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Income Tax Appellate Tribunal, GUWAHATI BENCH,
Before: Shri A. T. Varkey, JM]
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, “VIRTUAL HEARING” AT KOLKATA (सम�) �ी ऐ. टी. वक�, �यायीक सद�य) [Before Shri A. T. Varkey, JM] I.T.A. No. 354/Gau/2018 Assessment Year:2011-12
M/s. Balaji Enterprise, Guwahati Vs. Assistant Commissioner of Income-tax, (PAN: AAGFB9398A) Range-3, Guwahati Appellant Respondent
Date of Hearing 02.11.2020 Date of Pronouncement 13.11.2020 For the Appellant Shri Akkal Dudhewala, AR For the Respondent Shri Jayanta Mridha, JCIT, Ld. DR
ORDER Per Shri A.T.Varkey, JM This appeal is preferred by the assessee against the order of Ld. CIT(A)-1, Guwahati dated 17-09-2018 for assessment year 2011-12.
At the outset, The Ld. Counsel for the assessee Shri Akkal Dudhewala drew our attention to the legal issue raised by the assessee i.e. ground no. 5 wherein the assessee has raised the issue that the action of AO (Addl. CIT, Range-3, Gauhati) to have framed the assessment u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) without issuing notice u/s. 143(2) of the Act (notice issued by ITO, Wd-1, Shillong) was without jurisdiction, so it is void ab initio.
Brief facts pertaining to the legal issue are that the assessee firm (address – Centre Point, 1st floor, G. S. Road, Ulubari, Gauhati-781007) which was assessed under Range-3, Gauhati by intimation u/s. 143(1) of the Act for earlier as well as this assessment year and subsequent assessment years. According to the Ld. Counsel, for this relevant assessment
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 year, the ITO Ward-1 Shillong issued notice on 13 August 2012 u/s 143(2) of the Act and it was objected to by the assessee before the ITO Shillong that since its principal place of business as envisaged u/s. 124(1) of the Act since is at Gauhati,[i.e, the assessee’s territorial jurisdiction] jurisdiction to assess lies with the Income Tax Authorities at Gauhati and not at Shillong, the ITO understanding his mistake transferred the file to Addl. CIT, Range-3, Gauhati, and the AO framed the assessment U/s 143 (3) of the Act without issuing notice u/s. 143(2) of the Act, which omission on the part of AO was without jurisdiction as held by by the Hon’ble Supreme Court in ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC) and according to Ld AR, the non-issue of legally valid notice u/s. 143(2) is not a curable defect. And when this legal issue was raised before the Ld. CIT(A) he has rejected it on the ground that as per sub-section 3 of section 124 of the Act, the assessee was not entitled to call in question the jurisdiction of an AO unless he had objected to it within one month after being served with a notice under sub-section (2) of section 143(3) of the Act or after completion of the assessment whichever is earlier. According to Ld. CIT(A), neither such facts as regards any challenge to the assumption of jurisdiction has been noted in the assessment order nor the assessee has placed on record any material in this regard thereto. Therefore, according to Ld. CIT(A), in view of the express provision of section 124(3)(b) of the Act the assessee is precluded now to challenge the assumption of jurisdiction of the AO. Thereafter citing the decision of the Hon’ble Delhi High Court in CIT Vs. S. S. Ahluwalia (ITA Nos. 255/2002, 257/2002, 1577/2006, 314/2002, 315/2002, 316/2002, 1578/2006, 1580/2006 dated 14.03.2014) he rejected the legal issue raised by the assessee.
Assailing this action of Ld. CIT(A), the Ld. AR Shri Akkal Dudhewala drew our attention to the fact that the assessee was assessed by Income Tax Authorities under the jurisdiction of the Range/Circle-3, Guwahati. He drew our attention to page no. 1 to 5 of the paper book. which are the acknowledgement given u/s. 143(1) of the Act pertaining to the assessment of the assessee from AYs 2009-10 to 2013-14. The Ld. AR drew our attention to the fact that for AY 2009-10 the assessee had filed the return of income (ROI) in Form No. ITR-V for AY 2009-10 stating clearly that the designation of the AO was shown
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 (Ward/Circle-3(1), Guwahati) and the ROI was received by the JCIT’s office on 07.09.2009. Likewise, for AY 2010-11 it was filed before the same AO which was received by the JCIT on 28.01.2011. For AY 2011-12 (the present assessment year before us) the assessee had filed before the ITO, Ward/Circle-3(1), Guwahati wherein the column of territorial area was clearly shown as Ulubari (Bora Service), Guwahati (refer to page no. 3, ITR – V Acknowledgment for AY 2011-12) wherein the AO was stated to be ACIT, Circle- 3, Guwahati. Likewise for AY 2012-13, ITR-V, shows the same address and the same description of AO i.e. Ward/Circle-3(1), Guwahati. For AY 2013-14 also there is no change. However, according to Ld. AR, suddenly from nowhere the ITO, Ward-1, Shillong issued a notice u/s. 143(2) of the Act dated 13.08.2012 directing the assessee to be present before him on 03.09.2012 which was objected to by the assessee and thereafter, the ITO, Ward-1, Shillong transferred the file to the Addl. CIT, Range-3, Guwahati who passed the order citing section 120(4)(b) of the Act. The Ld. AR brought to our notice that the Ld. CIT(A) has erroneously brushed aside the jurisdictional issue raised by the assessee by simply stating that since the assessee has not objected to the jurisdiction when it received the sec. 143(2) notice within thirty days or completion of assessment whichever is earlier, he dismissed the legal issue raised before him, which action of Ld. CIT(A) cannot be accepted and is arbitrary and illegal, so according to him, since the AO-Shillong did not enjoy jurisdiction in any manner, he could not have issued notice u/s 143(2) of the Act, whereas the AO/Range-3 officer of Income Tax department enjoyed jurisdiction u/s 124 of the Act since the assessee’s place of business was under their territorial jurisdiction and therefore since the mandatory notice was issued by an officer who did not enjoy jurisdiction all consequent action is non-est in the eyes of law and so it should be quashed.
Per contra, the Ld. DR for the revenue vehemently opposed the legal issue raised by the assessee. According to him, the assessee has not objected to the notice issued u/s. 143(2) of the Act by ITO, Shillong and also has participated in the proceeding before Addl. CIT-Gauhati, therefore, there is no prejudice caused to the assessee, therefore, he does not want us to interfere with the legal issue raised before us. Further, according to the Ld. DR,
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 the PAN jurisdiction of the assessee was falling under the jurisdiction of Shillong office in the State of Meghalaya, therefore the ITO, Shillong issued 143(2) notice, so there is no illegality.
I have heard rival submissions and gone through the facts and circumstances of the case. Before me, the Ld. AR of the assessee has raised the jurisdiction of the AO at Gauhati who passed the assessment order without issuing notice u/s. 143(2) of the Act, which omission according to the Ld. AR vitiates the assessment order since it is mandatory to issue notice u/s. 143(2) of the Act to assume jurisdiction to frame assessment u/s. 143(3) of the Act. According to the Ld. AR, non-issue of legally valid notice u/s. 143(2) before framing assessment u/s. 143(3) of the Act is not a curable defect as held by the Hon’ble Supreme Court in ACIT Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC). However, the main contention of the Ld. Sr. DR is that since the assessee did not question the territorial jurisdiction of the ITO, Ward-1, Shillong after he received the statutory notice from him and, therefore, the assessee is estopped/shut out from doing so as stipulated by sub-section 3 of section 124 of the Act and since the assessee participated in the assessment proceeding before the Addl. CIT, Range-3, Guwahati so, there is no prejudice caused to the assessee. It is noted that the address of the assessee firm is – Centre Point, 1st floor, G. S. Road, Ulubari, Gauhati-781007, and it is noted that it is being regularly assessed by Income Tax Authorities under Range-3, Guwahati from AY 2009-10 to AY 2013-14 (refer to page 1 to 5 of paper book) and even the return of income for the relevant AY 2011-12 was filed before the JCIT, Range-3, Guwahati. It is noted that the territorial jurisdiction of the assessee is at Guwahati, so the question is whether the AO/ITO at Shillong could have issued a valid notice u/s. 143(2) of the Act against the assessee. In order to solve this legal issue and understanding the legal position with regard to the jurisdiction of the Income Tax Authorities it is pertinent to make a reference to provisions of sections 120, 124, 127 and 129 of the Act which are reproduced herein below:
Jurisdiction of income- tax authorities
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 (1) Income- tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. (2) The directions of the Board under sub- section (1) may authorise any other income- tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income- tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub- sections (1) and (2), the Board or other income- tax authority authorised by it may have regard to any one or more of the following criteria, namely:- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. (4) Without prejudice to the provisions of sub- sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,- (a) authorise any Director General or Director to perform such functions of any other income- tax authority as may be assigned to him by the Board; (b) empower the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of (5) The directions and orders referred to in sub- sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income- tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.
Jurisdiction of Assessing Officers
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12
(1) Where by virtue of any direction or order issued under sub- section (1) or sub- section (2) of section 120, the Assessing Officer has beenvested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify. (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; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub- section (1) of section 142 or under section 148 for the Making of the return or by the notice under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier. (c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.) (4) Subject to the provisions of sub- section (3), where an assessee calls in question the jurisdiction of an- Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub- section (2) before the assessment is made. (5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub- section (1) or sub- section (2) of section 120.]
Power to transfer cases
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 (1) The Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,— (a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation: In section 120 and this section, the word "case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.
Change of incumbent of an office Whenever in respect of any proceeding under this Act an income- tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income- tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor: Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”
A bare reading of the foregoing provisions reveal that an Assessing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income Tax Authorities, as specified u/s. 116 of the Act. As per sub-section (2) of Section 120 of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income Tax Authorities who are subordinate to that authority. We also note that the concurrent jurisdiction can be vested in more than one AO, which is discernible by a conjoint reading of Section 120(5) with Section 120(2) of the Act. Section 124(1) of the Act confers jurisdiction on an AO, by virtue of jurisdiction vested by any direction or order issued by CBDT under sub-section (1) and / or (2) of section 120 of the Act. The AO is vested with the jurisdiction u/s. 124 of the Act, over any area within the limits of such area, he shall have jurisdiction over any person (assessee) carrying on a business or profession and if the place at which he (assessee) carries on his business or profession is situated within the area ear-marked for him (AO); or if that person’s (assessee’s) business or profession is carried on in more places than one, then if the principal place of his business or profession is situated within the jurisdictional territorial area, the AO gets jurisdiction. Other than the assessee’s who are not in Business or Profession, in their cases, the AO will be vested with the jurisdiction if the person (assessee) is residing within the territorial area ear-marked by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120 of the Act speaks about. However, when there is a question to be determined as to whether an AO has jurisdiction to assess any person then it would be decided by the authorities as stipulated in sub-section (2) of section 124 of the Act by Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned, as the case may be). In case, if the question is one relating to areas within the jurisdiction of different Income tax authorities(Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners as stipulated therein) then if the other Income-tax authority also agrees then the question will be resolved mutually or else it will be referred to the CBDT. So, once the AO of an assessee is vested with the
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 jurisdiction u/s. 124 read with sec. 120(1) & (2) of the Act and issues statutory notices against an assessee, no person (assessee) shall be entitled to call in question the jurisdiction of an AO unless made within the period prescribed under clauses (a), (b) and (c) of section 124(3) of the Act [i.e, within one month]. We also note that sec. 124(5) saves the action of the AO who has territorial jurisdiction over the assessee in respect of the income earned by the assessee from the territorial jurisdiction vested in him by virtue of any directions or orders issued u/s. 120(1) or (2) of the Act. So, this saving provision which saves the action of an AO is limited to the income accruing or arising or received within the limits of his territorial area as conferred to him (AO) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the AO is vested with the jurisdiction by an order/direction issued under sub-sec. (1) or (2) of sec. 120 of the Act. Thus, as per the scheme of the Act, it can be seen that sections 120 and 124 vest jurisdiction on Income Tax Authorities and on an AO respectively and, therefore, both sections i.e. sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. (1) or (2) of sec. 120 of the Act.
Having taken note of the provisions of Section 120 & 124, we however find that Section 127 is a separate code of its own. Section 127(1) empowers, the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, to transfer any case from one or more AO subordinate to him. In other words, under Section 127(1) the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, can transfer the case records of an assessee from one AO to another functioning under his own charge. On the contrary, Section 127(2) empowers the foregoing authorities to transfer of cases from the AOs from his jurisdiction to the AOs who are not functioning under his jurisdiction and therefore who are not subordinate to such authority. In the cases covered u/s 127(2) therefore, if the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 Commissioner, of the AO to whom the case of an assessee is proposed to be transferred, agrees for the transfer, then the transfer can made u/s. 127(2)(a) of the Act. In case however there is any disagreement between such stipulated authorities, the matter is required to be referred to the Board which in turn decides the issue of transfer or the Board can then authorize an Income Tax authority by a notification as stipulated in clause (b) of sub-sec.(2) of section 127 of the Act. Sub-section(4) of Section 127 of the Act provides that upon the transfer of case by the authorities specified in sub-section (1) or (2) of section 127 of the Act, any stage of the proceedings shall not render the re-issue of any notice already issued by the AO or AOs from whom the case is transferred. In other words, Section 127(4) saves the actions of the AO from whom the case is transferred and allows the AO to whom the case of an assessee is transferred to take forward the proceedings from the point where the earlier jurisdictional AO had left. Here, it would be important to note the Explanation to section 127 defines the expression ‘case’. A reading of the said Explanation shows that the expression ‘case’ in relation to any person, whose name is specified in the transfer order passed u/s. 127 of the Act, means all proceedings under the Act in respect of any year which may be pending on the date of such order or direction or it may have been completed on or before such date, and includes also all proceedings under the Income-tax Act which may be commenced after the date of such order or direction of any year. This definition of the expression ‘case’ implies that, once a transfer is made by the authority specified in sub- section (1) or (2) of section 127 of the Act who had the jurisdiction over an AO who in turn had jurisdiction over the assessee/person/entity, by virtue of direction/order issued under section 120(1) or (2) of the Act, then the entire assessment of the person i.e. pre-transfer and post-transfer as on date of transfer will stand transferred and thereafter for all purposes of the Income Tax Act, the AO of the assessee to whom the case is transferred, will be the Assessing Officer in respect of the said the assessee for pre and post proceedings from the date of transfer. In other words, once transfer order of a case of an assessee is issued u/s. 127 of the Act the effect will be that (i) all the proceedings of the assessee under the Act in respect of any year which may be pending on the date of such order will stand transferred, (ii) all the completed assessment order of the assessee on or before the date of transfer will
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 stand transferred and (iii) all proceedings under the Act in respect of the assessee which may be commenced after the date of such transfer order have to be undertaken by the transferred new AO.
In the light of the above discussion, when I examine the facts involved in the assessee’s case it is noted that as per section 124(1) of the Act since the assessee’s place of business is located at Centre Point 1st floor, G. S. Road, Ulubari, Gauhati-781007 the Income Tax Authorities, Range-3 enjoyed the jurisdiction over the assessee’s case for the year under consideration i.e. AY 2011-12 and would have enabled the competent income tax authority (depending on the pecuniary jurisdiction vested in them) , Range-3 could have validly issued notice u/s. 143(2) of the Act as noted from the acknowledgment (ITR-V) and return of income (ROI) filed by the assessee from AYs 2009-10 to 2013-14. It is evident from a perusal of the ROI / ITR-V that assessee has duly shown its address at Centre Point, 1st floor, G. S. Road, Ulubari, Gauhati-781007 which falls under the Income Tax Authorities in Range-3, Guwahati since the territorial jurisdiction over the assessee firm falls under it because its principal place of business as per section 124(1) of the Act lies with the Income Tax Authorities at Range-3. Vesting of jurisdiction with the Income Tax Authorities was in terms of the order/direction of the CBDT in section 120(1) of the Act or by Income Tax Authorities (sec. 116) who were delegated the powers to issue orders/directions vesting the jurisdiction of assessment over the authorities subordinate to it. Therefore, I find that the ITO, Ward-1, Shillong did not have the territorial jurisdiction to issue notice u/s. 143(2) of the Act dated 13.08.2012. From a perusal of page 6 of paper book which is the impugned notice, it is noted that the AO has issued the notice at Centre Point, 1st floor, G. S. Road, Ulubari, Gauhati-781007. Thus, it is clear that the ITO, Ward-1, Shillong was aware of the address to which he was issuing the notice. Since the assessee’s principal place of business is at Guwahati i.e. in State of Assam, therefore the ITO, Shillong who is posted in State of Meghalaya could not have issued notice u/s. 143(2) of the Act unless empowered to by the Act as discussed supra which is not the case of Revenue. As per section 124 of the Act the Income Tax Authority gets jurisdiction, if the assessee’s place of business is in his
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 territorial jurisdiction and in case if the assessee has business or profession in different places, then the principle place of business will determine who the Assessing Officer is for the assessee. And in case if the assessee is not into business or profession, then the jurisdiction is based upon the residence of an assessee. In this case, since the principal place of business is in Guwahati the ITO, Shillong does not have the territorial jurisdiction to issue notice u/s. 143(2) of the Act and the Revenue has not led any evidence before me to show that ITO Shillong had been empowered as per the Act to issue notice u/s 143(2) of the Act.
Coming to the contention of the Ld. CIT, DR that since the assessee did not question the territorial jurisdiction of the ITO, Ward-1, Shillong after he received the statutory notice from him and, therefore, the assessee is estopped/shut out from doing so as stipulated by sub-section 3 of section 124 of the Act. In this regard, it is noted that sub-section (3) of section 124 of the Act will come into play only when the question arises as to as to whether an AO has jurisdiction to assess any person u/s. 124 of the Act and the AO derives his powers from the direction or order issued by CBDT and/or authorities under sub-section (1) or (2) of sec. 120 of the Act respectively. It is true that when a question of jurisdiction arises in the event an AO assumes jurisdiction u/s. 124 of the Act by virtue of the jurisdiction vested by direction or order issued by CBDT and/or other authorities under sub-section (1) or (2) of sec. 120 of the Act respectively, then assessee is estopped from raising an objection to the jurisdiction, after the time period prescribed under sub-section (3) of sec. 124 of the Act lapses. This however is not the fact of the appellant’s case. Admittedly the AO at Gauhati had enjoyed jurisdiction u/s. 124 of the Act since its place of business was at Ulubari at Gauhati and the Shillong Assessing Officer did not enjoy jurisdiction u/s 124 or u/s 127 of the Act. Therefore, in our opinion as far as in the appellant’s case is concerned, the provision of section 124(3) does not come into play since the Shillong Assessing Officer never had jurisdiction u/s 124 of the Act. In my considered opinion Section 124(3) of the Act does not in any way help
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 the Department to justify the action of AO at Shillong in issuing notice under Section 143(2) to the assessee, which is an action done by him without jurisdiction. So the challenge raised by the Ld, Sr. DR against the legal issue raised by assessee fails. Therefore, I do not find any merit in the contention of the Ld. CIT, DR on this score. Admittedly, the ITO, Shillong had no territorial jurisdiction over the assessee since the assessee’s principle placed of business was situated at Ulubari, Guwahati, therefore, sub-section 3 of section 124 of the Act will not come into play.
Coming to the contention of Sr DR that ITO Shillong had PAN jurisdiction of the assessee I note that there is no such jurisdiction vested in AO as per the Act called PAN jurisdiction. This may be an internal arrangement made by the Department which has no statutory recognition, so the contention cannot be accepted. Therefore, when the statute specifically recognizes territorial jurisdiction, pecuniary jurisdiction, classes of assessee’s ( viz company, etc) and has not recognized PAN jurisdiction, question of addressing this legal issue on PAN jurisdiction does not arise.
Coming to the next argument of the Ld. DR that since the assessee has participated in the assessment proceeding before the Addl. CIT, Guwahati there is no prejudice caused to the assessee, I am of the opinion that the AO before framing the assessment u/s. 143(3) of the Act has to follow the law as prescribed by the Act. It is settled law that issuance of notice in sub-section (2) of section 143 is mandatory before he passes an order u/s 143(3) of the Act and omission to do so makes the order null in the eyes of law. Here the notice has been issued by an AO who did not enjoy jurisdiction over the assessee which action is non-est in the eyes of law as discussed supra. Therefore, all subsequent action is null in the eyes of law because it ab in-itio void. Therefore, the assessee succeeds in its legal ground.
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 12. Before I part, I would like to deal with the case law which was relied on by the Ld. CIT(A) to dismiss the legal issue. It is noted that the Ld. CIT(A) relied on the order of the Hon’ble Delhi High Court in the case of S. S. Ahlualiwa (supra). In the case of S.S. Ahluwalia (supra), in that case, the assessee was assessed at Delhi from 1980-81 to 1983- 84. From the assessment year 1984-85 to 1987-88, he filed his returns at Dimapur. The case of the assessee was reopened u/s 148 by the ACIT, Investigation, Delhi, on the basis of CBI search. When the question of jurisdiction came before the Hon'ble High Court, it was held that where the assessee shifts his residence etc., the AO of the place where the assessee has shifted or otherwise will have jurisdiction and it is not necessary that in such case an order u/s 127 is required to be passed. While going through the decision, we note that there was also an order u/s 127 of the Act and the case was transferred to ITO, Ward 20, New Delhi. Thus, the case of S.S. Ahluwalia (supra) cannot be of any assistance to the Revenue.12. Coming back to the admitted facts in the present case, I hold that, without there being valid issuance of notice u/s 143(2) of the Act, the framing of assessment order u/s 143(3) of the Act by AO Gauhati is bad in law as held by the Hon’ble Supreme Court in CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon’ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is not a curable defect. This view was reiterated by the Hon’ble Apex Court in the case of CIT Vs Laxman Das Khandelwal(108 taxmann.com 183). The relevant observations are as follows:
“5. At the outset, it must be stated that out of two questions of law that arose for consideration in Hotel Blue Moon's case2 the first question was whether notice under Section 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act. It was observed:- "3. The Appellate Tribunal held, while affirming the decision of CIT (A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Gauhati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were:
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 "(1) Whether on the facts and in circumstances of the case the issuance of notice under Section 143(3) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside?" 4. The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and sub-sections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal. 13. The only question that arises for our consideration in this batch of appeals is: whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961? 27. The case of the Revenue is that the expression "so far as may be, apply" indicates that it is not expected to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression "so far as may be, apply". In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143." 6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect:- "292BB. Notice deemed to be valid in certain circumstances.—Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was – (a) Not served upon him; or
(b) Not served upon him in time; or
(c) Served upon him in an improper manner:
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12 Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment." 7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid. 8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon's case2. The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings rendered. by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.” 13. For the reasons set out above therefore, we uphold the objections raised by the appellant against the validity of the impugned order u/s 143(3) for AY 2011-12. We accordingly hold that since in the present case no valid notice u/s 143(2) was issued by the AO who held jurisdiction over the case of the appellant, the consequent order passed u/s 143(3) dated 24.03.2014 was legally unsustainable and therefore is null in the eyes of law and therefore quashed. The assessee accordingly succeeds on the preliminary legal issue raised before me.
In the result, the appeal of the assessee is allowed.
ITA No. 354/Gau/18 M/s. Balaji Enterprise, AY 2011-12
Order is pronounced in the open court on 13th November, 2020
Sd/- (Aby. T. Varkey) Judicial Member Dated : 13th November, 2020 JD(Sr.P.S.) Copy of the order forwarded to: 1. Appellant - M/s. Balaji Enterprise, C/o Rahul Raj Jain & Co. H No. 15, 1st Floor, Bye Lane, 2, Shaktigarh Pathm Bhangagarh, G. S. Road, Assam 781005.
2 Respondent – ACIT, Range-3, Guwahati 3. CIT(A)-1, Guwahati 4. CIT- Guwahati , 5. DR, ITAT, Guwahati.
/True Copy, By order, Senior Pvt. Secy.