HANUMAN AGRO INDUSTRIES LTD.,,KOLKATA vs. DCIT, CIRCLE 4(1), KOLKATA

1. Income Declared (Mofussil areas) Income declared (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate Upto Rs.20 lcs Above Rs. 20 Upto lacs Rs.30 Above Rs.30 returns lacs lacs Non-corporate Upto Rs.15 Above Rs. 15 Upto lacs Rs.20 Above Rs. 20 returns lacs lacs lacs An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.” 8.3. A perusal of the above provision of law along with the CBDT Instructions would show, in this case, the competent officer to proceed with the assessment by way of issue of notice u/s 143(2) of the Act was ITO, whereas, the notice u/s 143(2) has been issued by the ACIT, circle-36, Kolkata who did not have any jurisdiction to issue the aforesaid notice. As has been held by the various courts of the country including the Apex Court, the issuance of notice u/s 143(2) by the concerned Assessing Officer of a competent jurisdiction is mandatory to assume jurisdiction to proceed and frame assessment u/s 143(3) of the Act. 8.4. Identical issue came up for consideration before the Coordinate Bench of the Tribunal in the case of Bhagyalaxmi Conclave (P) Ltd. v. DCIT in IT Appeal No.2517/Kol/2019, dated 03-02-2021 wherein the Tribunal by further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that when the notice u/s 143(2) was issued by an officer who did not have jurisdiction to proceed with the assessment

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 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 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— where he has made a return 1 [under sub-section (1) of (a) 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 [subsection (2) of section 115WE or sub-section (2) of section 143] or after the completion of the assessment, whichever is earlier; where he has made no such return, after the expiry of the (b) 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.

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

6. I have considered the rival submissions. A perusal of the order of the Hon’ble Jurisdictional High Court in the case of Raghvendra Mohta, referred to supra, shows that the Hon’ble Jurisdiction High Court has in page 3 of its order held as follows:- The learned Tribunal took note of the decision of a Co-ordinate Bench of the learned Tribunal in the case of Bhagyalaxmi Conclave (P) Ltd. vs. DCIT, passed in IT Appeal No.2517/Kol/2019, dated 3.2.2021. Apart from other decisions and allowed the assessee's appeal, the revenue had challenged the order passed in the case of Bhagyalaxmi Conclave (P) Ltd. before this court in ITAT/221/2022 etc. and by a judgment reported in 2022 (12) TMI 1514, the appeal filed by the department was dismissed wherein one of the questions framed is identical to the substantial questions of law suggested by the revenue in the instant case. Thus, we find that the learned Tribunal was right in allowing the assessee' appeal and setting aside the order passed by the Assessing Officer on the ground of lack of inherent jurisdiction.

The Hon’ble Jurisdictional high Court has upheld the order of the coordinate bench of this tribunal in the case of Raghvendra Mohta, referred to supra. Consequently, respectfully following the decision of the coordinate bench of this tribunal as also the principles as laid down by the Hon’ble Jurisdiction High Court in the case of Raghvendra Mohta, referred to supra, as it is noticed that the notice u/s.148 of the Act issued on the assessee by the ACIT Circle-4(1), Kolkata did not have the pecuniary jurisdiction, therefore, the same is hereby quashed. Consequently, the reassessment framed by the Assessing Officer based on the invalid notice also stands quashed.