RAJAT COMMERCIAL ENTERPRISES PVT LTD,MUMBAI vs. DCIT CIR 11(1)(1), MUMBAI

This appeal is filed by Rajat Commercial Private Limited in A.Y. 2012-13, against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 25th November, 2022, wherein the appeal filed by the assessee against the assessment order passed under Section 143(3) read with section 147 of the Income-tax Act, 1961 (the Act) dated 26th December, 2017, passed by the Dy. Commissioner of Income Tax, Central Circle 1(1), Mumbai, (the learned Assessing Officer) was dismissed.

Brief facts of the case shows that assessee is engaged in the business of investment in shares and securities filed his return of income for A.Y. 2011-12 on 29th September, 2012, at a loss of ₹2,73,37,520/-. This return was processed on 14th February, 2013, under Section 143(1) of the Act.

The assessee preferred the appeal before the learned CIT (A). The claim of the assessee is that the long term capital gain earned on sale of investigation of Nouveau Global Ventures Ltd. is supported by the balance sheet of the assessee company, wherein the above shares were partly acquired in the year ended on 31st March, 2006 and further, copy of allotment letters for allotment of shares on 22nd September, 2009. The assessee submitted the bank statement evidencing the payment for allotment of the above share. The assessee also stated that after acquisition of the above 9,35,000 equity shares of ₹10 each, same were sub divided on 11th May, 2011. The Demat account of assessee with progressive share broker private limited was also submitted. As assessee also submitted the copy of contract notes on sale of the above share, transfer of the above shares from the Demat Account of the assessee supported with the brokers ledger account and bank statement for payment receive. Therefore, it was submitted that there is nothing unusual in the transaction by which it can be said to be unexplained. The assessee also challenged the reopening of the assessment. The ground of reopening was dismissed by the learned CIT (A) holding that the reasons recorded by the learned Assessing Officer are on application of mind and the reopening in absence of any assessment is valid. The assessee also challenged that no notice under Section 143(2) of the Act was issued to the assessee on 7th November, 2017, selecting the return of income filed originally on 20th September, 2012, for scrutiny

Therefore, assessee is in appeal before us. At the time of hearing, the assessee raised an additional ground of appeal stating that notice issued under Section 148 of the Act is invalid notice, as it was issued by the Income Tax Officer, who was not having jurisdiction as the return filed disclosed a loss of ₹2,73,37,520/-, for which the jurisdiction lies with the Dy. Commissioner of Income Tax. Thus, the issue of notice by non jurisdictional officer has rendered the order under appeal as null and void, therefore, bad in law.

The assessee submitted that the above ground of appeal is partly legal, does not require any further investigation of facts and it can be raised at any time, therefore, same may be admitted.

The learned Authorized Representative submitted the same facts as submitted in the application for admission of additional ground.

The learned Authorized Representative referred to the decision of the Hon'ble Bombay High Court in Writ Petition No. 3489 of 2019, in case of Ashok Devi Chand Jain dated 8th March, 2022. He referred to paragraph no. 5 that the notice under Section 148 of the Act is a jurisdictional notice.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that assessee has raised a jurisdictional issue of issue of notice by a non-jurisdictional officer. Such ground goes to the root of the matter and therefore, same deserves to be admitted.

On the merits of the additional ground, the learned Authorized Representative submitted that assessee filed return of income disclosing a loss of ₹2,73,37,520/-, for which the jurisdiction lies with the Dy. Commissioner of Income Tax, whereas the notice is issued under Section 148 of the Act by the Income Tax Officer, ward 11(1)(1), Mumbai, placed at page no.23 of the paper book. It was further stated that the reasons for reopening of the assessment on

The learned Departmental Representative vehemently contested that in the present case, the income disclosed by the assessee is ₹ nil and assessee has carried forward the losses of ₹2,73,37,520/- and therefore, the jurisdiction correctly lies with the learned Assessing Officer. She further referred to the return of income wherein in the return of income filed itself but assessee has given the jurisdiction of ITO Ward 8(3)(3), Mumbai. Therefore, now the assessee cannot question that notice under Section 148 of the Act is issued by learned Assessing Officer incorrectly, but should have been issued by the Dy. Commissioner of Income Tax.

As the learned Authorized Representative has placed reliance on the decision of the Hon'ble Bombay High Court in case of Ashok Devi Chand Jain, the learned Departmental Representative submitted that in that case in the Writ Petition itself the assessee has challenged the jurisdiction of the learned Assessing Officer.

We have carefully considered the rival contentions in the present case, the assessee has filed return of income on 29th September, 2012, wherein the current year loss of ₹2,73,37,520/-, was returned. It is also an admitted fact that notice under Section 148 of the Act on "1. Petitioner is impugning a notice dated 30th March, 2019 issued under section 148 of the Income-tax Act, 1961 (the Act) for A.Y. 2012-13 and order passed on 18th November, 2019 rejecting Petitioner's objection to reopening on various grounds.

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 INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A- I)], DATED 31-1-2011

As the facts of that case squarely applies to the case before us, respectfully following the decision of the Hon'ble Bombay High Court in case of Ashok Devi Chand Jain (supra), we also quash the order passed by the learned Assessing Officer. Accordingly, the additional ground raised by the assessee is allowed.

In the result, the appeal filed by the assessee is allowed on additional ground and other grounds of appeal are left open.