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Facts
The assessee filed their return of income and later information was received about the purchase of an immovable property. The Assessing Officer (AO) issued a letter to explain the source of investment, which was not replied to. Subsequently, a notice under section 148 of the Income Tax Act was issued, which the assessee objected to on grounds of jurisdiction and service after the due date.
Held
The Tribunal held that the initial notice under section 148 of the Act was issued by an officer who lacked jurisdiction. Although a subsequent notice was issued by the jurisdictional AO, it was beyond the prescribed limitation period. The Tribunal further noted that a jurisdictional notice with an inherent defect is not curable and relied on High Court judgments.
Key Issues
Whether the notice issued under section 148 of the Income Tax Act, 1961, was validly served considering issues of jurisdiction and limitation.
Sections Cited
143(1), 147, 148, 149(1)(b), 69
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 04.08.2023, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2011-12.
2. In the instant case, the Assessee had declared his total income at Rs.11,72,913/- by filing his return of income on 30.07.2011 which was processed under section 143(1) of the Act. Subsequently, an information was received in the office of ITO, Ward-3(4), Indore to the effect that the Assessee has purchased an immovable property in joint ownership with his wife Smt. Jyoti Bankda, during the year under consideration on a consideration of Rs.1,11,60,936/- and also paid stamp duty expenses of Rs.8,73,500/-. As per copy of the agreement the address of the Assessee was mentioned as 293-2, Niranjanpur, AB Road, Indore. Therefore, the Assessing Officer (AO) by presuming that the jurisdiction pertains to ITO Ward 3(4), issued a letter dated 24.01.2018, by which asked the Assessee to explain the source of investment in aforesaid property. The Assessee in response neither filed any reply nor any explanation. Therefore, the AO by recording reason for reopening and forming the reason to believe that there has been escapement of income within the meaning of proviso to section 147 of the Act, reopened the case of the Assessee and consequently issued the notice dated 27.03.2018 under section 148 of the Act, against which the Assessee vide letter dated 29.05.2018 raised an objection that the service of the notice under section 148 of the Act has been effected, after the due date which is bad in law in view of the decision of the Honorable Gujarat High Court in the case of Kanubhai M Patel HUF vs. Hiren Bhatt (Special Leave Application No.5295/5296/5297 of 2010). Accordingly, the notice dated 27.03.2018 served upon the Assessee on 23.05.2018 is invalid and therefore requested to cancel the notice. The Assessee further claimed that for one Assessee, there cannot be two Assessing Officers i.e. first ITO Ward 3(4), Indore and second DCIT 8(2)(2), Mumbai. Further the notice dated 27.03.2018 was not issued by the AO (DCIT – 8(2)(2), Mumbai) hence, the same is invalid and should be cancelled.
2.1 Though the AO considered the aforesaid objections of the Assessee, however not being convinced, held that the requirement of notice is satisfied, when a notice is actually issued and there is nothing to do with the service of notice u/s 148 of the Act within stipulated four years or six years which is the condition precedent in the case of notice u/s 143(2) of the Act. With regard to the issuing the notice by the ITO at Indore, the AO observed that since the assessee has pointed out that the jurisdiction vests with the DCIT 8(2)(2), Mumbai, the case has been transferred through ITO 3(4), Indore to DCIT 8(2)(2), Mumbai. Subsequently, another notice dated 25.06.2018 u/s 148 of the Act was issued to the assessee, in response to which the assessee did not respond. Thereafter, statutory notices were issued to the assessee to explain the transaction of purchase of immovable property, however, the assessee did not file any reply or explanation despite giving several opportunities.
The AO at last by holding “that the Assessee has nothing to say in the matter as far as the explanation regarding source of aforesaid purchase of property is concerned, he satisfied that the assessee has failed to offer the source of investment in the aforesaid property”, ultimately treated the amount of Rs.60,17,218/- (being 50% of the consideration amount and stamp duty registration of Rs.1,11,60,936/- + Rs.8,73,500/-) as income from unexplained sources and added the same to the income of the assessee u/s 69 of the Act.
3. The Assessee, being aggrieved, challenged the aforesaid addition as well as the reopening of the case by issuing notice u/s 148 of the Act before the Ld. Commissioner but could not get succeeded , as the Ld. Commissioner not only affirmed the reopening of the case u/s 147 of the Act but also upheld the addition by dismissing the appeal of the assessee.
4. The assessee, being aggrieved, is in appeal before us and at the outset claimed that first notice u/s 148 of the Act dated 27.03.2018 was admittedly issued by ITO Ward 3(4), Indore who admittedly had no jurisdiction to issue the notice u/s 148 of the Act and/or to reopen the case of the assessee u/s 147 of the Act, as the Assessee’s AO situated at Mumbai which is also clear from the assessment order passed by the DCIT 8(2)(2), Mumbai. Admittedly, the notice dated 27.03.2018 perhaps was issued within the limitation period, as the last date for issuing the notice was 31.03.2018, however, the same was received by the assessee only on 29.05.2018 and it is admitted fact that thereafter another notice dated 25.06.2018 u/s 148 of the Act was also issued by the jurisdictional AO, which is admittedly beyond the limitation period as prescribed for reopening of the case and therefore the assessment order is liable to be quashed, in view of the judgment passed by the Hon’ble Delhi High Court in the case of Dushyant Kumar Jain Vs. CIT (2016) 381 ITR 428 and another writ petition No.1569/2015 decided on 15.01.2016, wherein the identical issue was dealt with by the Hon’ble High Court.
5. On the contrary, the Ld. D.R. though admitted issuing the notice dated 27.03.2018 by the ITO, Indore which was not having jurisdiction, however, submitted that before reopening of the case and issuing the notice u/s 148 of the Act, the ITO, Ward 3(4), Indore by issuing the letter dated 24.01.2018, specifically asked the Assessee to explain the source of investment in the property under consideration, however the Assessee neither replied the said notice/letter dated 24.01.2018 nor filed any explanation, therefore the AO rightly formed the reason to believe for reopening of the case and consequently issued notice u/s 148 of the Act and thus reopening of the case cannot be faulted with.
We have heard the parties and perused the material available on record. Main controversy raised by the assessee pertains to the issuing of notice u/s 148 of the Act by the AO situated at Indore who, admittedly, had no jurisdiction as not disputed by the parties. Though subsequently the AO who was having jurisdiction at Mumbai, issued subsequent notice u/s 148 of the Act on 25.06.2018 but that was beyond the prescribed period of limitation admittedly expired on 31.03.2018, as set out in section 149(1)(b) of the Act and therefore, cannot be considered as valid notice for reopening of the case and/or for making the assessment order u/s 147 of the Act. We also observe that Hon’ble Jurisdictional High Court in the case of Ashok Devichand Jain Vs UOI & Ors Writ Petition No.3489 of 2029 decided on 08/03/2022 has also dealt with the identical issue, wherein the AO who was not having jurisdiction of the Assessee’s case but issued the notice u/s 148 of the Act and therefore the Hon’ble High Court quashed the notice by holding as under:
The primary ground that has been raised is that the Income Tax Officer who issued the notice under section 148 of the Act, had no jurisdiction to issue such notice. According to Petitioner as per instruction No. 1/2011 dated 31st January, 2011 issued by the Central Board of Direct Taxes, where income declared/returned by any Non-Corporate assessee is up to Rs. 20 lakhs, then the jurisdiction will be of ITO and where the income declared returned by a Non Corporate assessee is above Rs. 20 lakhs, the jurisdiction will be of DC/AC.
Petitioner has filed return of income of about Rs. 64,34,663/-and therefore, the jurisdiction will be that of DC/AC and not ITO. Mr. Jain submitted that since notice under section 148 of the Act has been issued by ITO, and not by DC/AC that is by a person who did not have any jurisdiction over Petitioner, such notice was bad on the count of having been issued by an officer who had no authority in law to issue such notice.
We have considered the affidavit in reply of one Mr. Suresh G. Kamble, ITO who had issued the notice under section 148 of the Act. Said Mr. Kamble, ITO, Ward 12(3)(1), Mumbai admits that such a defective notice has been issued but according to him, PAN of Petitioner was lying with ITO Ward (12)(3)(1), Mumbai and it was not feasible to migrate the PAN having returned of income exceeding Rs. 30 lakhs to the charge of DCIT, Circle 12(3)(1), Mumbai, as the time available with the ITO 12(3)(1) was too short to migrate the PAN after obtaining administrative approval from the higher authorities by 31st March, 2019
The notice under section 148 of the Act is jurisdictional notice and any inherent defect therein is not curable. In the facts of the case, notice having been issued by an officer who had no jurisdiction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law.
6. in the circumstances, we have no hesitation in setting aside the notice dated 30th March, 2019.”
6.1 The Hon’ble High Cout has clearly held that the notice under section 148 of the Act is a jurisdictional notice and any inherent defect therein is not a curable one. We further observe that the jurisdictional co-ordinate bench in the case of DCIT Vs Parmar Built Tech also dealt with the identical issue and by following the judgment of the jurisdictional High Court in the case of Ashok Devichand Jain (supra), quashed the assessment order itself. The Hon’ble Apex Court in the case of ACIT VS Hotel Blue Moon (2010) 321 ITR 362 (SC), also laid down that mandatory notice is required to be issued by the Assessing Officer, who has jurisdiction and is empowered to issue the notice and to make the assessment.
6.2 Coming to the instant case, we observe that admittedly the AO who had issued the jurisdictional notice dated 27-03-2018 u/s 148 of the Act within the limitation period, had no jurisdiction, whereas subsequent notice dated 29.05.2018 issued by jurisdictional AO was beyond the period of limitation and therefore respectfully following the dictum of the Hon’ble Jurisdictional High Court, the assessment order itself is liable to be quashed sans jurisdiction of the AO in issuing the statutory notice u/s 148 of the Act within the limitation period as prescribed u/s 149 of the Act. Consequently, the assessment order is quashed.
Coming to the merits of the case, we observe, as we have already quashed the assessment order itself, hence, no purpose would be served by deciding the merits of the case / other issues raised by the Assessee which would be a futile exercise.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 31.07.2024.