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Facts
The assessee purchased a residential land for Rs. 11,42,500/-. Information regarding this purchase came to the department via AIR. The ITO, Bareilly issued a notice under Section 148, but it was discovered that the assessee's address was in Lucknow, and the jurisdiction lay with the ITO, Lucknow. The case was transferred, and subsequent notices were issued.
Held
The Tribunal held that the notice under Section 148 was issued by an officer who lacked valid jurisdiction. Therefore, the assessment proceedings were void ab initio and bad in law, deserving to be quashed. The addition made was consequently annulled.
Key Issues
Whether the notice issued under Section 148 by an officer lacking proper jurisdiction renders the subsequent assessment proceedings void ab initio and liable to be quashed.
Sections Cited
147, 144, 148, 250, 142(1), 124(3), 139(1), 127, 124(2), 120, 154(1), 124(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
A.Y. 2008-09 Poonam Sen, vs. Income Tax Officer, A-1/73, Viram Khand, Gomti Range-1(3), Lucknow Nagar, Lucknow-226010 PAN: BACPS7483J (Appellant) (Respondent) Assessee by: Sh. Samrat Chandra, C.A. Revenue by: Sh. Deepak Yadav, DR Date of hearing: 03.06.2025 Date of pronouncement: 24.07.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: [ This is an appeal filed by the assessee against the orders of the ld. CIT(A)- Lucknow dated 4.08.2020, passed under section 250 of the Income Tax Act, 1961 wherein the ld. CIT(A) has dismissed the appeal of the assessee against the orders of the ITO-1(3), Lucknow, passed under section 147/144 of the Income Tax Act. The grounds of appeal are as under:-
1. The Learned CIT(A), has erred in law, in confirming order u/s 147/144 of the 1.T. Act, 1961 in the present case as the notice issued u/s 148 by the Income Tax Officer-2(1), Bareilly (here-in after referred to as the ITO, Bareilly) was issued without any jurisdiction and thus as the notice so issued u/s 148 itself is issued without jurisdiction the culmination of the same in the present order is void-ab- initio and bad-in-law and thus the order may kindly be annulled. II. On the fact and in the peculiar circumstances of the present case the reasons so recorded by the ITO, Bareilly itself are vitiated as the appellant had made a true and fair disclosure and that the investment so made cannot be disclosed in the Return so filed and further as per the reasons recorded the income escaping assessment is of Rs.65,73,000/- and whereas the addition towards purchase has been made of Rs.16,92,000/- only and thus the addition is devoid of any merit and needs to be quashed. Without Prejudice to Grounds Nos. I and II above:
III. The Ld. CIT(A) grossly erred on facts and in law in confirming an addition of Rs.11,92,000/- as alleged undisclosed investment in purchase of property whereas in fact the purchase has been made from out of known and disclosed sources of income available with the appellant at that time and thus the addition made without any basis only on whims and fancies, on a wholly misconstrued fact may kindly be ordered to be deleted. IV. That the Ld. CIT(A) did not afford the appellant any proper or sufficient opportunity to have her say or make necessary compliance of the reasons relied upon by him in passing the present order and thus the order passed without affording adequate opportunity may kindly be ordered to be quashed. V. That in any case and in any view of the matter, impugned addition/allowance assessment order are bad in law, illegal, unjustified, contrary to facts & law and based upon recording of incorrect facts and finding, without giving adequate opportunity of hearing, in violation of principles of natural justice and the same deserves to be quashed. VI. The appellant craves for leave to add, modify, amend or delete any other and further grounds of appeal with permission.”
The facts of the case are, that it came to the knowledge of the Department through an AIR information, that the assessee had purchased a residential land of 4150 Square Meter in Mohalla Jogiyan, Bareilly for Rs.11,42,500/-. The assessee did not mention the PAN on the purchase deed and the address given by the assessee on the purchase deed was E-1011 Rajendra Nagar, Bareilly present address Munsi Nagar Colony, Pilibhit Byepass Road, Bareilly. On the basis of this information, the ITO-2(1) issued a verification letter on 18.07.2014. When reply was not received, a notice under section 148 was issued on 23.03.2015 and was served on the assessee through his mother-in-law. No return was filed in response to this notice under section 148. Subsequently, notice under section 142(1) was issued, which was also not complied with. Thereafter, the ITO-2(1) transferred the case to ITO-1(3), Lucknow informing the ITO that the second address of the assessee was A-1/73, Vikram Khand, Lucknow and jurisdiction of the case lay with ITO-1(3), Lucknow. Therefore, on 11.01.2016, the ITO-1(3), Lucknow issued a notice under section 142(1) fixing the date of hearing. In response, Sh. Alok Gupta, C.A. appeared before the ld. AO and filed a power of attorney. He submitted that the notice was received after the limitation period and therefore, no documents as required by the notice was being submitted. In response, the ld. AO submitted to the assessee, that as per the order-sheet entry dated 5.02.2016, a notice under section 148 had been issued on 23.03.2015 and served on the mother-in-law of the assessee on 26.03.2015. Therefore, the service was proper and the ld. AO asked the assessee to ensure that compliance was made or the case would be decided ex parte. However, subsequent notices were not replied with either. Thereafter, the ld. AO issued a notice on 18.03.2016 proposing to make additions of Rs. 11,92,500/- on account of amounts paid by the assessee for the purchase of residential land from Sh. Sunil Kumar, amount paid for stamp duty with relation to the above transaction, amount paid on account of registration charges for the above transaction and amount invested in shares of M/s Dishra Infrabuild India Pvt. Ltd. The objections of the assessee were also invited. However, the assessee refused to receive the notice and after obtaining a report to this effect from the Notice Server, the ld. AO went ahead and completed the assessment under section 147 r.w.s. 144 at Rs.11,92,500/-.
Aggrieved with this order, the assessee went in appeal before the ld. AO. Before the ld. CIT(A), the assessee submitted that the notice under section 148 had been issued by an ITO who did not enjoy any jurisdiction in the case or over the assessee and therefore, since the notice under section 148 was bad in law, the order passed subsequently was void ab initio and bad in law and required to be annulled. It was submitted that the assessee had never filed its return of income in the jurisdiction of Bareilly till date and the ITO had transferred the file to Lucknow after realizing his mistake. Since the notice under section 148 had been issued by an authority who had not been vested with jurisdiction in the matter, the entire proceedings as well as the culmination of the same in an illegal order, needed to be quashed. The assessee challenged the additions on merits also pointing out that the ld. AO had chosen to ignore the fact that the assessee had been showing a regular income continuously in the past few years and that she had sufficient accumulated capital and profit generated during the year to make the said purchase. Therefore, the addition made was purely on account of surmises and conjectures and it should therefore, be deleted. Upon consideration of this reply, the ld. CIT(A) called for a remand report from the ld. AO. In the remand report, it was stated that the ld. AO was in possession of an information that the above-mentioned assessee had purchased an immovable property worth Rs.65,73,000/-, but not furnished any response to queries made before the reopening of the case. Therefore, notices under section 148 had been issued by the jurisdictional Assessing Officer with regard to the address contained in the sale deed. Subsequently, it was discovered that the assessee had another address at Lucknow and the AIS data revealed that the jurisdiction was vested in the ITO-1(3), Lucknow. Accordingly, the ld. AO had transferred the file to the concerned Assessing Officer. It was submitted that the notices under section 148 had been received by the assessee’s representative at the address to which it was sent and therefore, the assessee could not say that he had not received the notice. In response to this remand report, the assessee submitted that no notice had been served upon her either under section 148 or 143(3) or 142(1) by the ITO, 2(1), Bareilly. Furthermore, since the ITO-2(1), Bareilly was not the jurisdictional Assessing Officer, which had been borne out from his own records, he did not have the jurisdiction to issue these notices as he did not have the jurisdiction to assess the assessee. The transfer of the case to the ITO-1(3), Lucknow is proof of the fact that jurisdiction did not vest in the ITO-2(1), Bareilly. It was further submitted that since the jurisdictional AO had not issued the notices on time as compulsorily required, no proceedings could be launched against the assessee on the basis of a non-est notice. Reliance was placed on the decision of the Hon’ble Allahabad High Court in the case of CIT vs. M.I. Builders Pvt. Ltd. (2012) 349 ITR 271 (All) and Pr. CIT vs. Mohd Rizwan in of 2015 wherein the Hon’ble High Court had held that notice issued by an officer who had no valid jurisdiction over the assessee is invalid and that proceedings of re-assessment pursuant to notice under section 148 by incompetent officer are void ab initio, the assessment done thereafter is bad in law and deserved to be vacated. Accordingly, the assessee prayed that the additions may be quashed as being bad in law.
The ld. CIT(A) considered this issue and held that the above legal submission of the assessee is de void of any merit as AOs can have concurrent jurisdiction, as held by the Hon’ble Courts in a number of cases. It was the assessee who had filled the incorrect address of Bareilly in the sale deed and she could not therefore, take the plea that the notice was sent to the incorrect address. However, since the PAN was not available with the ITO-2(1), Bareilly, hence he correctly presumed jurisdiction over the assessee. It was held by the ld. CIT(A) that if the Bareilly address was not the correct address, then the assessee should have given her Lucknow address in the sale deed and the principle of estoppel clearly applied in the present case. The ld. CIT(A) quoted from the judgment of the Hon’ble Delhi High Court in the case of Abhishek Jain vs. ITO-55(1) in W.P. (Civil) No.11844/2016. He held that the ratio of the aforesaid case was identical to the facts of the assessee’s case because in the above case, the notice was issued by the ITO, Noida on the basis of AIR information and later on when the PAN was found, the case was transferred to ITO, Delhi. Thus, since in that case, the Court had upheld the assessment, he dismissed the appeal of the assessee on this point. Further, he pointed out that the Hon’ble High Court had held that any dispute regarding the service of notice had to be raised within one month of such service and in the present case, the assessee had not filed any objection regarding jurisdiction in response to the first set of notices. Thus, according to the provisions of section 124(3) of the Income Tax Act and in view of the aforesaid judgment of the Hon’ble Delhi High Court, the ld. CIT(A) held that the assessee was no longer entitled to raise any objection in the matter. He further held that there was no true disclosure made by the assessee as the assessee had not shown this purchase transaction in her ITR filed for the assessment year 2008-09 on 16.03.2009, as evident from a perusal of the ITR. In view of the same, he dismissed the said ground of appeal. Looking into the merits of the case, the ld. CIT(A) held that the assessee had failed to explain the sources of the payments or expenditures before the ld. AO either during assessment or in remand proceedings. She had only challenged the reopening without substantiating the source of the above payments. Accordingly, he held that from a perusal of the return of income for assessment year 2008-09, where it became evident that the assessee only had returned income of Rs.2,26,580/-, the sources of the payment and investment into the properties were not evident. He, therefore, dismissed the appeal filed by the assessee and upheld the addition made by the ld. AO.
5. The assessee is aggrieved at this order passed by the ld. CIT(A). Sh. Samrat Chandra, C.A. appearing on behalf of the assessee (hereinafter referred to as the ld. AR) submitted that an objection to jurisdiction could be raised at any time and the Hon’ble Bombay High Court had held in the case of CIT vs. Lalit Kumar Bardia (2017) 84 taxman.com 2013, that the issue of lack of jurisdiction can be raised even in appeal or in execution. The ld. AR further submitted that the notice under section 148 could only be issued by the ld. AO having jurisdiction over the case. For the above proposition, he relied upon the decisions of the Punjab and Haryana High Court in the case of Lt. Col. Paramjit Singh vs. CIT (1996) 89 taxman 536 (P&H) and Dushyant Kumar Jain vs. DCIT (2016) 66 taxman.com 126. The ld. AR also drew our attention to the decision of the jurisdictional High Court in the case of M.I. Builders Pvt. Ltd. vs. ITO (2008) 115 ITD 419 (Lucknow) and the case of Mavany Brothers vs. CIT (2015) 62 taxman.com 50 (Bombay). In the case of M.I. Builders, the Hon’ble Allahabad High Court had held that unless concurrent jurisdiction had been assigned to two officers, it could not be said that the officer who issued the notice under section 148 (and was not the regular Assessing Officer) had any jurisdiction over the matter. In the case of Mavany Brothers vs. CIT (supra), the Hon’ble Bombay High Court had held that the jurisdiction under section 147/148 was an extraordinary jurisdiction which could be exercised only when the conditions precedent in section 147/148 were satisfied and because the Assessing Officer who issued the notice did not have the original return of income available before him, it was not possible for that Assessing Officer to have a reasonable belief that income chargeable to tax had escaped assessment. The Hon’ble High Court held that reason to believe that income chargeable to tax had escaped jurisdiction was a jurisdictional fact and only on its satisfaction did any Assessing Officer acquire jurisdiction to issue notice. This lack of satisfaction of jurisdictional fact could not confer jurisdiction and an objection to it could be raised at any time even in appeal proceedings. The ld. AR further argued that the judgment in the case of Abhishek Jain (supra) was per incuriam of the judgment of the Hon’ble Delhi High Court in the case of Dushyant Kumar Jain (supra) wherein it had been held, that the reopening of the assessment sought to be made under section 148 was bad in law, since the notice had been issued and reasons recorded by an Assessing Officer who was not the Assessing Officer of the assessee. The ld. AR further submitted, that concurrent jurisdiction was not an automatic concurrence on several AOs as presumed in the judgment of Abhishek Jain (supra), it was only done through on order under section 120(4)/(5). It was further submitted that under section 154(1), the ld. AO of that territorial area would have jurisdiction over an assessee on the basis of place of business or principle place of business (in the case where business is carried out at several place) or place of residence. Thus, under section 120 r.w.s. 124(1), it is only one AO in whose territorial jurisdiction the principal place of business or the residence lies, who would have jurisdiction over an assessee. The ld. AR further submitted that concurrent jurisdiction could not be assumed by AOs. Where the jurisdiction over an assessee was not ascertained and he falls in the jurisdiction of two officer on territorial/class of persons/class of income/group of case basis, then the question of jurisdiction was to be resolved by the Competent Authority as provided under section 124(2). The ld. AR further submitted that section 124(2) had to be resorted to Suo Moto by the ld. AO without awaiting the objection of the assessee under section 124(3). The ld. AR further submitted that section 124(3) was only applicable for returns under section 139(1) and not against the re-assessment notice. This was evident from a plain reading of section 124(3). Finally, the ld. AR submitted that a transfer under section 127 was necessary for vesting of jurisdiction in other AOs and since the jurisdiction of the assessee had not been transferred to Bareilly under section 127, the officer there had no jurisdiction to issue a notice to the assessee and the assessee was not obliged to respond to such notice. Accordingly, the ld. AR prayed that since the notice under section 148 had been issued by an officer who lacked the jurisdiction to issue such notice, the consequent assessment proceedings were bad in law and deserved to be quashed. On the merits of the case, he submitted that the assessee was regularly filing a return and the ld. CIT(A) was not justified in holding that she did not have the means to make the investment, because she had sufficient accumulated capital which explained the investment. However, he submitted that the question of going into merit did not arise at this stage because the assessment itself was bad in law.
On the other hand, Sh. Deepak Yadav, Sr. DR placed his reliance on the orders of the ld. AO and the ld. CIT(A) and took us through them. He pointed out that it was the assessee that had mentioned the Bareilly address in the sale deed and therefore, since she had mentioned the same as her address, she could not say at this stage that the notice had not been served upon her. As per the provisions of section 124(3), if a notice had been served upon her wrongly, she should have filed an objection to the said notice within a period of one month. However, she had not responded to any of the notices issued to her and it was only after the proceedings were transferred to Lucknow that she chose to raise the issue of jurisdiction. Hence, the ld. Sr. DR prayed that not having raised an issue of jurisdiction before the ld. AO at Bareilly, the assessee was precluded from raising the same later and therefore, this ground of appeal
should be dismissed and the addition should be considered on its merits.
7. We have duly considered the facts and circumstances of the case. It appears that ITO, Ward-2(1), Bareilly was the designated officer authorized to collect AIR information and make enquiry in this regard. However, he was not the designated Assessing Officer of the assessee and therefore, upon failure of the assessee to respond his verification letters, he was obliged to refer the matter to the jurisdictional Assessing Officer of the assessee, after locating the PAN number of the assessee. The failure to locate the PAN number, cannot be a justification to issue the notice when not authorized to do so. It is seen that the assessee did not make compliance to these notices issued by the ITO, Ward-2(1), Bareilly. Thereafter, the ITO, Ward-2(1), Bareilly, on search of the PAN data base discovered the PAN number of the assessee and Suo Moto transferred the proceedings to the correct Assessing Officer. It is our view that when the ITO, Ward-2(1), Bareilly could locate the PAN number of the assessee after the fact of non-compliance by the assessee to his notices, he could also have located the PAN of the assessee prior to the issue of notice under section 148. In fact, it was the duty of the ld. ITO, Ward-2(1), Bareilly to determine whether the concerned assessee was assessed within his jurisdiction. The mere fact that a Bareilly address was mentioned in the sale deed, cannot confer jurisdiction upon the ITO, Ward-2(1), Bareilly, to assess the income of the assessee. An assessee may have more than one address and may choose to give any one address in a document, but that could not transfer the jurisdiction from his or her designated Assessing Officer. Thus, the notice issued by the ITO, Ward-2(1), Bareilly was clearly beyond his jurisdictional competence. It is, therefore, non-est in the eyes of law. Since, the notice is non-est in the eyes of law, the question of assessee, being required to file an objection to reject assumption of jurisdiction would not be necessary. In fact, the jurisdiction is not questioned by the Department either. Upon realizing that the correct jurisdiction vested in the ITO, Ward-1(3), Lucknow, the ITO, Ward-2(1), Bareilly himself transferred the case of the assessee from Bareilly to Lucknow. However, by this time, the time period for issue of notice under section 148 had lapsed and therefore, the Assessing Officer at Lucknow issued a notice under section 142(1), which was objected to by the assessee’s counsel. However, the ld. AO at Lucknow proceeded to complete the assessment despite such objections and added the disputed amount back to the income of the assessee. The ld. CIT(A)upheld this addition on account of his understanding of the judgment of the Hon’ble Delhi High Court in the case of Abhishek Jain vs. ITO-55(1), New Delhi (supra). However, we find that the Hon’ble jurisdictional High Court in the case of PCIT-2, Lucknow vs. Mohd Rizwan Prop. M/s M.R. Garments, Moulviganj, Lucknow in of 2015, when deciding a nearly identical matter has held as under: “32. Now we come to legality of notice issued under Section 148. Admittedly, it was issued by a Designated Officer authorized to receive AIR information and make inquiry. Thereafter, said Designated Officer was supposed to furnish entire material to Competent A.O. for further action.
In the present case, notice under Section 148 was not issued by A.O. having jurisdiction over Assessee and instead it was issued by Designated Officer authorized to collect AIR information and make inquiry in this regard. No notice was issued under Section 148 admittedly by Jurisdictional A.O.
Section 148 clearly talks of issue of notice by A.O. Meaning thereby, A.O. having jurisdiction over Assessee. In fact, it is his satisfaction which is to be recorded for justifying reopening of assessment/reassessment proceedings as contemplated under Section 147 and recording of reasons for the same purpose is mandatory. The satisfaction of A.O. could not have been hired or be delegated to any other authority.
In Commissioner of Income Tax, Kerala Vs. Thayaballi Mulla Jeevaji Kapasi 1967 (66) ITR 147 (SC), Court held that notice under Section 148 cannot be regarded as mere procedural requirement. It is a condition precedent for initiation of proceeding for assessment.
In Y. Narayana Chetty and another Vs. Income Tax Officer, Nellore and others 1959 (35) ITR 388 (SC), it was held, that, if notice issued is invalid or not properly served, any proceeding taken by A.O. to back assess, would be illegal and void.
A Constitution Bench, in Sardar Baldev Singh Vs. Commissioner of Income Tax, Delhi (1960) 40 ITR 605 (SC), a pari materia provision, i.e., Section 34 under old Indian Income Tax Act, 1922 (hereinafter referred to as "Act, 1922") was considered and it was held that A.O. having power to issue notice should be a particular A.O. having jurisdiction over Assessee at the time of issue of requisite notice. If notice issued by any other A.O. or notice is bad for any reason, than such back assessment would be illegal.
In Anirudhsinhji Jadeja and another Vs. State of Gujarat 1995 (5) SCC 302, Court held, if a statutory authority has been vested with jurisdiction he has to exercise it according to its own discretion.
In K.K. Loomba and Mrs. Uma Loomba Vs. Commissioner of Income Tax and others 2000 (241) ITR 152 (Delhi) it was held that A.O. having natural jurisdiction over the area would have jurisdiction to assess, issue notice under Section 148 as well and it cannot be done by anyone else.
Punjab and Haryana High Court in the case of Lt. Col. Paramjit Singh Vs. Commissioner of Income Tax and another 1996 (220) ITR 446 (Punjab) said "a notice for reassessment can be issued only by A.O. who had concluded the proceedings."
We, however, do not go to that extent for the reason that there may be any subsequent change resulting in change of jurisdiction of A.O. Notice of reassessment can be issued by such an Officer but not by Officer who has no jurisdiction for assessment/reassessment.
In Commissioner of Income Tax Vs. Rajeev Sharma 2011 (336) ITR 678, Court observed "provisions contained in Section 148 of Act, 1961 with regard to escaped assessment must be construed strictly with regard to procedure prescribed for escaped assessment."
The reason for issuance of notice by Competent A.O. is quite obvious inasmuch as such notice could have been issued only when concerned A.O. has reason to believe that some income has escaped assessment and recomputation/reassessment is needed. Now such satisfaction can be of that A.O. only who has jurisdiction in the matter and not of any third party. 44. We, therefore, hold that in the present case, no valid notice under Section 148 was issued by Jurisdictional A.O. before making assessment/reassessment and, therefore, proceedings of reassessment pursuant to notice issued under Section 148 by an incompetent Officer are void and ab initio.”
Therefore, following the said judgment, we hold that in the case of the assessee, since the notice was issued by an Assessing Officer lacking valid jurisdiction, the consequent assessment proceedings are bad in law and accordingly, the assessment order under section 147 r.w.s. 144 deserves to be quashed. Accordingly, ground no. 1 is allowed. As the assessment has been held to be void ab initio, there is no occasion to look into the merits of the addition, accordingly, ground nos. 3 and 5 are dismissed as infructuous. Similarly, ground no. 4 relates to lack of proper opportunity. It was not pressed before us and is, therefore, dismissed as infructuous. Ground no. 6 does not require a decision.