M/S J R ROADLINES PVT. LTD.,GUJRAT vs. D.C.I.T.,CIRCLE-1(1), KOLKATA

order

: May 27, 2022 ORDER

Per Sanjay Garg, Judicial Member:

“1. That the Ld. Commissioner of Income Tax (A) erred in law as well as on facts of the case in confirming the order passed by the Ld. Assessing Officer.

2. That the Ld. Commissioner of Income Tax (A) violated the principles of natural justice by not considering the adjournment application filed by the appellant.

4. That the appellant craves to leave, add or amend any of the grounds during the course of hearing.” Apart from the above grounds of appeal, the assessee has taken the following additional/legal grounds of appeal:

Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd “1. For that the assessing officer issuing the notice u/s 143(2) of the I.T Act 1961 did not have jurisdiction over the case of the assessee hence the notice is bad in law and the assessment order passed on the basis of such notice is bad in law and should be quashed.

2. That in the facts and circumstances of the case, the assessment order u/s 143(3) of the IT Act 1961 was without jurisdiction and bad in law and thus the entire assessment order be quashed and or cancelled.”

3. Since assessee through the additional legal grounds is hitting at jurisdiction of the concerned Assessing Officer to frame the impugned assessment order, therefore, we deem it proper to admit the aforesaid additional legal grounds and proceed to adjudicate these first as if the issue relating to jurisdiction of the Assessing Officer is decided in favour of the assessee, any discussion on merit will be rendered academic in nature.

The ld. counsel has submitted that the jurisdiction to pass the assessment order in this case laid with the ACIT/DCIT as the income declared by the assessee was more than Rs.30 lacs. The ld. counsel has further invited our attention to the impugned assessment order to show that the assessment order in this case has been passed by DCIT, Circle- 1(1), Kolkata. He has further invited our attention to the first para of the assessment order wherein, it has been mentioned that notice u/s 143(2) dated 09.08.2013 was issued and duly served upon the assessee. The ld. counsel has further invited our attention to the copy of the aforesaid notice u/s 143(2) dated 09.08.2013 which has been placed at page 27 of paper-book. A perusal of the aforesaid notice u/s 143(2) dated 09.08.2013 reveals that the same has been issued by the Office of the Income Tax Officer (ITO), Ward-1(1), Kolkata. The ld. counsel in this respect has submitted that in this case, the jurisdiction to issue notice u/s 143(2) of the Act vested with the DCIT and not with the ITO on account of pecuniary jurisdiction, the returned income being more than Rs.30 lacs of the assessee. He has further submitted as per the settled proposition of law, the issue of notice u/s 143(2) by the concerned Assessing Officer of competent jurisdiction was sine qua non to assume jurisdiction to frame assessment u/s 143(3) of the Act. He, in this respect, has relied upon the decision of the Hon’ble Supreme Court in the case of ACIT vs. M/s Hotel Blue Moon (supra). The ld. counsel, therefore, has submitted that in this case the concerned DCIT did not issue any notice u/s 143(2) of the Act before proceeding to frame assessment u/s 143(3) of the Act. He has submitted that since the concerned ITO, Ward-1(1) did not have jurisdiction to issue notice u/s 143(2) of the Act as such the said notice issued by him did not have any legal sanctity. He, therefore, has submitted that the assessment framed by the DCIT, in this case, was bad in law for want of issue of notice u/s 143(2) of the Act.

Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd The ld. DR could not rebut the aforesaid legal position based on aforesaid factual aspect put by the ld. counsel for the assessee. However, she has relied upon the findings given by the Assessing Officer in the assessment order.

“Jurisdiction of income- tax authorities (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. [Explanation.- For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub- section (1)]. (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 …… 6. A perusal of the aforesaid statutory provisions would reveal that the jurisdiction 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 jurisdiction of the Assessing Officers. The ld. Counsel in this respect has relied upon the CBDT Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd Instruction No.1/2011 [F.No.187/12/2010-IT(A-I), for the sake of convenience is reproduced as under:

Instruction No.1/2011 [F.No.187/12/2010-IT(A-I), DATED 31-1-2011 References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship. An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Income Income Declared Declared (Mofussil areas) (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate returns Upto Above Upto Above Rs. 30 lacs Rs. Rs. 20 Rs. 20 lacs 30 lacs lacs Non-corporate Upto Above Upto Above Rs. 20 lacs returns Rs. Rs. 15 Rs. 15 lacs 20 lacs lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.

7. A perusal of the above provisions of law along with the CBDT Instructions would show, in this case, the competent officer to proceed with the assessment by way of issue of notice u/s 143(2) of the Act was DCIT/ACIT, whereas, the notice u/s 143(2) has been issued by the ITO, Ward-1(1), Kolkata who did not have any jurisdiction to issue the aforesaid notice. As has been held by the various courts of the country including the Apex Court, the issuance of notice u/s 143(2) by the concerned Assessing Officer of a Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd competent jurisdiction is mandatory to assume jurisdiction to proceed to frame assessment u/s 143(3) of the Act. The identical issue also came into consideration before the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Conclave (P) Ltd. v. DCIT [IT Appeal No.2517/Kol/2019, dated 3-2-2021] wherein the Tribunal further relying upon various other decisions of the Co-ordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that when the notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment and the assessment was framed by the other officer who did not issue the notice u/s 143(2) before proceeding to frame the assessment, then such an assessment order was bad in law. The relevant part of the order passed in Bhagyalaxmi Conclave (P) Ltd. (supra) is reproduced as under:

“5.2. The assessee relied on the recent decision of this Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd. vs. DCIT, in order dated 12.01.2021. We find that the issues that arise in this appeal are clearly covered in favour of the assessee. This order followed the principles of law laid down in a number of other decisions of the ITAT, Kolkata Bench on this issue. 5.3. Kolkata “B” Bench of the Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd.(supra) held as follows: “10. In this case, the ITO Ward-3(3), Kolkata, issued notice u/s 143(2) of the Act on 04/09/2014. In reply, on 22/09/2014, the assessee wrote to the ITO, Ward-3(3), Kolkata, stating that he has no jurisdiction over the assessee. Thereafter on 31/07/2015, the DCIT, Circle-11(1), Kolkata, had issued notice u/s 142(1) of the Act to the assessee. The DCIT, Circle-11(1), Kolkata, completed assessment u/s 143(3) of the Act on 14/03/2016. The issue is whether an assessment order passed by DCIT, Circle-11(1), Kolkata, is valid as admittedly, he did not issue a notice u/s 143(2) of the Act, to the assessee. This issue is no more res-integra. This Bench of the Tribunal in the case of Soma Roy vs. ACIT in ITA No. 462/Kol/2019; Assessment Year 2015- 16, order dt. 8th January, 2020, under identical circumstances, held as under:- “5. After hearing rival contentions, I admit this additional ground as it is a legal ground, raising a jurisdictional issue and does not require any investigation into the facts. The ld. Counsel for the assessee submitted that as per Board Instruction No. 1/2011 [F. No. 187/12/2010-IT(A-I)], dt. 31/01/2011, the jurisdiction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non- corporate assessee and the income returned is above Rs.15,00,000/- and whereas, the statutory notice u/s 143(2) of the Act, was issued on 29/09/2016, by the Income Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the jurisdiction over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd statutory period prescribed under the Act. Thus, he submits that the assessment is bad in law. 5.1. 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.

6. The ld. D/R, on the other hand, submitted that the concurrent jurisdiction 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 jurisdictional Assessing Officer and even otherwise, Section 292BB of the Act, comes into play and the assessment cannot be annulled. On merits, he relied on the orders of the lower authorities.

9. This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in order dt. 27.09.2017, held as follows:- “5. From a perusal of the above Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the 'non corporate returns' filed where income declared is only upto Rs.15 lacs ; and the ITO doesn't have the jurisdiction to conduct assessment if it is above Rs 15 lakhs. Above Rs. 15 lacs income declared by a non- corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of Rs.50,28,040/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the assessment order, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward-1, Haldia on 06.09.2013 and the same was served on the assessee on 19.09.2013 as noted by the AO. The AO noted that since the returned income is more than Rs. 15 lacs the case was transferred from the ITO, Ward-1, Haldia to ACIT, Circle-27 and the same was received by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of the Act on the same day. From the aforesaid facts the following facts emerged:

Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd i) The assessee had filed return of income declaring Rs.50,28,040/-. The ITO issued notice under section 143(2) of the Act on 06.09.2013. ii) The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014. iii) On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia.

by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.

7. In the result, appeal of assessee is allowed. 9.1. 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:- “Return of income of assessee was Rs. 12 lakhs - As per CBDT instruction, jurisdiction for scrutiny assessment vested in Income- tax Officer and notice under section 143(2) must be issued by Income-tax Officer, Ward-I, Haldia and none other - But, notice 8 Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd was issued by Asstt. Commissioner, Circle Haldia much after CBDT's instruction and knowing fully well that he had no jurisdiction over assessee - Whether, therefore, notice issued by Asstt. Commissioner was invalid and consequently assessment framed by Income-tax Officers becomes void since issue of notice under section 143(2) was not done by Income-tax Officers as specified in CBDT instruction No. 1/2011.” 9.2. The Hon’ble High Court of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range – I, reported in [2005] 278 ITR 218 (Cal.) has held as follows:- “Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of - Assessment years 1983-84 to 1987-88 - Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for first time before Tribunal - Held, yesWhether jurisdiction of Assessing Authority is not dependent on date of accrual of cause of action but on date when it is initiated - Held, yes - Whether once a particular jurisdiction is created, same must be prospective and cannot be retrospective and it has to be interpreted having regard to manner in which it has been sought to be created - Held, yes – Assessee” 9.3. The Hon’ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC), held as follows:- “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 Hotel Blue Moon's case (supra). 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 9 Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd 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.”

6. 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 jurisdiction 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.”

The ld. DR, on the other hand, has submitted that in the earlier assessment orders, the address of the assessee was that of Kolkata only and that the Assessing Officer did not have any information that the assessee has shifted its address, therefore the concerned Assessing Officer at Kolkata was justified in passing the impugned assessment order.

10. We have considered the rival contentions of ld. representatives of both the parties and gone through the records. Before proceeding further, it will be relevant to reproduce the relevant provisions to section 124 of the Income Tax Act as under:

“124. Jurisdiction of Assessing Officers (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 been vested 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 [Principal Director General or] Director General or the [Principal Chief Commissioner or] Chief Commissioner or the [Principal Commissioner or] Commissioner; or where the question is one relating to areas within the jurisdiction of different [Principal Director General or] Directors General or [Principal Chief Commissioner or] Chief Commissioners or [Principal Commissioners or] Commissioners by the [Principal Director General or] Director General or the [Principal Chief Commissioners or] Chief Commissioners or the [Principal Commissioners or] Commissioners concerned or, if they are not in agreement, by the Board or by such [Principal Director General or] Director General or [Principal Chief Commissioner or] Chief Commissioner or [Principal 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 115WD or] 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 [sub-section (2) of section 115WD or] sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; 11 Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd (b) where he has made no such return, after the expiry of the time allowed by the notice under [sub- section (2) of section 115WD or sub- section (1) of section 142 or under sub- section (1) of section 115WD or under section 148 for the Making of the return or by the notice under the first proviso to section 115WF or 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.]”

In this case, the return of income was filed by the assessee at the address of Gandhi Dham, Gujarat. The ld. counsel has also invited our attention to paper-book page 112 to show that the assessee had written letter dated 17.12.2014 to the Commissioner of Income Tax-1, Kolkata with a copy of the same to the Deputy Commissioner of Income 12 Assessment Year: 2012-13 M/s J R Roadlines Pvt. Ltd Tax, Circle-1(1), Kolkata (Assessing Officer) to submit that the registered office of the assessee company is in the process of being shifted from Kolkata to Gandhidham, Gujarat and further that the principal place of business of the assessee was Plot No.6, Sector 10/C, GIDC Area, Gandhidham-370201. It has been further requested in the letter that the entire business operations of the assessee were being carried out in the State of Gujarat and that the principal place of business of the assessee being in Gandhidham, Gujarat, the jurisdiction of the assessee would now be with DCIT, Sector 8, Gandhidham, Gujarat. The assessee has also mentioned the address of the concerned DCIT with the name to whom the jurisdiction of the assessee lied. It has also been submitted in the said letter that all books of accounts and vouchers with relevant records were kept at principal place of business in Gandhidham and under the circumstances, it will be more convenient to the assessee, if the income tax proceedings are conducted by DCIT, Circle-Gandhidham. However, despite the aforesaid letter by the assessee to the Commissioner of Income Tax as well as the concerned Assessing Officer, no action had been taken, rather the concerned Assessing Officer i.e. DCIT, Kolkata proceeded to frame the assessment order dated 25.03.2015. The ld. counsel for the assessee has also invited our attention to the relevant documents to show that the assessee by the time has also applied with the Regional Director, Ministry of Corporate Affairs for the shifting of its registered office from Kolkata to Gujarat.