SHAKE AKHTAR HOSSAIN,KOLKATA vs. A.C.I.T.,CIRCLE-31, KOLKATA

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-9, Kolkata [‘CIT(A)’ for short] dated 26.03.2019 u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for AY 2015-16.

The assessee raised an additional ground which reads as follows: “For that in the facts and circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals)-9, Kolkata acted unlawfully in not appreciating that the conditions precedent for issuance of notice u/s. 143(2) of the Income Tax Act, 1961 was not complied with and/or fulfilled for the Ld. Assistant Commissioner of Income Tax, Circle 31, Kolkata in passing the assessment order u/s. 143(3) of the Income Tax Act, 1961 and his purported findings on that behalf are absolutely is at initio void, ultra vires and null in law” 3. The ld. Counsel for the assessee submitted that the notice u/s 143(2) of the Act was issued by an officer who had no jurisdiction over the assessee. He submitted that the jurisdiction of the assessee was with ITO, Kolkata as the returned income was filed with total income of ₹19,27,470/- which is below the total income limit of ₹20 lakh. For this, he relied on instruction no.1/2011 [F.No.187/12/2010-IT(A-I)] dated 31.01.2011. He pointed out that the notice u/s 143(2) of the Act was also issued by the ACIT, Circle- 31, Kolkata who had no jurisdiction over the case. Thus he submitted that the Assessment Year: 2015-16 Shake Akhtar Hossain. assessment is bad in law. In support of this contention he relied on the following case laws: i. Shri Sukumar Chandra Sahoo, Purba Medinipur vs. ACIT, Circle-27,Haldia, Purba Medinipur, ITA 2073/KOL/2016 dated 27.09.2017. ii. K.A.Wires Ltd., Kolkata vs. I.T.O.,Ward-8(3), Kolkata, ITA 1149/KOL/2019 dated 22.01.2020. iii. Sri Krishnendu Chowdhury, Kolkata vs. ITO, WD-1, HALDIA, Purba Medinipur, ITA 1153/KOL/2015 dated 18.11.2016.

On merits he submitted that the assessment was selected for scrutiny for the limited purpose of verifying the following: 1) contract receipt/fees mismatch, 2) Bonus/commission to employee mismatch, 3) Sales turn over mismatch, 4) Sundry creditors and tax credit mismatch and whereas the AO travelled beyond these items and made disallowance u/s 43B of the Act as well as 36(1)(va) of the Act. This, he submitted is not permissible in law. He submitted that the issue is covered in his favour by the decision of ‘C’ Bench of ITAT, Chandigarh in the case of Sh. Vijay Kumar, Patiala vs. ITO Ward-1, Patiala in order dated 12.09.2019. He further submitted that the entire amount of service tax was paid on or before 31st March, 2015 and hence, the question of disallowance u/s 43B does not arise. On disallowance made of payment of employees’ contribution towards provident fund, he relied on a number of case laws and submitted that, as the entire remittances were made prior to filing of the return of income, no disallowance should be made u/s 43B of the Act. For this proposition he relied on the case of CIT vs. Vijay Shree Ltd. (2014) taxman 12 (Cal)(Mag).

Rival contentions heard. On a careful consideration of the facts and circumstances of the case, perusal of the papers on record and case laws cited, I hold as follows.

The first issue is jurisdiction. The undisputed fact is that jurisdiction of the assessee lies with the ITO and not with the ACIT for the reason that the returned income is below 20 lakh. This issue has been considered by the Tribunal in the case of Sri Krishnendu Chowdhury (supra) wherein this circular of the Board dated 31.01.2011 was considered and thereafter it was held as follows:

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 noncorporate 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.

We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income of Rs.50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of ‘non corporate returns’ the ITO’s increased monetary limit was upto Rs.15 lacs; and if the returned income is above Rs. 15 lacs it was the AC/DC. So, since the returned income by assessee an individual is above Rs.15 lakh, then the jurisdiction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only the AC/DC had the jurisdiction to assess the assessee. It is settled law that serving of notice u/s. 143(2) of the Act is a sine qua non for an assessment to be made u/s. 143(3) of the Act. In this case, notice u/s. 143(2) of the Act was issued on 06.09.2013 by ITO, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the ACIT, Circle-27, Haldia on 24.09. 2014 when the ACIT issued statutory notice which was beyond the time limit prescribed for issuance of notice u/s. 143(2) of the Act. We note that the ACIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. 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 Assessment Year: 2015-16 Shake Akhtar Hossain. 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

On the issue of addition/disallowance made beyond the CASS criteria, the Chandigarh Bench of the Tribunal in the case of Sh. Vijay Kumar (supra) order dated 12.09.2019 held as follows:

Disallowance u/s 43B was beyond the power given to the AO in the limited scrutiny proceedings. If the AO wanted to go beyond the items of limited scrutiny, a procedure has been prescribed by the CBDT. Approval of a higher authority was required to be taken. This is not done. Hence, the disallowances are bad in law.

Be it as it may, the assessee has filed before us evidences that the service tax in question was paid before closing of the final year 31st March, 2015. Proof of payment was also submitted. The dates of payment are as follows:

On the issue of disallowance of employees’ contribution towards provident fund, the undisputed fact is that the payment was made prior to the due date of filing of return of income. Under such circumstances the payment is allowable as a deduction. This issue was considered by the Hon’ble Calcutta High Court in the case of Sh. Vijay Kumar (supra) adjudicated in view of the assessee. Respectfully following the same, we delete the disallowance and allow this ground of the assessee.

In the result, this appeal of the assessee is allowed.