SHIVAM DHATU UDYOG LTD.,KOLKATA vs. D.C.I.T.,CIRCLE-3(1), KOLKATA

ORDER

Per Shri A. T. Varkey, JM:

2. At the outset, Ld. AR for the assessee Shri Miraj D. Shah drew our attention to the additional ground raised by the assessee which is as under:

“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.

3. 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.”

5. From a perusal of the aforesaid Notice u/s. 143(2) of the Act, it is discerned that the same was issued on 08.08.2013 by DCIT, Circle-2, Gorakhpur (State of U. P.). And the assessee duly objected to the jurisdiction of the DCIT, Circle-2, Gorakhpur stating that the Shivam Dhatu Udyog Ltd. A.Y. 2012-13 assessee company has its registered office at Kolkata i.e. in the State of West Bengal. Realizing the mistake, DCIT, Circle-2, Gorakhpur transferred the case to the AO, Kolkata who admittedly have not issued the mandatory statutory notice u/s. 143(2) of the Act; and has issued only notice u/s. 142(1) of the Act and has framed the assessment u/s. 143(3) of the Act, which according to the Ld. AR is without jurisdiction and bad in law. For that he cited the following case laws i.e. M/s Rungta Irrigation Ltd. vs. ACIT in order dated 06.09.2019 relevant portion of it is re-produced as under:

“13. For understanding the legal position with regard to the jurisdiction of Income tax authorities, it is pertinent to make reference to provisions of Section 120, 124, 127 and 129 of the Act which are reproduced herein below:

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income- tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 (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.]

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”

14. A bare reading of the foregoing provisions reveal that an Assessing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board under sub-section (1) or sub-section (2) of section 120 of the Act. The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income Tax Authorities, as specified u/s. 116 of the Act. As per sub-section (2) of Section 120 of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the 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 that authority. We also note that the concurrent jurisdiction can be vested in more than one AO, which is discernible by a conjoint reading of Section 120(5) with Section 120(2) of the Act. Section 124(1) of the Act confers jurisdiction on an AO, by virtue of jurisdiction vested by any direction or order issued by CBDT under sub-section (1) and / or (2) of section 120 of the Act. The AO is vested with the jurisdiction u/s. 124 of the Act, over any area within the limits of such area, he shall have jurisdiction over any person (assessee) carrying on a business or profession and if the place at which he (assessee) carries on his business or profession is situated within the area ear-marked for him (AO); or if that person’s (assessee’s) business or profession is carried on in more places than one, then if the principal place of his business or profession is situated within the jurisdictional territorial area, the AO gets jurisdiction. Other than the assessees who are not in Business or Profession, in their cases, the AO will be vested with the jurisdiction if the person (assessee) is residing within the territorial area ear-marked by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120 of the Act speaks about. However, when there is a question to be determined as to whether an AO has jurisdiction to assess any person then it would be decided by the authorities as stipulated in sub-section (2) of section 124 of the Act by Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned, as the case may be). In case, if the question is one relating to areas within the jurisdiction of different Income tax authorities(Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners as stipulated therein) then if the other Income-tax authority also agrees then the question will be resolved mutually or else it will be referred to the CBDT. So, once the AO of an assessee is vested with the jurisdiction u/s. 124 read with sec. 120(1) & (2) of the Act and issues statutory notices against an assessee, no person (assessee) shall be entitled to call in question the jurisdiction of an AO within the period prescribed under clauses (a), (b) and (c) of section 124(3) of the Act. We also note that sec. 124(5) saves the action of the AO who has territorial jurisdiction over the assessee in respect of the income earned by the assessee from the territorial jurisdiction vested in him by virtue of any directions or orders issued u/s. 120(1) or (2) of the Act. So, this saving provision which saves the action of an AO is limited to the income accruing or arising or received within the limits of his territorial area as conferred to him (AO) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the AO is vested with the jurisdiction by an order/direction issued under sub- sec. (1) or (2) of sec. 120 of the Act. Thus, as per the scheme of the Act, it can be seen that sections 120 and 124 vest jurisdiction on Income Tax Authorities and on AO respectively and, therefore, both sections i.e. sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. (1) or (2) of sec. 120 of the Act.”

6. The Ld. A.R submits that the notice u/s 143(2) of the IT Act 1961 dated 08/08/2013 was issued by the DCIT, Circle 2, Gorakhpur, State of Uttar Pradesh was bad in law as the Shivam Dhatu Udyog Ltd. A.Y. 2012-13 DCIT Circle 2 Gorakhpur did not have jurisdiction by virtue of section 124/120 of the Act over the assessee which was based in Kolkata and is situated at State of West Bengal. Thus, according to him, the notice u/s 143(2) of the Act issued by DCIT, Gorokhpur was without jurisdiction and consequent actions were bad in law. Further, according to him, the case was transferred by DCIT, Gorakhpur to DCIT, Kolkata and the consequent framing of assessment order in this case passed by the DCIT, Circle- 3(1), Kolkata was without issue of any valid notice u/s 143(2) of the IT Act 1961 so bad in law.

7. It was brought to our notice by the Ld. A.R that the transfer of case from Gorakhpur to Kolkata was not made by passing any order u/s 127 of the Act and therefore the assessment by DCIT (Kolkata) is bad in law as held in Kusum Goyal vs. ITO (329 ITR 283).

8. According to Ld. A.R the law it is well settled that if the assessing officer who is not having jurisdiction over the case of the assessee issues notice u/s 143(2) of the Act, such notice is bad in law and invalid and all subsequent action including the assessment order passed on the basis of such notice is bad in law and void ab initio.

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the 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: 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.

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 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.

7. In the result, appeal of assessee is allowed. “

Shivam Dhatu Udyog Ltd. A.Y. 2012-13 12. Since the assessee has been able to demonstrate before us that there has been no notice issued u/s. 143(2) of the Act by the AO (DCIT Circle-3(1), Kolkata before he framed to scrutiny assessment u/s. 143(3) of the Act dated 17.03.2015, the assessment order is null in the eyes of law and the assessee succeeds on the legal issue raised before us. Since the AO (DCIT, Circle-3(1), Kolkata did not issue the mandatory notice u/s 143(2) of the Act, he did not enjoy the jurisdiction to frame the assessment u/s. 143(3) of the Act. Therefore, the order passed by the AO (DCIT, Circle-3(1), Kolkata is null in the eyes of law and it has to be quashed. We order accordingly.