R A REALTORS PVT. LTD.,HOWRAH vs. I.T.O., WARD - 13(1),, KOLKATA

From the above, it is noted that return of income filed by the assessee is at Rs. Nil. Notice u/s. 143(2) has been issued and served on the assessee on 10.09.2015. Notice u/s. 142(1) dated 13.06.2016 along with questionnaire has also been issued and served on the assessee. The important fact Ld. Counsel asserted is that both, the notice as well as the assessment order has been issued by the Assistant Commissioner of Income Tax, Circle-36, Kolkata, who did not have jurisdiction over the assessee owing to the pecuniary jurisdiction mandated by CBDT in its Instruction No. 1/2011 (F. No. 187/12/2010-ITA-1) dated 31.01.2011. According to him, since the assessee has disclosed nil income, the jurisdiction for framing the assessment vide CBDT Instruction No. 1/2011 vests with the Income Tax Officer whereas the assessment order in question has been framed by the ACIT, therefore, assessment order is without jurisdiction and deserves to be quashed. 6.1. He further submitted that as per the settled proposition of law, issuing notice u/s. 143(2) by the concerned AO and competent authority is sine qua non to assume jurisdiction to frame assessment u/s. 143(3) of the Act. For this, he placed reliance on the decision of Hon’ble Supreme Court in the case of ACIT Vs. Hotel Bluemoon 321 ITR 362 (SC). In the present case of the assessee notice u/s. 143(2) has been issued by Ld. ACIT who is not the AO having competent jurisdiction. Since the notice has been issued by a non-jurisdictional AO i.e. ACIT, the said notice issued by him does not have any legal sanctity. Therefore, consequent to such an invalid notice, assessment framed thereafter by Ld. ACIT is also bad in law.

Per contra, Ld. Sr. DR could not rebut the aforesaid legal proposition based on aforesaid factual aspect put forth by the Ld. Counsel for the assessee. The only assertion made by him was that the higher authority i.e. ACIT had all the concurrent jurisdiction to exercise his powers which the Income Tax Officer has, who is an officer below the rank of ACIT. A written submission by the Ld. Sr. DR is also placed on record which deals with merit of the case only.

We have considered the rival contentions and gone through the records. Before proceeding further, it will be appropriate to refer to section 120 of the Act which, for the sake of ready reference, is reproduced as under: “Jurisdiction of income- tax authorities 120.(1) Income- tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred 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 …… 8.1. A perusal of the aforesaid statutory provision 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. Therefore, CBDT having regard to the income as per return has fixed the jurisdiction of the Assessing Officers for class of cases with prescribed pecuniary limits based on income declared by the assessees. 8.2. The ld. Counsel in this respect has relied upon the CBDT Instruction No.1/2011 [F.No.187/12/2010-IT(A-I), for the sake of convenience is reproduced as under:

On the above observations, the short issue which falls for consideration in the instant case is whether there is valid notice issued u/s. 143(2) of the Act in commencing the scrutiny assessment and thereafter framing the assessment order u/s. 143(3) of the Act. In this respect, it is not in dispute that on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which in the present case is less than the ITA No.2275/Kol/2025 R A Realtors Pvt. Ltd prescribed limit in CBDT Instruction no. 1/2011 and, therefore, the same lay with ITO. However, the notice u/s. 143(2) was issued by ACIT, Circle-36, Kolkata. It is also a fact that subsequently the assessment has been framed by ACIT, Circle- 36, Kolkata only. Since a valid notice u/s. 143(2) has not been issued, the assessment proceeding carried thereafter can also not be held to be valid. We note that the assessment has been framed by the AO who is not having the prima facie jurisdiction to frame the impugned assessment, accordingly, the assessment is invalid. Case of the assessee finds support from the decision of Coordinate Bench of ITAT, Kolkata in the case of Rupasi Bangla Agro Industries Pvt. Ltd. Vs. ITO in ITA No. 909/Kol/2023 dated 14.12.2023.

Ld. DR has referred to the judgment of Hon’ble Supreme Court in the case of DCIT Vs. Kalinga Institute of Industrial Technology [2023] 151 taxmann.com 434 (SC) to contest that assessee did not raise objection in accordance with sec. 124(3) within 30 days of issuance of service of notice u/s. 143(2) and participated in the assessment proceedings. Therefore, he has no legal ground to challenge the assessment at this stage. 10.1. On the contentions raised by the Ld. Sr. DR on this aspect, we refer to section 124 of the Act which is extracted as under: “Jurisdiction of Assessing Officers.— 124. (1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction— (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the [Principal Director General or Director General] or the [Principal Chief Commissioner or Chief Commissioner] or the [Principal Commissioner or Commissioner]; or where the question is one relating to areas within the jurisdiction of different [Principal Director General or Director General] or [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner], by the [Principal Director General or Director General] or [Principal Chief Commissioners or Chief Commissioners] or [Principal Commissioner or Commissioner] concerned or, if they are not in agreement, by the Board or by such [Principal Director General or Director General] or [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer— ITA No.2275/Kol/2025 R A Realtors Pvt. Ltd (a) where he has made a return 1 [under sub-section (1) of section 115WD or under sub-section (1) of section 139], after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or 2 [sub-section (2) of section 115WE or sub-section (2) of section 143] or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under 3 [sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; 4 [(c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.] (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.”

From sub-section (1) of the aforesaid section, it is important to note that AO has to be vested with jurisdiction over any area as prescribed in clause (a) and (b). In sub-section (3), an assessee is not entitled to call for the jurisdiction of AO after the expiry of one month from the date on which it was served with a notice u/s. 143(2). Further, sub-section (5) states that every Assessing Officer shall have all the powers conferred by or under the Act on an Assessing Officer in respect of the income accruing or arising or received within the area over which he has been vested with jurisdiction by virtue of the directions or orders issued u/s. 120(1) and (2). 11.1. It is important to note that prima facie assumption of jurisdiction by the AO is to be first passed through the test prescribed in sub-section (1). In the case before us, the assessment has been framed u/s. 143(3) by an AO whose jurisdiction is under challenge who at the threshold itself did not had the jurisdiction over the assessee for issuing notice u/s. 143(2) of the Act. In the present case, both the notice issued u/s. 143(2) and the assessment completed thereafter are by an officer who does not have jurisdiction in terms of CBDT Instruction no. 1/2011, owing to nil income return filed by the assessee.

It is noted by the Hon’ble Apex Court in the case of Kalinga Institute of Industrial Technology (supra) that jurisdiction changed after the returns were filed. Also, it noted that the High court had granted liberty to the concerned authority to issue appropriate notice. It further clarified that the Assessing Officer is free to complete the assessment if the assessment order is not issued. 12.1. On perusing the order of Hon’ble High court, it is noted that it did not express its opinion on the order of assessment and the demand u/s. 156. It dealt only with the issue of notice u/s. 143(2) for which also it was kept open for the competent authority to issue appropriate notice to the assessee as per law. 12.2. Facts in the case of Kalinga Institute of Industrial Technology (supra) are distinguishable from the facts of the present case as noted above.

Accordingly, we allow the additional ground raised by the assessee and hold that the assessment order framed in the case of the assessee is without jurisdiction and is a nullity. The impugned assessment order is hereby quashed since the AO i.e. ACIT, Circle-36, Kolkata framed the said assessment did not have jurisdiction over the assessee as mandated by CBDT Instruction No. 1/2011. Since the additional ground has been allowed and the assessment order being quashed, the grounds on merits raised by the assessee in Form 36 are not adjudicated upon since they have been rendered academic in nature. In the result, appeal of the assessee is allowed. 14. 7.2 The Hon’ble Jurisdictional High Court has confirmed the above order observing as under on an appeal filed by the revenue:

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