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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Hon’ble Shri P. M. JagtapAM & Hon’ble Shri A. T. Varkey, JM]
ORDER Per Shri A. T. Varkey, JM: This is an appeal filed by the assessee against the order of Ld. CIT(A)-15, Kolkata dated 12.03.2019 for A Y 2014-15.
At the outset, the Ld. AR for the assessee Shri Somnath Ghosh drew our attention to the additional ground (legal issue) preferred by the assessee company which reads as under:
For that in the facts and circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals)-15, Kolkata acted unlawfully in not appreciating that none of the conditions precedent existed for and/or were fulfilled by the Ld. Income Tax Officer, Ward 7(1), Kolkata for his specious action of assuming jurisdiction for issuing notice u/s. 143(2) of the Income Tax Act, 1961 on 28.08.2015 in the instant case and the purported assessment order framed u/s. 143(3) of the Income Tax Act, 1961 on 27.12.2016 by the Ld. Deputy Commissioner of Income Tax, Circle-7(1), Kolkata without adhering to the mandatory tenets thereof is therefore ab initio void, ultra vires and ex-facie null in law.
According to the Ld. AR, the ITO, Ward-7(1), Kolkata who had issued notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) to the assessee dated 28.08.2015 did not enjoy jurisdiction (pecuniary jurisdiction) to assess the assessee being a corporate entity because the assessee’s income was above the pecuniary limit prescribed by the CBDT in Instruction No. 1/2011 dated 31.12.2011 and therefore the assessment framed by the DCIT u/s 143(3) of the Act, without issuing mandatory notice u/s Gajmukh Mercantile Pvt. Ltd. AY 2014-15 143(2) of the Act is without jurisdiction. And therefore his contention is that all consequent action taken by AO and later confirmed by Ld CIT(A) is null in the eyes of Law. To buttress this legal issue, the Ld. A.R pointed out that assessee’s returned income was to the tune of Rs.30,41,900/- and since the Income Tax Officer (ITO) in the case of corporate entity’s had power to assess it, only if the return of income (ROI) is less than Rs. 30 lakhs; and if the ROI is above Rs. 30 lakhs in metro cities, then assessment has to be framed only by the DCIT/ACIT. For ready reference Instruction No. 1/2011 of CBDT is reproduced as under:
Gajmukh Mercantile Pvt. Ltd. AY 2014-15 4. From a perusal of the above Instruction of CBDT, it is evident that the pecuniary jurisdiction conferred by the CBDT on ITO’s in respect of the “corporate returns” filed where income declared is below Rs. 30 lakhs in metro cities. And therefore the ITO did not had jurisdiction to conduct an assessment on a corporate entity if it’s ROI was above Rs. 30 lakhs. And if the declared income (ROI) of a corporate entity is above Rs. 30 Lakhs i.e. like the assessee in this case, the pecuniary jurisdiction lies before DCIT/ACIT. In this case, admittedly the assessee is a company (corporate entity) undisputedly declared an income of Rs. 30,47,900/- as is evident from para 1 of the assessment order dated 27.12.2016 and from the return of income placed from pages 39 to 54 of paper book. So, the assessee a corporate entity as per the CBDT Instruction dated 31.01.2011 (supra) could not have been assessed by the ITO [ITO, Ward-7(1)], Kolkata. Even though the assessment was framed by the DCIT, Circle-7(1) dated 27.12.2016, it is noted that the mandatory notice u/s. 143(2) of the Act informing the assessee that its case was selected for scrutiny was sent by the ITO, Ward- 7(1) dated 28.08.2015 which is placed at page 79 of the paper book and from perusal of the order sheet of the AO (ITO and DCIT) placed in the PB from page 122. And from a perusal of this order sheet reveals that the ITO had made entry in it dated 28.08.2015, wherein he has remarked that the case of the assessee has been selected for scrutiny through CASS and notice u/s. 143(2) of the Act has been issued to the assessee. Thereafter he records on the order sheet on 05.07.2016 that the case has been transferred from his office to DCIT, Circle- 7. Thereafter, the DCIT has endorsed that he has issued notice u/s. 142(1) of the Act dated 05.07.2016 (page 7 of the paper book) and then after making certain more entries in it, he framed the assessment dated 27.12.2016. From the aforesaid facts discussed the following facts emerged: i) The assessee a corporate entity had filed return of income declaring Rs.30,47,900/-. The ITO issued notice u/s. 143(2) of the Act on 28.08.2015. ii) The ITO, Ward-7 transferred the case to DCIT, Circle-7 on 05.07.2016 and thereafter the DCIT framed the assessment u/s. 143(3) of the Act without issuing mandatory scrutiny notice u/s. 143(2) of the Act.
Gajmukh Mercantile Pvt. Ltd. AY 2014-15 5. We note that CBDT Instruction is dated 31.01.2011 and the assessee had filed return of income on 07.11.2014 (AY 2014-15) declaring total income of Rs.30,41,900/-. As per the CBDT Instruction (supra) the pecuniary /monetary limit prescribed for an ITO in respect of an assessee which is corporate entity was up to Rs. 30 lakhs (metro cities); and if the returned income was above Rs. 30 lakhs, it was the DCIT/ACIT and not the ITO. Therefore, only the DCIT/ACIT had jurisdiction to assess the assessee. It is settled law that issue of notice u/s. 143(2) of the Act is sine-qua-non for an assessment to be framed u/s. 143(3) of the Act. However in this case, the notice u/s. 143(2) of the Act was issued on 28.08.2015 by ITO, Ward-7(1), when he did not enjoy the pecuniary jurisdiction to assume jurisdiction and issue the scrutiny notice. Admittedly, later when the ITO realized that he did not had the pecuniary jurisdiction to assess the income of the assessee, he duly transferred the file to the DCIT, Circle-7 on 05.07.2016. Thereafter, the DCIT had issued notice u/s. 142(1) of the Act on the same date of transfer and has not issued any notice u/s. 143(2) of the Act. Therefore, in this case, since the assessment u/s. 143(3) was framed by the DCIT, Circle-7 without issuance of the mandatory notice of scrutiny u/s. 143(2) of the Act which omission goes to the root of the matter and makes the assessment order bad in the eyes of law, for want of jurisdiction; and therefore, is null in the eyes of law. Therefore, the legal issue raised by the assessee (additional grounds) (supra) is allowed. The other grounds raised by the assessee need not be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 30th June, 2021.
Sd/- Sd/- (P. M. Jagtap) (A. T. Varkey) Vice President Judicial Member Dated: 30th June, 2021 Jd.(Sr.P.S.)
Gajmukh Mercantile Pvt. Ltd. AY 2014-15 Copy of the order forwarded to:
1. 1. Appellant – M/s. Gajmukh Mercantile Pvt. Ltd., C/o S. N. Ghosh & Associates, Advocates, 2, Garstin Place, 2nd floor, Suite No. 203, Off Hare Street, Kolkata-700 001. 2 Respondent –. DCIT, Circle-7(1), Kolkata.
3. The CIT(A)-15, Kolkata (sent through e-mail)
CIT , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)