SH. SUNIL KHULLAR,SAMRALA vs. DCIT, CIRCLE, KHANNA

Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the

order dated 26.04.2019 of the Commissioner of Income Tax (Appeals)-2,

Ludhiana [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the

Income Tax Act (hereinafter referred to as the ‘Act’).

appeal:-

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assessee inter alia, has contested the jurisdiction of the concerned

DCIT to frame the assessment order dated 31.3.2016 u/s 143(3) of the

Income Tax Act. Since the legal ground goes to the root of the case,

hence, we proceed to decide this legal ground first. 2

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relevant statutory provisions, not only the territorial jurisdiction but

the pecuniary jurisdiction of the Income Tax Officer / AO is to be

fixed by CBDT. The Ld. Counsel has further submitted that as per the

notification of the CBDT, orders issued by the PCIT applicable for the

assessment year / relevant period, the jurisdiction over the cases

having total income of more than Rs. 35 lacs were assigned to the

concerned DCITs / ACITs and the jurisdiction to frame assessment in

other cases lied with the concerned Income Tax Officer. The Ld.

Counsel in this respect has placed reliance on the following

documents:-

“Copy of Notification No. 50 dated 22.10.2014 published in the Gazette of India Extraordinary (SO 2752(e) issued by the CBDT under sub sec. (1) & (2) of Sec. 120 of Income Tax Act 1961. Copy of Notification No. 64/2014 dated 13.11.2014 F.No.187/40/2014(ITA-1) issued by CBDT under clause (b) of sub sec (4) of section 120 of Income Tax Act, 1961. Copy of order dated 31.10.2014 bearing F.No. Pr CCIT/CHD/Tech./2014-15/4595-96, issued by the Pr.Chief Commissioner of Income Tax, N.W. Region, Chandigarh passed in pursuance Notification No. 50 dated 22.10.2015 published in the Gazette of India Extraordinary (SO No.2751(E), addressed to the Chief Commissioner of Income Tax Shimla / Panchkula / Ludhiana and Amritsar. 3

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5 The Ld. counsel has further invited our attention to the return of

income filed by the assessee to submit that the income returned by the

assessee was at Rs. 16,95,280/- which was less than Rs. 35 lacs and

further the return of income was filed on 21.01.2014, whereas, the

notice was issued u/s 143(2) of the Act to the assessee on 2.9.2014

and whereas the assessment order was passed on 31.3.2016.. The Ld.

Counsel, therefore, has submitted that the jurisdiction to frame the

assessment in this case at that time lied with the concerned Income

Tax Officer and not with the DCIT.

such monetary limit prescribed. The aforesaid notification / letter was

issued for internal / administrative purpose of the Department and the

same did not give rise to the any legal right to the assessee to object

regarding the pecuniary jurisdiction to the Assessing officer. That

even as per the said notification / letter the concerned JCIT / DCIT

did not pass any order to transfer the case to the concerned ITO and,

therefore, in the absence of the any letter in writing, the jurisdiction

was vested with the concerned DCIT / JCIT.

record. Before proceeding further, it will be appropriate to refer to the

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provisions of Section 2(7A) of the Income Tax Act which defines the

Assessing officer as under:-

2(7A) "Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act”

case the AO means the concerned officer who is vested with relevant

jurisdiction by virtue of directions or orders issued under sub section

(1) or sub section (2) of Section 120 or any other provisions of this

Act.

Section 120 of the Act, which for the sake of ready reference, are

reproduced as under:-

“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 5

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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 …… 10. 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.

dated 31.10.2014 bearing F.No. Pr. CCIT/Chd/Tech./2014-15/4595-96, 6

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issued by the Pr. Chief Commissioner of Income Tax, N.W. Region,

Chandigarh passed in pursuance Notification No. 50 dated 22.10.2014

published in the Gazette of India Extraordinary (SO No. 2752(E),

addressed to the Chief Commissioner of Income Tax, Shimla /

Panchkula / Ludhiana and Amritsar wherein, among others, the

following specific directions were given in para 4.

“4. In view of the Gazette Notification and the approval received from the Zonal Member, I have been directed to state that jurisdiction over the cases having total income of more than Rs. 35 lacs before exemption under Chapter III and deductions under Chapter –XIA be assigned to the DCsIT /ACsIT and other cases be assigned to ITOs.”

the Income Tax Officer and not with the DCIT, therefore, the assessee

framed by the DCIT being without jurisdiction was bad in law.

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jurisdiction to frame such assessment was bad in law. The relevant part of

the order dated 03.02.2021 passed in ITA No.2517/Kol/2019 and Others

(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 ITA No. 2634/Kol/2019, 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 8

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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 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. 7. I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:- 8. I find that there is no dispute in the fact that the notice u/s 143(2) of the Act dt. 29/09/2016 has been issued by the ITO, Wd-1(1), Durgapur. Later, the case was transferred to the jurisdiction of the ACIT on 11/08/2017. Thereafter, no notice u/s 143(2) of the Act was issued by the Assessing Officer having jurisdiction of this case and who had completed the assessment on 26/12/2017 i.e., ACIT, Circle-1(1), Durgapur. Under these circumstances, the question is whether the assessment is bad in law for want of issual of notice u/s 143(2) of the Act. 9. This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in ITA No.

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2073/Kol/2016 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.

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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. 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 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, 12

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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 13

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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 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.” 10. Respectfully following the propositions of law laid down in all these case-law and applying the same to the facts of the case, we hold that the assessment order is bad in law for the reason that the Assessing Officer having jurisdiction over the assessee, has not issued a notice u/s 143(2) of the Act as required by the statute. Notice issue by the officer having no jurisdiction of the assessee is null and void. When a notice is issued by an officer having no jurisdiction, Section 292BB of the Act, does not comes into play. Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee.” 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.”

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decision cited above, it is held that the assessment framed u/s 143(3) of

the Act by the DCIT being without jurisdiction is bad in law and the same

is accordingly set aside.

In the result, the appeal of the assessee stands allowed.

Chandigarh, the 30th December, 2022.

sd/- sd/- [Sanjay Garg] [Shri Vikram Singh Yadav] Accountant Member Judicial Member

Dated: 30 .12.2022. Rs./rkk Copy of the order forwarded to: 1. Shri Sunil Khullar 2. DCIT, Circle-Khanna 3. CIT(A)- 4. CIT- , 5. CIT(DR), ITAT, Chandigarh