R MURUGAPPA @ MURUVAPPAN,PONDICHERRY vs. ITO, WARD-4, PONDICHERRY

PER G. MANJUNATHA, AM: This appeal filed by assessee is directed against order of

learned Commissioner of Income Tax (Appeals), Puducherry,

dated 14.03.2019 and pertains to assessment year 2011-12.

“ 1) The order of the Commissioner of Income Tax (Appeals), Puducherry dated 14.03.2019 in I. T.A.No.96/CIT(A)-PDY/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

2 ITA No.904/Chny/2019 Rs.2,70,00,000/- representing the cash deposits in the bank account No.406346314 on the application of section 68 of the Act in the computation of taxable total income without assigning proper reasons and justification.

3 ITA No.904/Chny/2019 proper opportunity given before passing of the impugned order as well as before completing the re-assessment and any order passed in violation of the principles natural justice would be nullity in law.

additional grounds vide letter dated 17.05.2022 and relevant

grounds of appeal taken by the assessee are reproduced as

under:-

I. The notice uls.148 dated 10.09.2014 issued by the Income Tax Officer, Ward- 1(1) Pondicherry is bad in law and consequently order of assessment dated 10.03.2016 passed u/s.144 r.w.s 147 is void ab initio.

4 ITA No.904/Chny/2019 4. The learned A.R. for the assessee referring to petition

filed by the assessee for admission of additional grounds

submitted that these additional grounds could not be raised at

the time of filing of appeal before the Tribunal due to

inadvertence and it could not be visualized by the assessee

even during the appeal proceedings before the learned CIT(A).

However, these additional grounds are jurisdictional in nature

and goes to route of the matter and further, facts relating to

said additional grounds are very much available on record

before the Assessing Officer. Therefore, in light of decision of

the Hon'ble Supreme Court in the case of National Thermal

Power Co. Ltd. Vs. CIT (1998) 229 ITR 383, additional

grounds filed by the assessee may be admitted.

petition filed by the assessee for admission of additional

grounds submitted that all along the assessee never

challenged jurisdiction of the Assessing Officer either during the

assessment proceedings or even before first appellate

proceedings, however, for the first time, the assessee has taken

legal grounds challenging jurisdiction of the Assessing Officer,

5 ITA No.904/Chny/2019 therefore, same cannot be admitted. The learned DR further

submitted that as per provisions of section 124(3) of the Income

Tax Act, 1961, no person shall be entitled to call in question the

jurisdiction of an Assessing Officer after expiry of one month

from the date on which he was served with notice u/s.142(1) or

143(2) of the Income Tax Act, 1961, and further, where he has

not made any return even notice issued u/s.148 of the Income

Tax Act, 1961. Therefore, at this stage, ground take by the

assessee challenging jurisdiction of the Assessing Officer

cannot be entertained.

filed by the assessee for admission of additional grounds. We

have carefully gone through grounds taken by the assessee

challenging validity of 148 notice issued by the Assessing

Officer in light of provisions of section 124, 127 and 129 of the

Income Tax Act, 1961, and we find that grounds taken by the

assessee are purely legal grounds, which goes to root of the

matter in questioning jurisdiction of the Assessing Officer to

assess income of the assessee and said grounds can be taken

up for first time at any time of proceedings, including

proceedings before the Tribunal as held by the Hon'ble

6 ITA No.904/Chny/2019 Supreme Court in the case of National Thermal Power Co. Ltd.

Vs. CIT (supra). Therefore, we are of the considered view that

additional grounds filed by the assessee needs to be admitted

and therefore, we admit additional grounds filed by the

assessee for adjudication.

additional ground filed by the assessee is validity of 148 notice

dated 10.09.2014 issued by the Income Tax Officer, Ward-1(1),

Puducherry and consequent assessment order passed u/s.144

r.w.s 147 dated 10.03.2016. The learned A.R. for the assessee

referring to notice issued by the Income Tax Officer, Ward-1(1),

Puducherry dated 10.09.2014 submitted that notice u/s.148 of

the Act for reopening of assessment was issued by the

Assessing Officer, who is having no jurisdiction on the

assessee, which is evident from the fact that subsequently on

22.04.2015 the Income Tax Officer, Ward-1(1), Puducherry, has

transferred case to the Income Tax Officer, Ward-4,

Puducherry, with reason for transfer that jurisdiction vests with

the Income Tax Officer, Ward-4, Puducherry. Therefore,

assessment framed u/s.144 r.w.s. 147 of the Income Tax Act,

7 ITA No.904/Chny/2019 1961 dated 10.03.2016, pursuant to 148 notice issued by non-

jurisdictional Assessing Officer is void, ab initio and liable to be

quashed. The learned A.R. for the assessee further referring to

transfer proforma, which was furnished before us and copies of

order sheet entries from records of the Assessing Officer

submitted that there is no dispute about issue of 148 notice by

the non-jurisdiction Assessing Officer and further, it is also not

in dispute that case has been transferred to jurisdiction

Assessing Officer for the reason that jurisdiction vests with the

Income Tax Officer, Ward-4, Puducherry. Further, there is no

reference to transfer of case as required u/s.127 of the Act, nor

notice issued u/s.129 of the Act for change of incumbent of an

office. Therefore, in absence of such orders from the competent

authority, notice issued by the Income Tax Officer, Ward-1(1),

Puducherry u/s.148 of the Act, is invalid and consequential

assessment order passed u/s/.144 r.w.s. 147 is void ab initio

and liable to be quashed. In this regard, the AR relied upon

decision of the Hon’ble Gujarat High Court in the case of

Shirishbhai Hargovandas Sanjanwala Vs. ACIT (2017) 396 ITR

167 and also Pankajbhai Jaysukhlal Shah vs. ACIT (2020)

425 ITR 70 and also had relied upon decision of the Hon’ble

8 ITA No.904/Chny/2019 High Court of Calcutta in the case of PCIT Vs Nopany & Sons

(2022) 286 taxman.com 388.

‘A’ of jurisdictional details of O/o. PCIT, Puducherry submitted

that all Assessing Officers have territorial jurisdiction over the

cases of Union territory of Puducherry and further, cases have

been allocated to jurisdiction of each Assessing Officer based

on alphabets of name of the assessees and their income.

Therefore, once all AOs having jurisdiction over assessees in

the territorial jurisdiction, then question of issuing notice by

non-jurisdictional Assessing Officer does not arise. The learned

DR further referring to provisions of section 124(5) of the Act,

submitted that as per said provision, every Assessing Officer

shall have all powers conferred by or under this Act, on an

Assessing Officer in respect of income accruing or arising or

received within area, if any, over which he has been vested with

jurisdiction by virtue of direction or order issued sub-section (1)

or (2) of section 120 of the Income Tax Act, 1961. Therefore,

there is no merit in the arguments of the assessee that notice

issued u/s.148 of the Act is invalid and consequent proceedings

are liable to be quashed. The learned DR has also taken

9 ITA No.904/Chny/2019 support from the provisions of section 124(3) and submitted

that if at all any person needs to question jurisdiction of the

Assessing Officer, he shall question said jurisdiction at the first

available option, that too within one month from the date on

which he was served with notice or before completion of

assessment, whichever is earlier. In this case, the assessee

never questioned jurisdiction of the Assessing Officer upto the

stage of first appellate authority. However, for the first time

grounds has been taken to challenge jurisdiction of the

Assessing Officer before the Tribunal and thus, grounds filed

by the assessee should not be entertained.

available on record and gone through orders of the authorities

below. The jurisdiction of an Assessing Officer is decided by

virtue of any direction or order issued under sub-section (1) or

(2) of section 120 of the Income Tax Act, 1961, where Board

shall decide jurisdiction of an Assessing Officer based on

criteria of territorial area, persons or classes of persons, or

income or classes of income and cases or classes of cases

and such jurisdiction has been conferred to the Assessing

10 ITA No.904/Chny/2019 Officer by an order. In this case, as per annexure ‘A' of

jurisdiction details of O/o. PCIT., Puducherry, Income Tax

Officer, Ward-1, Puducherry has jurisdiction over business

assesses with name starting from alphabet “A,B,C,F, G & J”,

having returned income upto Rs.10 lakhs and corporate

assessees name starting from alphabet ‘A’ to ‘M’ having

returned income upto Rs.15 lakhs. The Income Tax Officer,

Ward-4, having jurisdiction over business assessees name

starting with alphabet “H, I, K & M” having returned income upto

Rs.10 lakhs and salary cases name starting from “A to M”

having returned income upto Rs.10 lakhs. Therefore, as per the

Board order, jurisdiction of the Income Tax Officer, Ward-1,

Puducherry and the Income Tax Officer, Ward-4, Puducherry

has been separately defined. Therefore, concerned A.O. can

exercise their jurisdictional power over the assessees having

names starting with alphabet mentioned against their

jurisdiction. In this case, name of the assessee starts with

alphabet ‘M’ and the assessee is a business assessee.

Therefore, obviously jurisdiction over the assessee lies with the

Income Tax Officer, Ward-4, Puducherry, but not with ITO.,

Ward-1(1), Puducherry.

11 ITA No.904/Chny/2019 10. In this case, admittedly, ITO., Ward-1(1), Puducherry had

issued notice u/s.148 dated 10.09.2014. It is also an admitted

fact that the Income Tax Officer, Ward-1(1), Puducherry has

transferred case to the Income Tax Officer, Ward-4,

Puducherry, through transfer proforma, as per which reasons

for transfer of case was specified as jurisdiction vests with the

Income Tax Officer, Ward-4, Puducherry. Further, the Income

Tax Officer, Ward-4, Puducherry does not issue notice u/s.148

of the Income Tax Act, 1961. In fact, there is no dispute with

regard to notice issued u/s.148 of the Act . The Revenue itself

has admitted fact that 148 notice was issued by the Income

Tax Officer, Ward-1(1), Puducherry. It is also admitted fact that

there is no reference to any order from the Board or PCIT,

Puducherry, in terms of section 120(1) or 124(1) or 124(2) of

the I.T.Act, 1961 for transferring case from Income Tax Officer,

Ward-1(1) to Income Tax Officer, Ward-4, Puducherry, by

specific order. In fact, the Income Tax Officer, Ward-1(1),

Puducherry himself has transferred case to the Income Tax

Officer, Ward-4, Puducherry, because jurisdiction over the

assessee is clearly vests with the Income Tax Officer, Ward-4,

Puducherry. The Revenue had also failed to bring on record

12 ITA No.904/Chny/2019 any evidence to prove that any notice issued u/s.129 of the

Income Tax Act, 1961 for change of incumbent of office at least

to prove their case that new officer has assumed proper

jurisdiction. In absence of any such details, it can be safely

concluded that Income Tax Officer, Ward-1(1), Puducherry

does not have any jurisdiction over the assessee and

consequently, he cannot issue notice u/s.148 of the Act, 1961

to the assessee. Since, the Assessing Officer, who had issued

notice u/s.148 of the Act and the Assessing Officer, who had

completed assessment u/s.144 r.w.s 147 of the Act is different,

unless, there is statutory notice as required to be issued u/s.148

from the jurisdictional Assessing Officer, consequent

assessment order passed by the Assessing Officer u/s.144

r.w.s 147 is void ab initio and liable to be quashed.

in support of his arguments, including decision of the Hon’ble

Gujarat High Court in the case of Shirishbhai Hargovandas Sanjanwala Vs. ACIT (supra), where the Hon’ble High Court

under identical set of facts held that issuance of reassessment

notice by the Assessing Officer, who has no jurisdiction to

13 ITA No.904/Chny/2019 assess the assessee was bad in law and further, it was not a

mere irregularity or defect which could be cured. The relevant

findings of the Hon’be High Court are as under:-

“5. It can thus be seen that even the department agrees that normal assessment of the petitioner lies before circle 4(2), Ahmedabad whereas in the present case, impugned notice has been issued by the Assistant Commissioner of circle 5(2), Ahmedabad. This according to the department happened since in the sale deed, the petitioner was described as an agriculturist. As an agriculturist, having a particular residential address, his assessment would be made by the Assistant Commissioner, circle 5(2) and that is how the impugned notice came to be issued by the said officer.

14 ITA No.904/Chny/2019 particular nature can exercise such powers which would be purely a case of lack of authority failing which there would be a total anarchy and any officer positioned at any place may choose to exercise jurisdiction over any assessee.

Hon’ble Gujarat High Court in the case of Pankajbhai

Jaysukhal Shah Vs. ACIT (2020) 425 ITR 70 and the Hon’ble

High Court under identical set of facts held that where reasons

for reopening of assessment was recorded by the Assessing

Officer, who had jurisdiction over the petitioner, while notice

u/s.148 for this purpose was issued by another Assessing

Officer, who had no jurisdiction, then said notice was bad on

this count. The relevant findings of the Hon’ble High Court are

as under:-

15 ITA No.904/Chny/2019 “A notice under section 148(1) would be a valid notice if the jurisdictional Assessing Officer records the reasons for reopening the assessment as contemplated under sub-section(2) of section 148 and, thereafter, the same officer namely the jurisdictional Assessing Officer issues the notice u/s.148(1). In the instant case, while the reasons for reopening the assessment has been recorded by the jurisdictional Assessing Officer viz. the Deputy Commissioner Circle-2, Jamnagar, the impugned notice under section 148(1) has been issued by the Income Tax Officer, Jamnagar who had no jurisdiction over the petitioner. Hence, such notice was bad on the count of having been issued by an officer who had no authority in law to issue such notice. As a necessary corolla it follows that no proceedings could have been taken under section 147 in pursuance of such invalid notice. In the aforesaid premises, the impugned notice under section 148(1) as well as all the proceedings taken pursuant thereto cannot be sustained. The impugned notice issued under section 148, and all the proceedings pursuant thereto including the assessment order are, hereby, quashed and set aside.”

Lucknow Bench in the case of Mohd. Rizwan Vs. ITO (2015)

40 ITR(T) 153, where the Tribunal held that reassessment by

jurisdictional Assessing Officer on the basis of notice issued by

the ITO collecting AIR information, but having no jurisdiction

over the assessee is invalid.

16 ITA No.904/Chny/2019 14. A similar view had been expressed by the Hon’ble

Calcutta High Court in the case of PCIT Vs. Nopani & Sons

(2022) 286 taxmann.com 388, where it has been clearly held

that where case of the assessee was transferred from ITO,

Ward-3 to ITO., Ward-4, impugned order u/s.143(3) was by

ITO, Ward (4) without issuing notice u/s.143(2) and only in

pursuance with notice issued by the ITO, Ward-3, who had no

jurisdiction over the assessee at relevant time, said impugned

order would be null and void.

High Courts and Tribunals are that if the Assessing Officer, who

had jurisdiction over the assessee completes assessment

u/s.143(3) of the Act, on the basis of notice issued by the non-

jurisdictional Assessing Officer is bad in law and void ab initio.

Although, the learned DR justified assessment order passed by

the Assessing Officer having jurisdiction over the assessee on

the basis of 148 notice issued by non-jurisdictional Assessing

Officer in light of provisions of section 124(3) and 124(5) of the Act, we do not find any substance in the arguments advanced

by the learned DR for simple reason that section 124(5) deals

with powers of the Assessing Officer in respect of income

17 ITA No.904/Chny/2019 accruing or arising or received within the area, if any, such

powers can be derived with by virtue of direction or order

issued under sub-section (1) or (2) of section 120 of the

Income Tax Act, 1961. If you go by said provisions of the Act,

then, case of the assessee clearly lies with the jurisdiction of

the ITO, Ward 4, Puducherry, but not with the ITO., Ward-1(1),

Puducherry. Therefore, when the ITO, Ward-1(1), Puducherry

does not have jurisdiction over the assessee, he ought not to

have issued notice u/s.148 of the Income Tax Act, 1961.

Further, having issued notice u/s.148 and transferred case to

jurisdiction officer, the ITO, Ward-4(1), the incumbent Assessing

Officer should have started case by issue of fresh notice

u/s.148 or section 143(2) of the Act or notice u/s.129 of the Act

to assume jurisdiction on change of incumbent of office. In this

case, the Assessing Officer, who completed assessment

u/s.144 r.w.s 147 of the Act has not issued any notice and thus,

assessment framed on the basis of 148 notice issued by non-

jurisdiction officer is invalid and liable to be quashed. Hence, we

quash reassessment order passed by the Assessing Officer

u/s.144 r.w.s147 of the Income Tax Act, 1961, dated

10.03.2016.

18 ITA No.904/Chny/2019 16. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 29th July, 2022

Sd/- Sd/- ( वी. दुगा� राव) (जी. मंजुनाथ) (V.Durga Rao) (G.Manjunatha) "या�यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे"नई/Chennai, 'दनांक/Dated 29th July, 2022 DS आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. *वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.