M/S CHANDRIKA INVESTMENTS vs. ITO,

Ground no.1 & 2 of the assessee’s appeal are as under;

The Learned AR of the assessee submitted copy of CBDT Instruction No.1/2011 dated 31-01-2011 and it was submitted that these instructions were issued by the Board u/s 119 of the IT Act, 1961 and therefore, these are binding of the AO. Thereafter, he submitted that in the present case, as per the return of income filed by the assessee in pursuance to notice u/s 142 (1) of the Act, the assessee declared total income of Rs.3,42,45,991/- and even as per the revised return filed by the assessee, the income declared by the assessee is Rs.127,50,050/- and as per the instructions of the Board, if the income declared by the assessee is more than Rs.30.00 lakhs in Metro Cities, the assessment has to be famed by the DCIT or ACIT. But in the present case, the assessment order has been passed by the ITO and therefore, this order is not valid and should be quashed. At this juncture, it was pointed out by the Bench that even if it is held that the ITO was not competent to pass the impugned order, then the matter has to go back for framing de-novo assessment by DCIT or ACIT and in reply, ld. AR of the assessee had nothing to say. As against this, the ld. DR of the revenue placed reliance on the judgment of the Hon’ble Delhi High Court rendered in the case of CIT Vs Kapil Jain reported in 50 DTR 342(Del.) in support of his contention that if no objection has been raised by the assessee regarding the jurisdiction of the AO within one month after completion of the assessment then the assessee cannot raise such objection afterwards. He also supported the order of the ld. CIT(A) wherein he has given a finding that the CBDT Instruction No.1/2011 dated 31-01-2011 are applicable only in cases where returns have been filed in compliance with the provisions of sec.139(1) of the IT Act, 1961 but not where the return is filed following a survey conducted u/s 133A of the IT Act, 1961. He further submitted that in the present case, a survey was conducted by the assessee and thereafter, in pursuance to notice issued u/s 142(1) of the IT Act, this return was filed by the assessee and therefore, these instructions of the Board are not applicable in the present case.

The facts are not in dispute. As per the return filed by the assessee after survey in compliance to notice issued u/s 142(1) of the Act, the income declared by the assessee is Rs.342.45 lakhs and as per the revised income also, the income declared by the assessee is Rs.127.50 lakhs and therefore, the income declared by the assessee is much in excess of the limit prescribed by the CBDT Instruction No.1/2011 dated 31-01-2011 as per which the ITO has no jurisdiction to frame an assessment order where the income declared by the assessee in a Metro City as per the return of income is Rs.30.00 lakhs and the date of assessment order passed by the AO is 17-10-2011 and these instruction are applicable with effect from 01-04-2011. Therefore, this is an admitted position that the impugned assessment order passed by the ITO is not valid. But we feel that the assessment order is irregular but not illegal and therefore, we feel that the matter should go back for de-novo assessment by a competent Officer being ACIT or DCIT.

Regarding the judgment of the Hon’ble Delhi High Court rendered in the case of Kapil Jain (Supra) on which reliance has been placed by the revenue, we find that in that case, the case of the assessee was transferred to Circle-36(1) and such transfer order was passed by the CIT on 21-04-2004 but on the date of issue of notice u/s158BD r.w.s.158BC of the Act on 19-04-2004, the jurisdiction vested with the ITO, Ward29(1) in so far the assessee was concerned.

In view of our above discussion, we hold that the assessment order passed by the ITO in the present case is not a valid assessment order and hence, we set aside the same and restore the matter back for framing a de-novo assessment by a competent Officer being ACIT or DCIT. In view of our decision, other grounds raised by the assessee in its appeal and the appeal of the revenue do not require any separate adjudication at this stage.

In the result, the appeal of the assessee is allowed for statistical purposes and the appeal of the revenue is dismissed.