and as quoted hereinabove, the assessment made without juri iction by a non-juri ictional AO, without issue of any valid notice u/s 143(2) by the juri ictional AO and without acquiring juri iction to make assessment u/s 143(3), be annulled.”
On the other hand, ld. DR of the Revenue submitted that the assessee has to challenge the issue under consideration within two months. He submitted
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that income has to be assessed and income alone cannot be considered for juri iction. He relied on section 124 (3) of the Act as per which assessee has to file objections within two months. In this regard, he relied on the decision of Hon’ble juri ictional High Court in the case of Abhishek Jain vs.
ITO (2018) 94 taxmann.com 355 (Delhi).
7. In the rejoinder, ld. AR of the assessee submitted that section 124 applies with the territorial juri iction and it is not applicable to pecuniary juri iction. The relevant section applicable is section 120 and he reiterated that the action of the Assessing Officer is illegal and in this regard, he relied on the CBDT Instruction No.1/2011, which is placed on record.
8. Considered the rival submissions and material placed on record. We observe that assessment was completed by the Assessing Officer, Ward 28 (1), Delhi vide order dated 30.12.2019. We observe that as per the CBDT Instruction
No.1/2011 dated 31.01.2011 u/s 119 of the Act in the present case, the assessee has declared an income of Rs.91,05,020/- and as per the Instruction, income upto Rs.30,00,000/- is with the ITOs and anything above
Rs.30,00,000/-, assessment has to be completed by ACs/DCs. In the given case, we observed that as per the income declared by the assessee, the juri iction falls under ACs/DCs. In the given case, the assessment was completed by ITO, Ward 28 (1), Delhi. The revenue has not brought on record any order passed u/s 127 for transfer of juri iction. Considering the 8
peculiar facts on record, we observe that actual juri iction lies with ACs/DCs and it is beyond the juri iction of ITOs. Therefore, notice u/s 143(2) to assess the income of the assessee is beyond the juri iction of the ITO. Therefore, the juri iction notice u/s 143(2) is bad in law and accordingly even assessment order passed with wrong juri iction is bad in law. In this regard, we rely on the decision of ITAT, Delhi Bench in the case of Vipul Mittal vs. DCIT in ITA No.2850/Del/2019 dated 15.01.2025
wherein it was held as under :-
14. Considered the rival submissions and material placed on record. We observed that assessee has filed its return of income declaring income of Rs.59,68,220/-. As per the CBDT Instruction No.01/2011, the juri iction over the assessee’s case lies only with Assistant/Deputy Commissioner of Income-tax as the income declared by the assessee is above Rs.20 lakhs falls under the category of non-corporate returns. It is brought to our notice that notice u/s 143(2) was issued by the ITO, Ward 11 (3) on 28.08.2015, who do not have juri iction over the assessee in the case considering the fact that the return of income declared by the assessee is over and above
Rs.20 lakhs. The assessment was completed by the DCIT, Circle 11 (2),
New Delhi u/s 143(3) of the Act. However, we observed that the juri iction lies only with DCIT, however the statutory notice u/s 143(2) was issued by the ITO instead of the present Assessing Officer i.e. DCIT.
In this regard, the Assessing Officer also filed the submissions which are placed on record in which it was submitted that as per the PAN based juri iction, the juri iction over the case at the time of issue of notice with the ITO, Ward 11(3). Thereafter, the juri iction was transferred to Circle
11 (2), Delhi on 21.07.2016 who was ultimately passed the assessment order after allowing the opportunity to the assessee. The Assessing Officer in its submissions as well as ld. DR objected to the submissions of the assessee for the reason that the present juri ictional issue now instead of raising the same during assessment itself within one month from the date of receipt of the notice u/s 124 (3) of the Act. After considering the factual matrix in this case, we observed that similar issue under consideration is considered by the coordinate Bench in the case of YKM Holdings Pvt. Ltd.
vs. ACIT (supra) wherein it was held as under :-
“4. We have heard the rival submissions and perused the material available on record. At the outset, we find that the additional grounds raised by the assessee go to the root of the matter challenging the juri ictional per
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se. All the facts relevant for its adjudication are placed on record. Hence, in the light of decision of Hon’ble Supreme Court in the case of NTPC Ltd.
reported in 229 ITR 383, we are inclined to admit the additional grounds and take up the same for its adjudication.
We find that assessee’s returned income for the A.Y. 2015- 16 was Rs. 37,78,510/- hence, the juri iction of the assessee should lie with ACIT/DCIT since the returned income had exceeded Rs. 30,00,000/-, in view of the CBDT Instruction No.1/2011 dated 31.01.2011. For the sake of convenience, the said Instruction No.1/2011 [F. No.187/12/2010-IT(A-I)] dated 31.01.2011 is hereby reproduced:-
“SECTION 119 OF THE INCOME-TAX ACT, 1961-INCOME-TAX
AUTHORITIES-
INSTRUCTIONS TO SUBORDINATE AUTHORITIES
INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(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:
Income Declared (Mofussil areas) Income Declared (Metro cities)
ITOS
ACS/DCS
ITOS
DCS/ACS
Corporate returns
Upto Rs. 20
lacs
Above Rs. 20
lacs
Upto Rs. 30
lacs
Above Rs. 30
lacs
Non-corporate returns
Upto Rs. 15
lacs
Above Rs. 15
lacs
Upto Rs. 20
lacs
Above Rs. 20
lacs
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.”
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6. In the instant case, the notice under section 143(2) of the Act stood issued to the assessee on 12.04.2016 by ITO Ward 27(4), Delhi. In July, 2016, the ITO transferred the juri iction of the assessee from him to DCIT since the returned income for A.Y. 2015-16 is more than 30,00,000/-. Copy of the said transfer memo is enclosed in page 5 of the paper book. After the transfer of juri iction from ITO to DCIT, no fresh notice under section 143(2) of the Act was issued by ACIT, Circle 4(1), Gurgaon. The assessment was ultimately framed under section 143(3) of the Act for A.Y. 2015-16 on 14.12.2017 by ACIT, Circle – 4(1), Gurgaon. It is pertinent to note that assessment for the A.Y. 2014-15 of the assessee was completed under section 143(3) of the Act on 30.11.2016 by DCIT, Circle – 27(2), New Delhi. Hence, it was argued that the notice under section 143(2) of the Act dated 12.04.2016 issued by the ITO selecting the return of assessee for A.Y. 2015-16 for scrutiny is without juri iction and consequently, the assessment framed under section 143(3) of the Act dated 14.12.2017 required to be quashed as void ab initio. When this was confronted to learned DR, he pointed out to the provisions of section 124(3) of the Act wherein it was mentioned that assessee should challenge within one month about the juri iction of the AO on receipt of the notice. In the instant case, nowhere up to learned CIT(A), the assessee has challenged the juri iction of the learned AO. In our considered opinion, this argument of the learned DR is wrong in as much as section 124(3) of the Act talks only about territorial juri iction, whereas the issue involved here is pecuniary juri iction. Further, the provisions of section 124(3) of the Act could be taken shelter by the Revenue only when legal valid notice under section 143(2) of the Act has been issued by the Revenue. In the instant case, notice issued under section 143(2) of the Act on 12.04.2016 by ITO is not legal as he did not possess juri iction over the assessee for A.Y. 2015-16 in as much as the returned income for A.Y. 2015-16 had exceeded Rs. 30,00,000/-. We find that the issue in dispute is no longer res integra by the decision of Hon’ble Delhi
Instruction No.1/2011[F. No.187/12/2010-IT(A-I)] Dated 31.01.2011. For the sake of convenience, the entire order is reproduced hereunder:
“1. Petitioner is impugning a notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2012-
13 and order passed on 18th November, 2019 rejecting Petitioner’s objection to reopening on various grounds.
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 juri iction 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 juri iction will be of ITO and where the income declared returned by a Non Corporate assessee is above Rs. 20 lakhs, the juri iction will be of DC/AC.
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3. Petitioner has filed return of income of about Rs. 64,34,663/- and therefore, the juri iction 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 juri iction 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.
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 juri ictional 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 juri iction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law.
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.
Petition disposed.” 7. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation to hold that the assessment framed under section 143(3) of the Act deserves to be quashed in the instant case as the initial scrutiny notice issued under section 143(3) of the Act dated 12.04.2016 by ITO was without juri iction as he did not possess juri iction over the assessee for the A.Y. 2015-16. Consequently, assessment framed under section 143(3) of the Act is hereby quashed as void ab initio. The additional ground no.2 is hereby allowed.”
Similar view was expressed by the ITAT, Mumbai in the case of Monarch & Quershi Builders vs. ACIT (supra) and by the coordinate Bench in the case of Sapna Rastogi vs. ITO (supra).
Further the Revenue has not brought on record an order u/s 127 of the Act passed in order to transfer the case to DCIT, Circle 11 (2), New Delhi except making the submissions that assessee should file the objection within one month u/s 124(3) of the Act. Since the issue of notice u/s 12 143(2) is the basis of initiation of the assessment u/s 143(3) and the juri ictional officer should have issued the notice and also completed the assessment. The present Assessing Officer has completed the assessment without following the due process of law and we, respectfully following the decisions of the coordinate Bench and ITAT Mumbai, are inclined to hold that the juri ictional notice u/s 143(2) was not issued by the DCIT before completing the assessment u/s 143(3) of the Act and that there is an unwarranted defect in this case which is not curable. Accordingly, the assessment passed in the given case is quashed and accordingly, the additional grounds raised by the assessee are allowed.”
Respectfully following the above decision, we are inclined to set aside the assessment order. Accordingly, Ground Nos.2 & 3 raised by the assessee are allowed. 18. Since the grounds on juri ictional issues are allowed, the issues on merit become academic, therefore, not deliberated upon. 19. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 9th day of July, 2025. (VIKAS AWASTHY) ACCOUNTANT MEMBER
Dated: 09.07.2025
TS