ACIT CIRCLE-4(3)(1), MUMBAI, MUMBAI vs. KHADAMAT INTEGRATED SOLUTIONS PVT LTD, MUMBAI

Kindly refer to the cross objection filed by the appellant for. A.Y. 2016-17 on 15.04.2025 before the Hon'ble Tribunal against the order of Ed. CIT(A) dated 30.05.2024 u/s 250 of the Act. It is submitted that the department appeal memo was received by the appellant on 12.12.2024. Accordingly, the present cross objections were due to be filed on or before 11.01.2025. Since, the cross objections are filed on 15.04.2025, there is a delay of 94 days [3 months and 4 days] in filing the present cross objection.

The appellant most humbly submits that the delay in filing the appeal is due to genuine and bona fide reasons and circumstances beyond the control of the appellant as explained hereunder:

The appellant is a 100% subsidiary of M/s Public Services Company (PSC), headquartered in the State of Kuwait. The company was incorporated in India on 15.03.2014 to carry out medical screening of persons visiting Kuwait as a pre-visa process as per the mandate received by M/s PSC from the State of Kuwait. For the year under consideration, M/s PSC has entered into a contract with the appellant to carry out medical screening work in India. Later, the said contract was not renewed and hence the appellant company became in operational from 12 April 2018 and the directors and KMP went back to Kuwait and the other employees also left the organisation. The office premises at Andheri, Mumbai was closed.

In the meantime, assessment proceedings were initiated against the appellant in August 2017. The appellant had appointed a consultant, M/s Devesh K. Shah & Co (Now M/s Devesh K. Shah & Associates LLP), Chartered Accountants to ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

Thereafter, department has filed the appeal before the Hon'ble Tribunal. However, the appellant was not aware of appeal filed by department. No physical notice was received as the office address of the appellant was closed from April 2018. The email ID of the consultant was available with the department and accordingly, the notice of hearing was sent on the email id of the consultant. The consultant informed the parent company, M/s PSC about such appeal hearing. Thereafter, after taking instructions from the appellant's parent company, a request for the copy of appeal memo in Form 36 was filed and the appeal memo was received by their Consultant on 12.12.2024. Reason for delay in filing the cross objections

It is submitted that upon receipt of the appeal memo in Form 36, immediately. the consultant approached a tax counsel to take legal advice on the matter who suggested to file cross objections/appeal before Hon'ble Tribunal against the order of Ld. CIT(A).

The parent company, M/s PSC, being situated at Kuwait, does not have background, understanding of Income Tax laws and the functioning of judiciary in India.

After explaining the legalities of the matter, M/s PSC in the second week of February 2025, asked for some time to decide the course of action. Meanwhile, the consultants were requested to take additional time from the Tribunal for the hearing. After taking advise from the management, M/s PSC granted approval for filing the cross objections and engaging a counsel to represent the case. The consultants appointed the counsel and arranged to file cross objections before the Hon'ble Tribunal on 15.04.2025. 10. It is submitted that M/s PSC has now fully taken charge of the matter and is actively involved in the appellate proceedings to ensure timely and appropriate legal representation before the Hon'ble Tribunal.

The Petitioner respectfully submits that the delay in filing the cross objection of 94 days is due to bona fide and unavoidable circumstances beyond its control as explained above. The delay in filing cross objections is purely unintentional and arose solely due to factors beyond the control of the appellant. It is submitted that there was no willful intention to delay the filing of the cross objection.

It is submitted that the appellant has a strong case challenging juri iction of the assessing officer passing the assessment order as well as on merits w.r.t. disallowance of various expenses made in the assessment order. If the delay is not condoned, the appellant shall be highly prejudiced as substantial additions and demand will be confirmed without affording the appellant a sufficient opportunity to present it's case.

In view of the above, it is submitted that the delay of 94 days in filing the appeal before Hon'ble Tribunal may kindly be condoned.

In this connection, reliance is placed on the decision of the ………………………………………………………………………………… ………………………………………………………………………………… ………………………………………………………………………………… …………………………………………………………………………..

In light of the above submissions and contentions, the appellant prays that the delay of 94 days in filing the present cross objections may kindly be condoned and the cross objections be kindly decided on merits.

On the contrary, the Ld. DR refuted the claim of the Assessee qua condonation of delay.

We have given thoughtful consideration to the rival claims of the parties on the issue qua limitation or condonation of delay. The Hon'ble Supreme Court in the case of Collector of Land Acquisition v. Mst. Katiji and Others [167 ITR 471] with regard to condonation of delay in filing an appeal, has laid down certain principles including that “ordinarily, a litigant does not stand to benefit by lodging an appeal late. Refusing to condone delay can result in a meritorious

Coming to Cross Objection, the Assessee has raised additional grounds, such as order passed under section 143(3) of the Act is invalid and bad in the eyes of law. Further, the notice under section 143(2) of the Act has been issued by the invalid Authority and hence bad in the eyes of law. Further, the Assessing Officer, ACIT(12)(3)(1),Mumbai passing the assessment order under section 143(3) of the Act has not issued mandatory notice under section 143(2) of the Act.

As the Assessee in the CO, has raised the legal issues, which emanates from the orders/documents/material already available on record and goes to the root of the case and therefore, in view of the judgment of the Hon‟ble Apex Court in the case of National Thermal Ward-12(3), Mumbai on 01.08.2017, which resulted into passing the assessment order dated 25.05.2023 under section 147 read with section 144 read with section 144B of the Act by the ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

1 Further, as in the metro cities, the Income Tax Officer was empowered to make the assessments only, in the cases of the income declared upto Rs.30 Lakh only, and therefore, notice issued by the Income Tax Officer under section 143(2) of the Act dated 01.08.2017 was not as per the Instruction and / or power given by the CBDT and thus would entail the quashing of the assessment order as well.

2 dated 08.03.2022 decided by the Hon‟ble High Court and in the case of Monarch and Qureshi Builders vs. ACIT, in ITA No. 2026/Mum/2023, dated 21.12.2023, wherein the Hon‟ble Coordinate Bench of the Tribunal followed the aforesaid judgment of the Hon‟ble High Court, in the case of Ashok Devichand Jain (supra).

On the contrary, the learned DR refuted the claim of the Assessee by submitting that the Instruction (supra) issued by the CPC is just for the convenience of the Assessing Officer and / or the ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

1 The learned AR in support of aforesaid contentions, also relied on the judgments passed by the Hon‟ble Apex Court in the case of Deputy Commissioner of Income Tax (Exemption) vs. Kalinga 9. Heard the parties and perused the material available on record and considered the rival submissions of the parties. The Assessee has raised the issue that admittedly the Assessee by filing its return of income on 29.11.2016 for assessment year under consideration had declared its total income at Rs.16,38,56,590/- and therefore as per Instruction no. 1 (supra), only DC/AC was empowered to make the assessment on the basis of pecuniary limit as prescribed in the said instruction and thus the notice 01.08.2017 u/s 143(2) of the act issued by the ITO, on the basis of which, the assessment order 25.05.2023 under section 147 read with section 144 read with section 144B of the Act has been passed by the Assessment unit of the Revenue Department/ACIT-13(2)(1) but not by the Income Tax Officer, Ward-12(3)(2), Mumbai, who issued the notice under section 143(2) of the Act, would be nullity and would entail quashing of the Assessment order as well.

1 The legal issue raised by the assessee goes to the very root of the case, and therefore, we deem it appropriate to decide the legal issue raised by the assessee qua juri iction of the Assessing Officer for issuing the juri ictional notice under section 143(2) and/or passing the assessment order by the subsequent Assessing Officer on the basis of notice u/s 143(2) of the act issued by the ITO and/or without issuing any fresh notice u/s 143(2) of the Act.

We observe that admittedly the notice under section 143(2) of the Act is mandatory and requirement of issuing the same, cannot be waived off, as has also been held in the case of Assistant No.1/2011 dated 31.01.2011 has increased the existing monetary limits of the Deputy Commissioners/Assistant Commissioners and Income Tax Officers, for assessment of retuned income, as per monetary limit, which read as under:

Admittedly, the Assessee had declared its income at Rs.16,38,56,590/-, by filing its original return of income on 29.11.2016 for the assessment year under consideration, which was selected for complete scrutiny, and therefore, the statutory notice under section 143(2) of the Act was issued on 01.08.2017 by Income Tax Officer (supra). Admittedly accordingly to Instruction No.1/2011 referred to above, only DC / AC has the power to make the Assessee‟s assessment and to issue the notice under section 143(2) of the Act, whereas in the instant case, as observed above the notice dated 01.08.2017 under section 143(2) of the Act was issued by the Income Tax Officer (supra), who in fact had no juri iction or competency or power to make the assessment of the income involved/declared over and above Rs.30 Lakh, therefore, the assessment order passed in the absence valid juri iction notice, would be nullity.

We further observe that Hon‟ble Juri ictional High Court in the case of Ashok Devichand Jain (supra) has also dealt with an identical situation, wherein statutory notice under section 148 of the Act was issued by the ITO but not by the DC/AC as prescribed in aforesaid Instruction No.01/2011 (supra) and therefore the notice u/s 148 of the act was challenged by the assessee, and the Hon‟ble Juri ictional High Court thus by taking cognizance of such fact that the notice was issued by the ITO, who does have any juri iction, held “such notice as bad, on the count of having been issued by an officer, who had no authority in law to issue such notice. The notice under section 148 of the Act is juri ictional notice and any inherent defect therein, is not curable”. The Hon‟ble High Court ultimately set aside the notice dated 30.03.2019 under section 148 of the Act, by observing and holding as under:

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 31* 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 & Non Corporate assessee is above Rs. 20 lakhs, the juri iction will be of DO/AC.

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 ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

In the circumstances, we have no hesitation in setting aside the notice dated 30* March, 2019.”

We further observe that the Hon‟ble Coordinate Bench of the Tribunal in the case of Ketan Tokeshi Shah vs. Deputy CIT in ITA No.1107/Mum/2023 decided on 26.07.2023 has also dealt with identical issue and the Instruction No. 1/2011 (supra) and by following the judgment in the case of Ashok Devichand Jain (supra) held the assessment completed under section 143(3) of the Act by issuing a notice under section 143(2) of the Act by DCIT, Central Circle – 2, Thane, as without juri iction and consequently quashed the assessment itself.

Thus respectfully following the judgment of the Hon‟ble Juri ictional High Court in the case of Ashok Devi Chand Jain (supra), which has also been followed by the Tribunal in more than 10-20 cases, we are of the considered view that in the instant case, as the Income Tax Officer who issued notice under section 143(2) of the Act had no power/juri iction to make the assessment of the assessee, because of the pecuniary limit and as it is held by the Hon‟ble High Court in Devi Chand Case (supra) that inherent defect is not curable, thus the assessment order passed in pursuance to ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

Now coming to the objection raised by the learned DR to the effect that the assessee has not raised any objection with regard to the juri iction of the Assessing Officer in issuing the notice under section 143(2) of the Act by incompetent authority, as alleged. We observe from the judgment of the Hon‟ble High Court in the case of Kalinga institute of Industrial Technology (supra), the Hon'ble High Court set aside the notice issued under section 143(2) of the Act on the ground that Juri ictional Officer had not adjudicated upon returns, as juri iction had been changed after returns were filed by considering peculiar facts that the juri iction was vested with the Commissioner of Income Tax (O )(Exemption), however a notice under section 143(2) of the Act was issued by the Assistant Commissioner of Income Tax, Corporate, Circle-1(2) Bhubaneshwar, whereas the Ld. Joint Commissioner of Income Tax (O )(Exemption), Bhubaneshwar by filing an affidavit claims that juri iction over the assessee was validly vested with the Circle and accordingly the assessment under section 143(3) of the Act was completed, as per the provisions of the Act.

1 However the Hon‟ble Apex Court by taking into consideration peculiar facts and circumstances the case specific to the effect that since records revealed, the assessee had participated pursuant to notice issued under section 142(1) and had not questioned the juri iction of the Assessing Officer and the juri iction had been changed after the returns were filed and the Hon‟ble High Court had granted liberty to the Concerned Authority to issue appropriate notice and section 124(3)(a) preclude the assessee from questioning the juri iction of the Assessing Officer, if he does not do so within 30 days of the receipt of notice under section 142(1) of the Act, ultimately by allowing the SLP directed that the Assessing Officer is free to complete the assessment (in case the assessment order has not been issued) within the next 60 days.

2 Here it is not the case of the Department that the Income Tax Officer, who had issued the notice under section 143(2) of the Act was empowered and competent to issue such notice and to make the assessment in the case of assessee and / or income declared by the assessee, which was admittedly more than Rs.30 Lakh, the limit prescribed in the circular referred to above for making the assessment by the ITO. Further, the Hon‟ble Apex Court in the case of Kalinga Institute of Industrial Technology (supra) has taken into cognizance of the provisions of section 124(3)(a) of the Act, which deals with the territorial juri iction of the Assessing Officer, as also held by the Hon‟ble Juri ictional High Court in the case of Peter Vaz vs. CIT, (2021) 128 taxmann.com 180 (Bom). by observing and holding as under: -

We further observe that Hon‟ble Juri ictional High Court in the case of Bansilal B. Raisoni & Sons vs. Assistant Commissioner of Income Tax, Central Circle-1 Nasik, (2019) 101 taxmann.com 20 (Bom) has also held the same, as observed above.

We further observe that the Hon‟ble High Court of Gujarat in the case of Commissioner of Income Tax – 2 vs. Ramesh D. Patel, (2014) 42 taxmann.com 540 (Gujarat) has also held that section 124 of the Act, pertains to territorial juri iction of Assessing Officer vested under sub section (1) or (2) of section 120 of the Act, by observing as under:

We further observe that Hon‟ble Coordinate Bench of the Tribunal in the case of Aananda Devicon (P.) Ltd. vs. Assistant Commissioner of Income Tax (2024) 163 taxmann.com 372 (Raipur-Trib.) has also dealt with an identical issue and held that on a careful perusal of Section 124 of the Act, it transpires that the same deals with the issue of "territorial juri iction" of an Assessing Officer. Ostensibly, sub-section (1) of Section 124 contemplates vesting with the A.O juri iction over a specified area by virtue of any direction or order issued under subsection (I) and subsection (2) of Section 120 of the Act. The assessee's objection to the validity of the juri iction assumed by the Income- Tax Officer, is by no means an objection to his territorial juri iction, but in fact an objection to the assumption of juri iction by him in contravention of the CBDT Instruction No.1/2011. dated 31.01.2011, therefore, the provisions of sub- section (3) of Section 124, would not assist the case of the revenue. For brevity and ready reference, conclusion drawn by the Hon'ble bench is reproduced herein below: -

We further observe that the learned DR also relied upon the judgment of the Hon‟ble Apex Court in the case of Ambience Farms (P.) Ltd. (supra), wherein SLP filed against the decision of the Hon‟ble High Court has been dismissed. In that case, the Hon‟ble High Court dealt with an issue, wherein the assessee challenged the notice under section 143(2) of the Act issued by the ACIT / DCIT

Thus, on the aforesaid analyzations, it has become clear and therefore we reiterate that the provisions of section 124 of the Act deals with the territorial juri iction of the Assessing Officer and if no objection is raised within the time limit, as prescribed under section 124(3)(a) of the Act, then the Assessee would be precluded to raise the objection qua territorial juri iction, however, in the instant case, as we are not dealing with the territorial juri iction but in fact deals with the notice u/s 143(2) of the Act issued by the Income Tax Officer, who had no authority and / or power to assess the income of the assessee and / or to make the assessment in the case of the assessee being beyond pecuniary juri iction/limit, as prescribed by the CBDT vide Instruction no. 01/2011. ITA No.3766/MUM /2024 & CO No.85/MUM/2025 (A.Y. 2016-17) Khadamat Integrated Solutions Pvt. Ltd.

The Income Tax Act 1961 also mandates assessing officers to fulfil certain pre-conditions before issuing a notice of reassessment. Section 149 requires assessing officers to issue a notice of reassessment under Section 148 within the prescribed time limits. Further, Section 151 requires assessing officers to obtain sanction of the specified authority before issuing notice under Section 148. In Chhugamal Rajpal v. S P Chaliha, a three-Judge Bench of this Court held that Section 151 must be strictly adhered to because it contains “important safeguards.”

A statutory authority may lack juri iction if it does not fulfil the preliminary conditions laid down under the statute, which are necessary to the exercise of its juri iction. There cannot be any waiver of a statutory requirement or provision that goes to the root of the juri iction of assessment. An order passed without juri iction is a nullity. Any consequential order passed or action taken will also be invalid and without juri iction. Thus, the power of assessing officers to reassess is limited and based on the fulfilment of certain preconditions.”

As the Hon'ble Apex Court in Rajeev Bansal has clearly held that “ If a statute expressly confers a power or imposes a duty on a particular authority, then such power or duty must be exercised or performed by that authority itself. Further, when a statute vests certain power in an authority to be exercised in a particular manner, then that authority has to exercise its power following the prescribed manner. Any exercise of power by statutory authorities inconsistent with the statutory prescription is invalid. A statutory authority may lack juri iction if it does not fulfil the preliminary conditions laid down under the statute, which are necessary to the exercise of its juri iction. There cannot be any waiver of a statutory

As we have quashed the notice u/s 143(2) of the Act and the assessment order itself, thus inclined not to delve into other grounds/aspects of the case as raised by the Assessee, as the adjudication of the same, would be futile exercise. Thus, the Cross Objection under consideration filed by the Assessee is allowed.

In view of the judgment in Cross Objection filed by the assessee, the appeal filed by the Revenue Department has become infructuous, thus, the same is dismissed being infructuous.

In the result, Cross Objection filed by the Assessee is allowed, whereas the appeal filed by the Revenue Department stands dismissed as infructuous.