PANKAJ DAHYABHAI SHAH,PALGHAR vs. ASSISTANT COMMISSIONER OF INCOME TAX, PALGHAR, PALGHAR

After having heard counsels for both the parties on this application, I found that the additional grounds so raised through the application are legal in nature and no separate evidences are required for adjudicating the same and both the grounds raised by the assessee goes to the roots of the case. Therefore, while placing reliance on the decision of Hon’ble Supreme Court, in the case of National Thermal Power Corporation Limited reported in 229 ITR 383, I allow the application for raising additional ground and admit the same to be adjudicated on merits.

Since the additional grounds raised by the assessee are Legal in nature and goes to the roots of the case, therefore I have decided to deal with these grounds, firstly.

Ground No. 1 of the additional grounds raised by the assessee relates to challenging the framing of assessment order dated 18.12.2018 by ACIT, and in this regard, the Ld. AR submitted that AO did not have the juri iction to frame the impugned orders of assessment in accordance with the CBDT circular No. 1/2011 dated 31 January 2011, and as such the order of assessment is ultravires and deserve to be 3 Pankaj Dahyabhai Shah, Mumbai quashed. On this proposition Ld. AR relied upon the decision of the coordinate Bench of ITAT in the case of Amiya Gopal Dutta Vs DCIT in ITA No. 126/Kol/2022 and in the case of Hirak Sarkar Vs. ACIT in ITA No. 850/Kol/2019. 6. On the contrary, DR relied upon the orders passed by the revenue authorities. And submitted that the order of assessment has been passed validity.

I have heard the counsels for both the parties and perused the material placed on record, judgements cited before me and the orders passed by the revenue authority. From the records, I notice that it is undisputed fact that the assessee is a non-corporate entity and has declared total income of Rs. 14,96,960/-. I further noticed that during the course of assessment notice under section 143(2) of the Act was issued by the ITO, Ward-1, Palghar to the assessee, whereas the final assessment was framed by ACIT, Circle, Palghar. I have also perused the instruction number 1/2011 as stated hereinabove which is extracted below for the sake of convenience and ready reference.

I have considered the rival contentions of both the Id. representatives of the parties. Before proceeding further, it will be appropriate to refer to section 120 of the Act which, for the sake of ready reference, is reproduced as under:

A perusal of the aforesaid statutory provisions would reveal that the juri iction of Income Tax Authorities may be fixed not only in respect of territorial area but also having regard to a person or classes of persons and income or classes of income also. Therefore, the CBDT having regard to the income as per return has fixed the juri iction of the Assessing Officers.

Now, in this case, the reasons for forming belief of escapement of income by the assessee were recorded by the ITO, Ward-23(3), Hooghly and thereafter, notice u/s 148 of the Act was also issued by the by the ITO, Ward-23(3), Hooghly. However, the assessment has been framed by the ACIT, Circle-23(1), Hooghly. At this stage, it will be appropriate to refer to the provisions of section 127 of the Act as under:

A perusal of the above statutory provisions would reveal that juri iction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from ITO, Ward- 23(3), Hooghly to ACIT, Circle- 23(1), Hooghly. Even, there is no 7 Pankaj Dahyabhai Shah, Mumbai document on the file that the ACIT, Circle-23(1), Hooghly had ever recorded any reasons to form belief that the income of the assessee has escaped assessment nor did he issue any notice u/s 147 of the Act. On the other hand, the ITO, Ward-23(3), Hooghly had recorded the reasons for reopening of the assessment and had issued notice u/s 148 of the Act, but did not proceed further with the framing of assessment. Under the circumstances, the assessment framed by ACIT, Circle-23(1), Hooghly, is bad in law on two counts, firstly he did not have any pecuniary juri iction to frame the assessment and secondly he himself did not form any belief that the income of the assessee has escaped assessment nor did he issue notice u/s 148 of the Act which was sine qua non to assume juri iction to frame to assessment. The issue relating to the pecuniary juri iction also came into consideration before the Coordinate Bench of the Tribunal in ITA No.2517/Kol/2019 and Others vide order dated 03.02.2021, wherein the Tribunal further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that the assessment framed by Assessing Officer who was not having pecuniary juri iction to frame such assessment was bad in law. The relevant part of the order dated 03.02.2021 passed in ITA No 2517/Kol/2019 and Others is reproduced as under:

3. Kolkata "B" Bench of the Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd. (supra) held as follows:

On merits, he rebutted the findings of the lower authorities The ld. Counsel for the assessee relied on certain case-law, which I would be referring to as and when necessary.

The ld. D/R, on the other hand, submitted that the concurrent juri iction vests with the ITO as well as the ACIT and hence the assessment cannot be annulled simply because the statutory notice u/s 143(2) of the Act, was issued by the ITO and the assessment was completed by the ACIT. He further submitted that the assessee did not object to the issue of notice before the juri ictional Assessing Officer and even otherwise, Section 292BB of the Act, comes into play and the assessment cannot be 9 Pankaj Dahyabhai Shah, Mumbai annulled. On merits, he relied on the orders of the lower authorities.

I find that there is no dispute in the fact that the notice u/s 143(2) of the Act dt. 29/09/2016 has been issued by the ITO, Wd-1(1), Durgapur. Later, the case was transferred to the juri iction of the ACIT on 11/08/2017. Thereafter, no notice u/s 143(2) of the Act was issued by the Assessing Officer having juri iction of this case and who had completed the assessment on 26/12/2017 i.e., ACIT, Circle-1(1), Durgapur. Under these circumstances, the question is whether the assessment is bad in law for want of issual of notice u/s 143(2) of the Act

This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in ITA No. 2073/Kol/2016 order dt. 27.09.2017, held as follows:-

We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income of Rs.50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of 'non corporate orate returns' the ITO's increased monetary limit was upto Rs.15 lacs; and if the returned income is above Rs. 15 lacs it was the AC/DC. So, since the returned income by assessee an individual is above Rs 15 lakh, then the juri iction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only the AC/DC had the juri iction to assess the assessee. It is settled law that serving of notice u/s 143(2) of the Act is a sine qua non for an assessment to be made u/s. 143(3) of the Act. In this case, notice w/s. 143(2) of the Act was issued on 06.09.2013 by ITO, Ward- 1, Haldia when he did not have the pecuniary juri iction to assume juri iction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary juri iction to issue notice he duly transferred the file to the ACIT, Circle-27, Haldia on 24.09. 2014 when the ACIT issued statutory notice which was beyond the time limit prescribed for issuance of notice u/s. 143(2) of the Act. We note that the ACIT by assuming the juri iction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the ACIT, Circle-27, Haldia after the limitation period for issuance of statutory notice u/s 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law and consequential assessment order passed u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law. Therefore, the legal issue raised by the assessee is allowed Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.

1. This Bench of the Tribunal in the case of Krishnendu Chowdhury vs. ITO reported in [2017] 78 taxmann.com 89 (Kolkata-Trib.) held as follows:-

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 Hotel Blue Moon's case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act.

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, 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."

Respectfully following the propositions of law laid down in all these case-law and applying the same to the facts of the case, we hold that the assessment order is bad in law for the reason that the Assessing Officer having juri iction over the assessee, has not issued a notice u/s 143(2) of the Act as required by the statute. Notice issue by the officer having no juri iction of the assessee is null and void. When a notice is issued by an officer having no juri iction, Section 292BB of the Act, does not comes into play Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non- juri ictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the juri ictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee."

Respectfully following the propositions of law laid down in these orders stated above, we hold that the orders are bad in law for the reason that the assessing authority passed the order u/s 143(3) of the Act i.e. DCIT-13(1), Kolkata has not issued a notice u/s 143(2) of the Act and also for the reason that the juri iction of these cases lies with the ITO and not the DCIT. Hence all the orders passed by the ld. CIT(A) in these four cases are hereby quashed and the appeals of the assessees are allowed."

In view of the discussion made above and respectfully following the decision cited above, it is held that the reassessment framed u/s 147 Ward(1) Palghar. However, ultimately the order of assessment was framed by a ACIT Palghar circle who had only issued notice under section 142(1) of the Act dated 14.05.2018, but had not issued mandatory notice u/s 143(2) of the Act. Even at the time of transfer of the case from the ITO to ACIT, the assessee should have been informed and hearing should have been taken place, but no notice of such transfer has ever been issued or served upon the assessee.

The above issue has again been ‘squarely covered’ by the decision of the Coordinate Bench of ITAT in the case of Veerendra Gurulingappa Mangalge Vs. ITO in ITA No. 695/PUN/2019, wherein the identical issue was decided in favour of the assessee, the operative portion of the order of the Coordinate Bench of ITAT In the case cited above is reproduced below.

The provision of section 127 of the Act deals with transfer of cases where a particular case had been transferred from one juri iction to another juri iction as in the present case. The provision clearly states that a reasonable opportunity of hearing has to be provided to the assessee in case of such transfer. What the provision of section 129 states is merely a change in incumbent of the office and not regarding transfer of case. Therefore, first it is clear that the assessment was completed without issuing the notice u/s.143(2) of the Act by ITO, Ward 2(4), Aurangabad. Moreover, if at all, there was change of juri iction from ITO, Ward 2(1), Aurangabad to ITO, Ward 2(4), Aurangabad, provision of section 127 of the Act is absolutely clear that a reasonable opportunity of hearing should be given to the assessee which was not done in the present case. Tax Jurisprudence which is the spirit of welfare legislation. The Quasi-judicial Authority cannot be permitted to transfer juri iction from one Assessing Officer to another without the knowledge and information of the assessee who is actual tax payer and contributing revenue to the government. To safeguard that Section 127 of the Act has been incorporated. In the present case of the assessee, when one Officer has issued notice u/s.143(2) of the Act, his juri iction was transferred and another Officer has been placed for framing assessment. First of all on this transfer of case, the assessee should have been informed and hearing should have been taken place. Secondly, the Officer who ultimately completed the assessment, should have issued notice u/s.143(2) of the Act to the assessee again. In this case, notice has been issued by the ITO, Ward 2(1), Aurangabad and assessment was completed by the ITO, Ward 2(4), Aurangabad which is not permissible within the scope and ambit of the Act.

In view of the aforesaid examination of facts and legal parameters, we set aside the orders of the Sub-ordinate Authorities and hold the assessment order passed by the Assessing Officer to be null and void-ab-initio. Thus, legal ground has been answered in favour of the assessee. Therefore, any other grounds on merits becomes academic in nature and hence, are dismissed.

Therefore considering the facts of the present case and also keeping in view the above decision, I am of the view that the quasi-judicial authorities cannot be permitted to transfer juri iction from one assessing officer to another without the knowledge and information of the assessee who is actual taxpayer and contributing revenue to the Government, therefore to safeguard such a situation, the provisions of section 127 of the Act has been incorporated. In the present case at the time of transfer, no information or opportunity of hearing was provided to the assessee and secondly the officer who ultimately complete the assessment has not issued notice under section 143(2) of the Act to the assessee again. In this case notice u/s 143(2) has been issued by the IT0, ward(1) Palghar and assessment was completed by ACIT Circle, Palghar which is not permissible within the scope and ambit of Act 15. Therefore, considering the facts as discussed above and keeping in view the Legal parameters, I set aside the order of the AO on this ground as well and hold that the assessment order passed by the CIT, Palghar to be null and void ab in intio and allow this ground of appeal. Thus in this way, the legal grounds raised by the assessee are decided in favour of assessee. 16. Thus, in view of my findings on legal grounds the decision on any other ground on merits becomes academic in nature and hence the appeal filed by the assessee stands for partly allowed.

अपीलाथ / The Appellant 2. थ / The Respondent. 3. संबंिधत आयकर आयु / The CIT(A) 4. आयकर आयु(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, सािपत ित ////

उप/सहायक पंजीकार ( Asst.