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Facts
The assessee, residing in Gurgaon, filed his return for AY 2015-16, which was subsequently assessed by the ITO, Ward-02(3), New Delhi, leading to disallowances under Section 68 and for commission. The assessee challenged the assessment proceedings, arguing that the ITO, New Delhi, lacked both territorial jurisdiction (as the assessee resided in Gurgaon) and pecuniary jurisdiction (as both his and his company's income exceeded specified limits, requiring assessment by ACIT/DCIT).
Held
The Tribunal admitted the additional ground on jurisdiction, ruling that the ITO, Ward-02(3), New Delhi, lacked both territorial and pecuniary jurisdiction. It found the notice issued under Section 143(2) by the New Delhi ITO to be `non est` in the eyes of law, thereby vitiating the entire assessment proceedings under Section 143(3). The Tribunal relied on CBDT Notification No. 50/2014 and Circular No. 1/11 to support its finding on lack of jurisdiction.
Key Issues
Whether the ITO, Ward-02(3), New Delhi, had valid territorial and pecuniary jurisdiction to issue notice under Section 143(2) and complete assessment under Section 143(3) for an assessee residing in Gurgaon with income exceeding the ITO's pecuniary limits.
Sections Cited
Income Tax Act, 1961: Section 143(2), Income Tax Act, 1961: Section 143(3), Income Tax Act, 1961: Section 68, CBDT Notification No. 50/2014 dated 22.10.2014, CBDT Circular No. 1/11 dated 31.01.2011
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Income Tax Appellate Tribunal, DELHI BENCH: “B”, NEW DELHI
Before: SHRI M BALAGANESH&
The instant appeal filed at the behest of the Assessee is directed against the order dated 15.01.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-I, New Delhi, under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for Assessment Year 2015-16, whereby the addition made by ITA No.- 1533/Del/2019 Sh. Deepak Gupta the Assessing Officer, the ITO, ward - 2(3) New Delhi has been confirmed.
Alongwith other grounds, the assessee before us, has raised an additional ground regarding the maintainability of the assessment proceedings, to this effect, that the Ld. AO is having lack of jurisdiction in issuing notice u/s 143(2) of the Act from his office lying at New Delhi and in that view of the matter the same notice is not maintainable. Due to lack of jurisdiction, the entire assessment proceeding, therefore, is vitiated and thus liable to be quashed. On this issue, he has relied upon the judgment passed by the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd., reported in 229 ITR 383 (SC) and further the judgement passed by the Punjab and Haryana High Court in the case of VMT Spinning Power Co. Ltd. vs. CIT , reported in 389 ITR 326 (P&H). However, the Ld. DR has raised his objection to this effect, that this particular ground regarding the maintainability of the assessment proceedings has not been raised before the authorities below and thus the same neither can be raised here, nor can be entertained by us, if so raised. Accordingly, Ld. Counsel for the assessee submitted before us that no additional evidence required for adjudication of this particular ground of maintainability. Further that there is no disputed question of fact raised in this particular ground. It was further contended by the Ld. Counsel for the assessee that the question arose from the facts are already on record. The determination of this particular ground will also aid in determining the assessee’s current tax liability meaning thereby the Page 2 of 13
ITA No.- 1533/Del/2019 Sh. Deepak Gupta issue involved herein raised in the additional ground goes to the root of the matter and hence prayed for admission of the same. The submission made by the Counsel is basically on this fact that both the company and the assessee being the Director of the company are of Gurugram and not New Delhi. Thus, the Notice issued u/s 143(2) of the Act by the ITO, Ward-2(3), New Delhi is of no consequence due to lack of jurisdiction, fact of which admittedly goes to the root of the matter. On this aspect, he further relied upon the judgement passed by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd (supra) wherein it is held that the issue raising legal argument without reference to any disputed question of fact particularly when there is no additional evidence required in adjudication of this new legal ground and that on the basis of the facts which is already on record and further that when the adjudication of this ground is having an impact on the current tax liability of the assessee, then the same is required to be admitted, even by the Tribunal though not raised before the authorities below. It is pertinent to mention that judgment passed by the Hon’ble Punjab and Haryana High Court as relied upon, is on the same lines of the judgment that by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd.
Having heard the Ld. Counsel appearing for the parties, and having regard to the facts and circumstances of the case, particularly taken into consideration the ratio laid down by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd, (supra) we are of the considered opinion that the additional Page 3 of 13
ITA No.- 1533/Del/2019 Sh. Deepak Gupta ground as narrated hereinbefore in regard to the jurisdiction of the Ld. AO in issuing the notice u/s 143(2) of the Act goes to the root of the matter and thus this additional ground demands adjudication at the very threshold by us. In view of the matter, the additional ground is, therefore, admitted.
The brief facts leading to this case is this that the assessee residing at SUA-084, Summit DLF City Phase-5, Sector-54, Gurgaon filed its return of income for the assessment Year 2015-16 declaring total income at Rs. 1, 34,94,302/-. Upon selection of the case under scrutiny, the notice u/s 143(2) of the Act dated 12.09.2016 followed by notice u/s 142(1) of the Act dated 03.05.2017 were issued to the assessee. The said assessment was completed u/s 143(3) of the Act by order dated 30.12.2017 upon making disallowance of Rs. 59,51,778/- u/s 68 of the Act and Rs. 1,19,036/- on account of commission paid to the entry operators out of undisclosed sources, which was confirmed by the First Appellate Authority, hence the instant appeal before us.
So far as the maintainability of assessment order is concerned, the assessee’s case is of two folds. Firstly the assessee is residing admittedly in Gurgaon at the Address - SUA-084, Summit DLF City Phase-5, Sector-54, Gurgaon, fact of which is mentioned in both the orders passed by the authorities below; as the assessee admittedly resides outside the purview of New Delhi the AO being ITO ward- 2(3), New Delhi, has, thus no jurisdiction to issue notice u/s 143(2) of the Act. As the basis of the assessment order is not ITA No.- 1533/Del/2019 Sh. Deepak Gupta maintainable due to lack of jurisdiction the entire assessment proceeding is vitiated and thus liable to be set aside. On the aspect for, he has relied upon the CBDT Circular being Notification No. 50/2014 dated 22nd October, 2014; a copy whereof is also submitted before the Court, the relevant contents whereof is as follow:
“ Explanation:- For the purposes of this notification,- (i) "residing" means,- (a) in the case of an individual, place of residence, unless otherwise provided in this notification; (b) in the case of an Hindu undivided family, place of residence of the Karta; and (c) in the case of a firm or an association of persons or a body of individuals or a local authority and all other artificial juridical persons other than companies, the place where the head office is located. (ii) in cases of companies whose names begin with any of the numericals (hereinafter "numeric companies"), the Principal Commissioners of Income-tax or Commissioners of Income-tax who exercise the powers and perform the functions in respect of companies whose names begin with the alphabet which is same as that of the first alphabet of the name of the numeric companies.”
5.1 Relied upon this above notification, the case made out by the assessee is this that as the assessee is residing admittedly at Gurgaon, the assessee’s income is required to be assessed by the Assessing Officer, Gurgaon and not the ITO, ward-2(3), New Delhi. The second limb of argument of the assessee in regard to the maintainability of the assessment proceeding is this that the assessee since having an annual income of Rs. 1,34,94,302/- for the year under consideration which is more than 30 lakhs, the ITO, in that event, is not appropriate authority to assess the income of ITA No.- 1533/Del/2019 Sh. Deepak Gupta the assessee; the pecuniary jurisdiction lies not with the ITO but with the ACIT. In view of Notification No. 1 of 2021 passed by the CBDT, a copy of which is also annexed with the Paper Book. Moreso, the return of income of the assessee’s company is also more than 30 lakhs, rather Rs. 9337115 for the year under consideration, which is one of the main contentions raised by the Ld. Counsel appearing for the assessee. A copy of the ITR for Assessment Year 2015-16 of the company namely Ameya Universal has been handed over to us, copy whereof has also been given to the Ld. DR.
The Ld. DR submitted the note on this issue which is reproduced herein below:
ITA No.- 1533/Del/2019 Sh. Deepak Gupta
ITA No.- 1533/Del/2019 Sh. Deepak Gupta
ITA No.- 1533/Del/2019 Sh. Deepak Gupta 6.1 According to him, the charge of Ward no. 2(3) had jurisdiction over the persons being company registered under the Companies Act, 2013 or 1956 and having its principal place of business in area NCT of Delhi whose name begin with the alphabet ‘Am’ and all cases of individuals being Managing Director or Director or Manager or Secretary in such companies.
We have heard the Ld. Representative of the Department. In regard to the first issue as raised by the assessee that the ITO, Ward- 2(3) , New Delhi is not having jurisdiction to issue the notice u/s 143(2) of the Act, having regard to the place of residence of the assessee company at Gurgaon, it was contended that the Notification as relied by the Counsel appearing for the assessee being 50/2014 dated 22nd October, 2014 has been issued for compliance to be made by the Principal CIT for deputing officer for determining the income of the assessee. In that view of the matter, the assessee before us cannot at all rely upon the said circular. Further, that the ACIT has rightly exercised jurisdiction in issuing notice u/s 143(2) of the Act in determining the total income of the assessee u/s 143(3) of the Act on 30.12.2017.
7.1 So far as the pecuniary jurisdiction is concerned it was submitted by the Ld. DR that as per ITR filed by the company in year 2017, i.e. for the Assessment Year. 2016-17, the return of income of the assessee was Rs. 3,18,770/-. Therefore the jurisdiction of the assessee vested with Ward-2(3), Delhi, at the time of assessment proceedings for Assessment Year 2015-16. In that ITA No.- 1533/Del/2019 Sh. Deepak Gupta view of the matter, the assessee argument that the ITO, Ward 2(3), does not have valid jurisdiction over the assessee, is wrong and not acceptable. A copy of the ITR return filed by the assessee company for the assessment Year 2016-17 is also annexed with the written note submitted by the Ld. DR.
We have heard the rival contentions made by the respective parties. We have further perused the relevant materials available on record. So far as the jurisdiction for assumption of charges for determining the assessment of income of the assessee by the Ld. ITO, Ward 2(3), Delhi is concerned, we find the same has practically ignored the place of residence being in Gurgaon, though the residential address is reflecting in both the assessment and appellate order itself. The Notification being No. 50/ 2014 dated 22nd October, 2014 issued by the CBDT strengthened the case of the assessee, to this effect that the residence of the assessee is the first and foremost criteria for consideration in assumption of charges by the Departmental Officers in assessing the annual income of the assessee. The Departmental view that such circular has been issued to provide guidelines to the PCIT in deputing Officer, is therefore, has not relevance at all. We thus, inclined to accept the argument advanced by the Ld. Counsel appearing for the assessee to this effect that the notice issued u/s 143(2) dated 12.09.2016 by the ITO, Ward -2(3), New Delhi is lack of jurisdiction. The same is, therefore, non est in the eyes of law. As the notice u/s 143(2) of the Act dated 12.09.2016 being the very basis of the scrutiny assessment u/s 143(3) of the Act is found to be non est in Page 10 of 13
ITA No.- 1533/Del/2019 Sh. Deepak Gupta the eyes of law, the entire proceedings is, thus, vitiated and liable to be quashed.
We have considered the Notification being No. 50/ 2014, so far as the pecuniary jurisdiction is concerned being notification dated 1/2011 dated 31.01.2011 wherein it has clearly spelt out that the corporate returns above 20 lakhs are to be assigned to AC/DC in Moffisil and Metro Cities. The same will be assigned to the DC/AC having declared income above Rs. 30 lakhs. In case of non- corporate returns, the AC/DC are to be assigned cases with declared income above 15 lakhs and 20 lakhs in Moffisil and Metro Cities, respectively. The Ld. DR relied upon the ITR returns filed by the assessee company for the Assessment Year 2016-17, having declared income of Rs. 3,18,770/-, whereas the return of income for the year 2015-16 filed by the assessee company, which is to be taken into consideration while assigning charges on the basis of pecuniary limits, shows total income of Rs. 9337120/-, which is much more than Rs. 20 lakhs fulfils the criteria as mentioned in Circular being No. 1/11 dated 31/1/2011. This particular aspect of the matter has been duly considered by us in deciding the issue and having regard to this facts and circumstances of the case, we decline to accept the submissions made by the Ld. DR. Since both the assessee and his company have declared income more than 20 lakhs for the year under consideration, the pecuniary jurisdiction lies with the ACIT/DCIT for determining the annual income of the assessee and not with the ITO, who has wrongly usurped such jurisdiction having regard to the departmental /CBDT Circular/ Page 11 of 13
ITA No.- 1533/Del/2019 Sh. Deepak Gupta Instruction. On that score, therefore, too, the holdings of charge in determining annual income of the assessee by the ITO, Ward -2(3), Delhi is found to be without jurisdiction and is liable to be quashed. We, thus, with the above observations, quash the entire assessment proceedings.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 30.04.2024.