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Facts
The assessee, a real estate company, received participation amounts for a housing project. The Assessing Officer (AO) made an ad-hoc addition of Rs. 62,43,351. The CIT(A) confirmed this addition. The assessee appealed against the CIT(A)'s order.
Held
The Tribunal held that the assessment order was bad in law due to lack of proper jurisdiction and issuance of statutory notices. The Tribunal noted that the AO had not issued a mandatory notice under Section 143(2) of the Income Tax Act, 1961, and that the jurisdiction assumed was in contravention of CBDT instructions.
Key Issues
Whether the assessment order is valid when a mandatory notice under Section 143(2) was not issued and the AO lacked proper jurisdiction based on CBDT instructions.
Sections Cited
143(3), 131, 133, 143(2), 124(3), 292B, 127(1)
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Income Tax Appellate Tribunal, DELHI
ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld.
Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 19/06/2024 for the Assessment Year 2017-18.
The Ground of appeal are as under:-
“1. The Ld. Commissioner of Income Tax-Appeals ("CIT-A") was not justified in law and on facts in not appreciating the submissions made and the information and documents submitted by the appellant during the course of the appeal proceedings and in confirming the action of the Ld. Assessing Officer (AO) passing the impugned assessment order under section 143(3) of the Income Tax Act, 1961 (Act) by making an Rakshit Estates Pvt. Ltd. Vs. ITO ad-hoc addition of Rs. 62,43,351 being 20% of the advance received by the appellant from the applicant customers during the year.
2. That the Ld. CIT (A) was not justified in law and on facts in confirming the action of the Ld. AO making the ad hoc addition of Rs. 62,43,351 out of the application money received from the intending customers as participation amount to acquire plot in the appellant's proposed project in spite of their complete details provided by the appellant during the course of the assessment as well as the appeal proceedings, e.g. name, address, PAN, amount received from each applicant customer, indicating the mode of payment along with their Application Forms and such advance being duly reflected in the audited financial statements of the appellant.
3. That the Ld. CIT (A) was not justified in law and on facts in confirming the action of the Ld. AO in passing the impugned assessment order making an ad hoc addition of Rs. 62,43,351 without any basis and merely on suspicion, surmises and conjectures and without even making proper investigations by exercising his powers under section 131/133 of theAct to call for information from the applicant customers to satisfy himself and without pointing out any specific instance where he was not satisfied with the appellant's explanation warranting the said addition.
4. That the Ld. CIT (A) was not justified in law and on facts in confirming the action of the Ld. AO in passing the impugned assessment order making an ad hoc addition of Rs. 62,43,351, without issuing a show cause notice before making the Rakshit Estates Pvt. Ltd. Vs. ITO impugned addition, thus, denying the appellant an opportunity to confront the same which is against the principles of natural justice.
5. That the Ld. CIT (A) was not justified in law and on facts in passing the impugned order in a mechanical manner without specifying the proper section and provisions of law justifying the ad hoc addition and without appreciating/rebutting the submissions of the appellant along with the information and documents furnished during the course of assessment/appeal proceedings.
6. That the Ld. CIT (A) was not justified in law and on facts in not affording a proper opportunity to the appellant of being heard in the matter as requested during the course of the appeal proceedings which is in violation of the principle of natural justice.
Additional Grounds of Appeal:
“07. That in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) erred in law in not noticing that the assessment order framed by the Income Tax Officer Ward 3(4) Gurgaon was bad in law as it was without jurisdiction in as much as the Return of Income was not filed in his jurisdiction and that initial notice us 143(2) picking up the case for scrutiny was issued by the ITO Ward 2(2)(2), Ghaziabad in whose jurisdiction the return of income was filed.
8. That without prejudice to the other grounds raised in the appeal, in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) failed in law not to appreciate that the assessment order framed by the Income Tax Officer Ward 3(4) Gurgaon was not enforceable in law because he failed to issue statutory notice mandated u/s 143(2) of the Income Tax Act, 1961 and he also failed to appreciate that initial notice issued by the ITO Ward 2(2)(2), Ghaziabad was without jurisdiction in case it is viewed that valid jurisdiction over the case was with the ITO Ward 3(4), Gurgaon.
Rakshit Estates Pvt. Ltd. Vs. ITO 09. That assuming but not admitting that the ITO Ward 3(4) Gurgaon had the jurisdiction to make assessment the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in not noticing that he had failed to serve mandatory notice required to be issued u/s 143(2) of the Act within the statutory time provided and hence the consequential assessment was bad in law and that notice dated 28- 09-2018 as mentioned in para I of the assessment order was never ever served on the Appellant.
That without prejudice to the aforesaid grounds L.d. Commissioner of Income Tax (Appeals) erred in law in not appreciating that the the assessment proceedings completed u/s 143(3) were bad in law as the notices referred as issued u/s 143(2) were not addressed to the Principal Officer of the Appellant Company.
That in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the the assessment order passed on 29-12-2019 bearing pressed DIN No. ITBA/AST/S/143(3)/2019-20/1023384026(1) was unsustainable in law for non-compliance of para 2 2 of Department's own binding Instruction F.No. System/ITD/Instruction/AST- DIN/2019-20 dated 25-10-2019 which mandate the 'User to mention system generated DIN in the relevant order and all its annexures including demand notice, computation sheet etc. before dispatching the same to the assessee whereas the Demand Notice (ITBA/AST/S/156/2019-20/1023384069(1)) dated 29-12-2019 and Computation sheet ITRA/AST/S/216/2019-20/1023384063(1)) dated 29-12-2019 altogether bear different DINs.
12. That in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the assessment order passed on 29-12-2019 was beyond jurisdiction and it be held that the ITO 3(4) Gurgaon did not have the jurisdiction when the case was actually picked up for scrutiny by the ITO 2(2)(2), Ghaziabad 13. That in the facts and circumstances of the case Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the assessment order passed on 29-12-2019 was unsustainable in law because additions made therein were travelling beyond the limited points of the scrutiny.
14. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) erred in law in not adjudicating all the grounds raised
in appeal filed before him Rakshit Estates Pvt. Ltd. Vs. ITO
15. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) hopelessly erred in law in upholding the order passed by the Ld. Assessing Officer on the ground since the Assessee failed to discharge the burden of proof by not establishing the genuineness of source of the above amount which was not the ground or reasoning on which the AO framed the assessment to the prejudice of the Appellant.
16. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) erred in law in not adjudicating the specific ground of 'violation of principles of natural justice in providing proper opportunity which violation was writ large in the case where last three notices issued u/s 142(1) are seen issued giving just one day for making compliance."
Brief facts of the case are that, statement of facts as mentioned in the order of the Ld. CIT(A) are as under:-
The appellant is a Company engaged in Real Estate activities as a builder, developer and colonizer. The appellant had filed its return of income for A.Y. 2017-18on 30.10.2017, declaring an income of Rs. Nil. The appellant has invited participation in the prospective residential group housing project of the company, proposed to be developed and constructed at Zone L of the Master Plan of Delhi-2021 in South West Delhi for which land has been acquired by the Company in the said area. The applicants were fully aware that their participation in the aforesaid project was prospective in nature and contingent upon the notification or issuance of the applicable legal framework/ policy for implementation of the Land Pooling Policy notified by the Ministry of Urban Development, Government of India. Thus, in case the aforesaid project is shelved due to any reason, the applicants shall only be entitled to seek refund of the amount/ advance paid to the Company. Presently only the participation amount for the purchase of agriculture land for participating in land pooling policy (FSI Cost) has been received. The appellant received an aggregate participation amount of Rs. 3,12,16,754 and refunded an aggregate amount of Rs. 1,47,25,500 to the outgoing participants during the AY 17-18 resulting in a net increase of Rs. 1,64,91,254 under the head Participation against Agriculture Land’ reflected under Other Long Term Liabilities in Rakshit Estates Pvt. Ltd. Vs. ITO the Balance Sheet as on 31.3.2017. The appellant's case was selected for Complete Scrutiny under CASS and notice u/s 143(2) dated 08.08.2018 was issued. Further, statutory notices were issued from time to time, requiring the appellant to file details as per questionnaire, which were duly complied by the appellant by furnishing its Income Tax Return, financial statements, application and applicant details, participation amount received along with written submissions. However, the Ld. ITO, ignoring the facts and circumstances of the case, material available on the assessment record, submissions of the appellant and the supporting evidence adduced during the course of proceedings as well as the provisions of law in this regard, has assessed the income of the appellant at Rs. 62,43,351 by making a disallowance of 1/5th of Rs. 3,12,16,754 being the amount received from the participants and thereby making an addition of Rs. 62,43,351 ignoring the fact that the amount neither represented any expense nor any allowance claimed by the appellant but receipt of advance and, therefore, it could not be subjected to such an ad-hoc and arbitrary disallowance. The appellant, would also like to mention that the Council of the appellant suffered from Heart Attack on 4 Dec 2019 and was under intensive medical treatment at the time of final hearing of scrutiny proceedings and the Ld. Income Tax Officer (AO) did not provide adequate opportunity to the appellant to submit further explanations in this regards.
Aggrieved by the assessment order dated 29/12/2019, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 19/06/2024, dismissed the Appeal of the Assessee. As against the order of the Ld. CIT(A), the Assessee preferred the above Appeal on the Grounds and additional grounds mentioned thereon.
The Ld. Counsel for the Assessee addressing on Additional Grounds No. 7 to 10 vehemently submitted that the assessment has been framed by ITO, ard-3(4), Gurgaon, however, no notice u/s 143(2) of the Act has jurisdiction to frame the assessment lies with ITO-Wrd-3(4), Gurgaon, he alone can issue statutory notice u/s 143(2) of the Act and notice issued by ITO-Ward-2 (2)(2), Ghaziabad is bad in law, therefore, the assessment framed by ITO-WARd-3(4), Gurgaon cannot be sustain in the eyes of law. The Ld. Counsel relied on plethora of judicial precedents and sought for allowing the additional Grounds No. 7 to 9.
6. Per contra, the Ld. Departmental Representative apart from arguing orally filed Factual Report of the A.O. which reads as under:- Ground No. 7 The assessee in its Income Tax Return (ITR) for AY 2017-18 had declared the address P-8/14. DLF Phase-II, Gurgaon, Haryana which clearly places the assessee under the jurisdiction of the Income Tax Officer, Ward-3(4). Gurgaon. It is evident that the initial notice u/s 143(2) was issued by ITO Ward 2(2)(2), Ghaziabad. However, since the assessee's declared address was in Gurgaon, the jurisdiction was rightly transferred to ITO Ward 3(4), Gurgaon as per PAN jurisdiction norms. It is further submitted that the assessee never raised any objection to jurisdiction during the course of assessment proceedings before the AO. As per Section 124(3) of the Income Tax Act, no challenge to jurisdiction is maintainable after one month from thedate of service of the first notice u/s 143(2), if not objected to in writing.. In view of the above. the jurisdiction of the AO at Gurgaon was validly exercised and the contention raised by the assessee in this ground is factually incorrect and and devoid of merit. Ground No. 8 The case was selected for scrutiny under CASS, and a valid notice u/s 143(2) dated 08.08.2018 was issued within the prescribed time limit by ITO Ward 2(2)(2), Ghaziabad. Later, Rakshit Estates Pvt. Ltd. Vs. ITO based on PAN and address in the ITR (P-8/14, DLF Phase-11, Gurgaon), the jurisdiction was rightly transferred to ITO Ward 3(4), Gurgaon in the system. It is further submitted that the assessee fully cooperated in assessment and never raised objection to jurisdiction or notice at any stage. As per Section 124(3) of the Act. any objection to jurisdiction must be raised within one monthfrom the date of the first notice. The assessee never objected during the entire assessment proceedings, which shows implied acceptance of jurisdiction and procedural compliance. Ground No. 9 That a valid and timely notice u/s 143(2) was issued on 08.08.2018 by ITO Ward 2(2)(2). Ghaziabad - within the prescribed period of 6 months from the end of the relevant financial year (ie.. by 30.09.2018), satisfving the statutory requirement. It is further submitted that it is a well-settled principle of law that minor clerical or typographical errors in an assessment order do not render the proceedings invalid, especially when: • The assessee was duly served a valid notice. • The assessee participated in the assessment without raising any objection. • The notice satisfies all conditions laid down under the Income Tax Act.
It is further submitted that as per section 292B of the Income Tax Act. the assessment proceedings can not be held invalid merely on the fact that there has been any mistake in the notice/ order. Ground No. 10
That the notice u/s 143(2) was issued in the name of "Rakshit Estates Private Limited", which is the correct legal name of the assessee company. There is no statutory requirement under the Income Tax Act mandating that the words "Principal Officer" must be compulsorily mentioned. as long as the notice is addressed to the company. This is a well settled position in case law Commissioner Of Income Tax vs M/S Jagat Novel Exhibitors Private ... on 8 February, 2012 where it was held that "One of the questions, which arises for consideration, in such cases is whether there was prejudice. The test to be applied is whether the party receiving the notice would be in doubt whether the said notice is meant for him or not. If the recipient of notice was not in doubt that it was meant for him, the misnomer or misdescription is not fatal. Thus failure to mention the words "Principal Officer" on the notices is not fatal"
In this case the assessee responded to the notice and participated in proceedings. Therefore, the objective of service was fulfilled, and no prejudice was caused. The notice u/s 143(2) was validly issued in the name of the assessee company, and the absence of the words "Principal Officer" does not render the notice defective. The proceedings are valid in law and the ground raised is without merit, both factually and legally unsustainable.
7. The Ld. Departmental Representative relying on the orders of the Lower Authorities and also Factual Report of the A.O. reproduced above, sought for dismissal of Ground No. 7 to 10 of the Assessee.
We have heard both the parties and perused the material available on record. In the present case, originally a notice u/s 143(2) of the Act was issued by ITO-Ward-2 (2)(2), Ghaziabad. Thereafter, as Assessee’s declared address was in Gurgaon, the Jurisdiction was transferred to ITO, Ward-3(4), Gurgaon as per PAN jurisdiction norm. However, the ITO-3(4), Gurgaon has not issued notice u/s 143(2) of the Act, but passed the assessment order u/s 143(3) of the Act on 29/12/2019 by making addition of Rs. 62,43,351/-. The above said factual aspects have not been disputed by the Department. of DurgaManikanta Traders Vs. ITO, vide Order dated 12.12.2022 while dealing with the similar issue held as under:-
“ 13. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
14. Admittedly, it is a matter of fact borne from record that the CBDT vide Instruction No. 1/2011, dated 31.01.2011 had, inter alia, revised the existing monetary limits for assigning cases to ITOs and DCs/ACs. For the sake of clarity, we deem it fit to cull out the CBDT Instruction No.1/2011 dated 31.01.2011,Page 1 of APB, which reads as under: “INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], DATED 31-1-2011
References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship.
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:
Income Declared (MofussilAraeas) Income Declared (Metro cities)
ITOs ACs/DCs ITOs DCs/ ACs Corporate UptoRs. 20 Above Rs. UptoRs. 30 Above Rs. 30 lacs returns lacs 30 lacs lacs Non- UptoRs. 15 Above Rs. UptoRs. 20 Above Rs. 20 lacs corporate lacs 15 lacs lacs returns
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.” (emphasis supplied by us)
Rakshit Estates Pvt. Ltd. Vs. ITO As stated by the Ld. AR, and, rightly so, the CBDT vide its aforesaid Instruction No.1/2011, dated 31.01.2011 had, inter alia, revised the earlier existing monetary limit for assigning the cases to ITOs/ACs/DCs w.e.f. 01.04.2011. On the basis of the aforesaid CBDT Instruction No.1/2011 (supra) w.e.f 01.04.2011, the case of a non-corporate assessee located in a mofussil area having declared an income above Rs.15 lacs in his return of income is to be assigned to the ACs/DCs. As the case of the present assessee for the A.Y.2012-13 was selected for scrutiny assessment vide notice issued u/s. 143(2), dated 24.09.2015, therefore, the aforesaid CBDT Instruction No.1/2011, dated 31.01.2011 that was applicable w.e.f. 01.04.2011 duly applied to his case. Also, as per the areas earmarked in the aforesaid Instruction No.1/2011, dated 31.01.2011 as the assessee is not located in any of those cities/stations which have been held to be metro cities, therefore, his case would be as that of a non-corporate assessee who is located in a mofussil area. Also, as is borne from the record the assessee had filed his return of income for the A.Y.2014-15 declaring an income of Rs. 6,57,380/-. 13 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1)
On the basis of the aforesaid facts, we are of the considered view, that as stated by the Ld. AR, and, rightly so, as per the CBDT Instruction No.1/2011, dated 31.01.2011 the jurisdiction over the case of the assessee who is located in a mofussil area i.e. Bhilai and had filed a non-corporate return for the year under consideration, i.e., A.Y.2014-15 declaring an income of Rs.6,57,380/- was vested with the ITO, Ward 1(1), Bhilai. Although notice u/s. 143(2), dated 24.09.2015 had been issued within the stipulated time period, i.e., within six months from the end of the relevant assessment year which would have expired as on 30.09.2015, however, the same was issued by the DCIT-1(1), Bhilai, i.e., an A.O who pursuant to the CBDT Instruction No.1 of 2011, dated 31.01.2011 was not vested with the jurisdiction over the case of the assessee for the year under consideration. On the other hand the ITO-1(1), Bhilai, who as per the aforesaid CBDT Instruction (supra) was vested with the exclusive pecuniary jurisdiction over the case of the assessee for the year under consideration had issued the notice u/s. 143(2) of the Act, dated 05.05.2016, i.e., beyond the stipulated time period, therefore, no valid jurisdiction could have been assumed on the basis of the same for framing the assessment vide order under Sec. 143(3), dated 29.12.2016.
On the basis of our aforesaid deliberations, we are in agreement with the Ld. AR that the ITO-1(1), Bhilai could not have validly assumed 14 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) jurisdiction and framed the assessment vide his order passed u/s. 143(3) of the Act, dated 29.12.2016 on the basis of the notice issued u/s. 143(2), dated 24.09.2015 by the DCIT-1(1), Bhilai i.e. a non jurisdictional A.O. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of Ashok Devichand Jain Vs. UOI in W.P. No.3489 of 2019, dated 08.03.2022. In the said case the Hon’ble High Court by referring to the CBDT Instruction No.1 of 2011, dated 31.01.2011, had observed, that as the pecuniary jurisdiction over the case of the assessee before them who had returned an income of Rs.64.34 lacs was vested with the DCs/ACs, therefore, the notice issued u/s.148 of the Act by the ITO who during the year under consideration had no pecuniary jurisdiction over the assessee’s case was bad in the eyes of law. Considering the aforesaid lapse in the assumption of jurisdiction the Hon’ble High Court had quashed the notice that was issued by the ITO Rakshit Estates Pvt. Ltd. Vs. ITO u/s.148 of the Act. Also, a similar view had been taken by the Hon’ble High Court of Gujarat in the case of PankajbhaiJaysukhlal Shah Vs. ACIT, Circle-2 (2019) 110 taxmann.com 51 (Guj.). In the said case, though the A.O who had jurisdiction over the case of the assessee had recorded the ‘reasons to believe’ but notice u/s.148 of the Act was issued by another officer, therefore, the notice so issued u/s.148 of the Act was quashed by the Hon’ble High Court. At this stage, we may herein observe, that the 15 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) aforesaid order of the Hon’ble High Court had thereafter, been upheld by the Hon’ble Supreme Court in the case of ACIT, Circle-1 Vs. PankajbhaiJaysukhlal Shah[2020] 120 taxmann.com 318 (SC). Also, we find that the similar view had been taken by this Tribunal in its recent order passed in the case of Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai in dated 17.10.2022, wherein dealing with the multifacet contentions that were raised by the department, the Tribunal had observed as under:
“13. On the basis of our aforesaid deliberations, we are in agreement with the Ld. AR that though the assessment proceedings were rightly initiated and initially embarked upon by Dy. CIT, Circle1, Bhilai i.e. the officer who was vested with the jurisdiction over the case of the assessee, but the same thereafter had wrongly been framed by an officer who as observed by us hereinabove did not have jurisdiction over the case of the assessee in so far the year under consideration was concerned. As the criteria laid down vide the CBDT Instruction No.1/2011, dated 31.01.2011 for conferring the varied jurisdictions with the ITOs/DCs/ACs on the basis of income declared by the assessee in his return of income is binding upon the department and has to be scrupulously followed, therefore, there can be no escape from the same for justifying assumption of jurisdiction by an officer other than that prescribed in the said instruction. Our aforesaid view is fortified by the Judgments of the Hon’ble Supreme Court in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC) and Commissioner of Customs etc. Vs. Indian Oil Corporation Ltd. &Anr. (2004) 267 ITR 272 (SC). In the aforesaid judgments it was held by the Hon’ble Apex Court that though the CBDT/CBEC circulars are not binding on court or the assessee, but the departmental authorities are bound by them and cannot act in contravention of the same. Also, support is drawn from the judgment of the Hon’ble High Court of Chhattisgarh in the case of Dy. CIT Vs. SunitaFinlease Ltd. [2011] 330 ITR 491 (Chattisgarh). In its said order it was observed by the Hon’ble Jurisdictional High Court that the administrative instructions issued by CBDT are binding on the Income-tax authorities. On the basis of our aforesaid 16 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) observations, we are of the considered view that as the framing of the assessment in the case of the present assessee by the IncomeTax Officer, Ward-2(2), Bhilai is clearly found to be in contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, therefore, the same cannot be justified.
We shall now deal with the objection raised by the Ld. DR that as the assessee had not called in question the jurisdiction of the Income-Tax Officer, Ward-2(2), Bhilai within the stipulated time period of one month from the date on which he was served with the notice(s) u/ss.143(2) and 142(1), dated 03.03.2015, therefore, it was not permissible for him to challenge the same for the first time in the course of the proceeding before the tribunal. Having given a Rakshit Estates Pvt. Ltd. Vs. ITO thoughtful consideration to the aforesaid claim of the ld. DR we are unable to persuade ourselves to subscribe to the same. On a careful perusal of Section 124 of the Act, it transpires that the same deals with the issue of “territorial jurisdiction” of an Assessing Officer. Ostensibly, sub-section (1) of Section 124 contemplates vesting with the A.O jurisdiction over a specified area by virtue of any direction or order issued under sub-section (1) and sub-section (2) of Section 120 of the Act. On the other hand sub-section (2) of Section 124 contemplates the manner in which any controversy as regards the territorial jurisdiction of an A.O is to be resolved. Apropos, subsection (3) of Section 124 of the Act, the same places an embargo upon an assessee to call in question the jurisdiction of the A.O where he had initially not raised such objection within a period of one month from the date on which he was served with a notice under sub-section (1) of Section 142 or sub-section (2) of Section 143. In sum and substance, the obligation cast upon an assessee to call in question the jurisdiction of the A.O as per the mandate of sub-section (3) of Section 124 is confined to a case where the assessee objects to the assumption of territorial jurisdiction by the A.O, and not otherwise. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of Peter Vaz Vs. CIT, Tax Appeal Nos. 19 to 30 of 2017, dated 05.04.2021 and that of the Hon’ble High Court of Gujarat in the case of CIT Vs. Ramesh D Patel (2014) 362 ITR492 (Guj.). In the aforesaid cases the Hon’ble High Courts have held that as Section 124 of the Act pertains to territorial jurisdiction vested with an AO under subsection (1) or sub-section (2) of Section 120, therefore, the provisions of sub-section (3) of Section 124 which places an embargo on an assessee to raise an objection as regards the validity of the jurisdiction of an A.O would get triggered only in a case where the dispute of the assessee is with respect to the territorial jurisdiction and would have no relevance in so far his inherent jurisdiction for framing the assessment is concerned. Also, support 17 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) is drawn from a recent judgment of the Hon’ble High Court of Calcutta in the case of Principal Commissioner of Income-tax Vs. Nopany& Sons (2022) 136 taxmann.com 414 (Cal). In the case before the Hon’ble High Court the case of the assessee was transferred from ITO, Ward-3 to ITO, Ward-4 and the impugned order was passed by the ITO, Ward-4 without issuing notice u/s 143(2) and only in pursuance to the notice that was issued by the ITO, Ward-3, who had no jurisdiction over the assessee at the relevant time. Considering the fact that as the assessment was framed on the basis of the notice issued under Sec. 143(2) by the assessing officer who had no jurisdiction to issue the same at the relevant point of time, the Hon’ble High Court quashed the assessment. Apart from that, the aforesaid view is also supported by the order of the ITAT, Kolkata ‘B’ Bench in the case of OSL Developers (p) Ltd. Vs. ITO, (2021) 211 TTJ (Kol) 621 and that of ITAT, Gauhati Bench in the case of Balaji Enterprise Vs. ACIT (2021) 187 ITD 111 (Gau.). Accordingly, on the basis of our aforesaid observations, we are of the considered view that as the assessee’s objection to the validity of the jurisdiction assumed by the IncomeTax Officer, Ward-2(2), Bhilai is by no means an objection to his territorial jurisdiction, but in fact an objection to the assumption of jurisdiction by him in contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, therefore, the provisions of subsection (3) of Section 124 would not assist the case of the revenue.
Rakshit Estates Pvt. Ltd. Vs. ITO 15. We shall now deal with the contention of the Ld. DR that as both the officers in question i.e. Dy. CIT, Circle-1, Bhilaiand the Income Tax Officer, Ward-2(2), Bhilai as per sub-section (5) of Section 120 were vested with concurrent jurisdiction over the assessee, therefore, initiation of the assessment proceedings by the Dy. CIT, Circle-1, Bhilai vide notice issued u/s.143(2) dated 24.09.2013, which thereafter had culminated into an assessment framed by the Income-Tax Officer, Ward-2(2), Bhilai vide his order passed u/s.143(3), dated 30.03.2015 does not suffer from any infirmity. In our considered view the aforesaid contention of the Ld. DR is absolutely misplaced and in fact devoid and bereft of any merit. As the aforesaid CBDT Instruction No.1/2011, dated 31.01.2011 exclusively vests the pecuniary jurisdiction over the case of the assessee for the year under consideration i.e. A.Y.2012-13 with the ACs/DCs, therefore, in our considered view despite vesting of concurrent jurisdiction with the Income- Tax Officer, Ward-2(2), Bhilai and the Dy. CIT, Circle-1, Bhilai the assessment in his case for the year under consideration could only have been framed by the Dy. CIT, Circle-1, Bhilai. Neither is there any reason discernible from the orders of the lower authorities nor demonstrated before us by the ld. DR which would by any means justify framing of the M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) assessment vide impugned order u/s 143(3), dated 30.03.2015 by the Income-Tax Officer, Ward-2(2), Bhilai. Apart from that, we find that as per the mandate of sub-section (1) of section 127 of the Act, where a case is to be transferred by authorities therein specified from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him, then he is under an obligation to record his reasons for doing so after giving the assessee a reasonable opportunity of being heard in the matter wherever it is possible to do so. For the sake of clarity sub-section (1) of Section 127 is culled out as under:
“(1) The [Principal Director General or] Director General or [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.”
On a careful perusal of the aforesaid mandate of law, it transpires, that even in a case where jurisdiction over the case of an assessee that is vested with one A.O (having concurrent jurisdiction over the case of the assessee) is to be transferred to another A.O (having concurrent jurisdiction over the case of the assessee), even then the authority specified under sub-section (1) of Section 127 is obligated to record his reasons for doing so. Considering the aforesaid position of law, we are of the considered view that now when in the present case the assessment proceedings were initiated by the Dy. CIT, Circle-1, Bhilai vide notice u/s.143(2), dated 24.09.2013, which thereafter were taken up and culminated by the Income-Tax Officer, Ward-2(2), Bhilai vide his order passed u/s.143(3) dated 30.03.2015, then, as per the mandate of sub-section (1) of Section 127 of the Act, the specified authority i.e. Commissioner or above was Rakshit Estates Pvt. Ltd. Vs. ITO obligated to have recorded his reasons for transferring the case from the aforesaid Dy. CIT, Circle-1, Bhilai to the Income-Tax Officer, Ward-2(2), Bhilai. However, nothing has been brought to our notice which would justify the transfer of jurisdiction over the assessee’s case from the Dy. CIT, Circle-1, Bhilai to Income-Tax Officer, Ward-2(2), Bhilai. 19 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) .
16. Be that as it may, we are of the considered view that as in the case of the assessee the assessment order u/s.143(3), dated 30.03.2015 had been passed by a non-jurisdictional officer i.e. the Income-Tax Officer, Ward-2(2), Bhilai, which is in clear contravention of the CBDT Instruction No.1/2011 dated 31.01.2011, therefore, the same cannot be sustained and is liable to be struck down on the said count itself. Before parting, we may herein observe that a similar issue as regards the validity of an assessment framed by an A.O who had invalidly assumed jurisdiction in contravention to the CBDT Instruction No.1/2011, dated 31.01.2011 had came up in a host of cases before the various benches of the Tribunal, wherein the respective assessments framed were struck down, for the reason that the same were passed by officers who were not vested with the requisite jurisdiction as per the CBDT Instruction No.1/2011, dated 31.01.2011. Our aforesaid view is fortified by the order of the ITAT, Kolkata Bench ‘SMC’ in the case of Anderson Printing House (P) Ltd. Vs. ACIT (2022) 192 ITD 548 (Kolkata-Trib.). In its order the Tribunal had after drawing support from the order of the ITAT, Kolkata in the case of Bhagyalaxmi Conclave (P) Ltd. Vs. DCIT, (Kol) of 2019, dated 03.02.2021 which in turn had relied on the earlier orders passed in the case of Hillman Hosiery Mills Pvt.Ltd. Vs. DCIT, Soma Roy Vs. ACIT, ITA No.463/Kol/2019 dated 08.01.2020; and Shri Sukumar Ch. Sahoo Vs. ACIT, ITA No.2073/Kol/2016 dated 27.09.2017, had struck down the assessment for want of valid assumption of jurisdiction by the A.O who had framed the assessment in contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, observing as under:
“5. A perusal of the aforesaid statutory provisions would reveal that the jurisdiction of Income Tax Authorities may be fixed not only in respect of territorial area but also Assessment Year: 2016-17 Anderson Printing House Pvt. Ltd having regard to a person or classes of persons and income or classes of income also. Therefore, the CBDT having regard to the income as per return has fixed the jurisdiction of the Assessing Officers. The ld. Counsel in this respect has relied upon the CBDT
Instruction No.1/2011 [F.No.187/12/2010-IT(A-I), for the sake of convenience is reproduced as under: "Instruction No.1/2011 [F.No.187/12/2010-IT(A-I), DATED 31-1-2011 References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship.
Rakshit Estates Pvt. Ltd. Vs. ITO 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:
Income Declared (MofussilAraeas) Income Declared (Metro cities)
ITOs ACs/DCs ITOs DCs/ ACs Corporate UptoRs. 20 Above Rs. UptoRs. 30 Above Rs. 30 lacs returns lacs 30 lacs lacs Non- UptoRs. 15 Above Rs. UptoRs. 20 Above Rs. 20 lacs corporate lacs 15 lacs lacs returns
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.
6. Now, in this case, the assessment has been framed by the ACIT. At this stage, it will be appropriate to refer to the provisions of section 127 of the Act as under: Power to transfer cases (1) The [Principal Director General or] Director General or [Principal Chief Commissioner or] Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
A perusal of the above statutory provisions would reveal that jurisdiction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from Income Tax Officer to ACIT. The notice u/s 143(2) has been issued by ACIT which was beyond his jurisdiction and the same is therefore, void ab initio. Under the circumstances, the assessment framed by ACIT, is bad in law as he did not have any pecuniary jurisdiction to frame the assessment. The issue relating to the pecuniary jurisdiction also came into consideration before the Coordinate Bench of the Tribunal in and Others vide order dated 03.02.2021, wherein the Tribunal 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 the assessment framed by Assessing Officer who was not having pecuniary jurisdiction to frame such assessment was bad in law. The relevant part of the order dated 03.02.2021 passed in and Others is reproduced as under:
Rakshit Estates Pvt. Ltd. Vs. ITO "5.2. The assessee relied on the recent decision of this Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd. vs. DCIT, in order dated 12.01.2021. We find that the issues that arise in this appeal are clearly covered in favour of the assessee. This order followed the principles of law laid down in a number of other decisions of the ITAT, Kolkata Bench on this issue.
5.3. Kolkata "B" Bench of the Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd.(supra) held as follows:
"10. In this case, the ITO Ward-3(3), Kolkata, issued notice u/s 143(2) of the Act on 04/09/2014. In reply, on 22/09/2014, the assessee wrote to the ITO, Ward-3(3), Kolkata, stating that he has no jurisdiction over the assessee. Thereafter on 31/07/2015, the DCIT, Circle-11(1), Kolkata, had issued notice u/s 142(1) of the Act to the assessee. The DCIT, Circle-11(1), Kolkata, completed assessment u/s 143(3) of the Act on 14/03/2016. The issue is whether an assessment order passed by DCIT, Circle-11(1), Kolkata, is valid as admittedly, he did not issue a notice u/s 143(2) of the Act, to the assessee. This issue is no more res-integra. This Bench of the Tribunal in the case of Soma Roy vs. ACIT in Assessment Year 2015-16, order dt. 8th January, 2020, under identical circumstances, held as under:-
"5. After hearing rival contentions, I admit this additional ground as it is a legal ground, raising a jurisdictional issue and does not require any investigation into the facts. The ld. Counsel for the assessee submitted that as per Board Instruction No. 1/2011 [F. No. 187/12/2010-IT(A-I)], dt. 31/01/2011, the jurisdiction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non- corporate assessee and the income returned is above Rs.15,00,000/- and whereas, the statutory notice u/s 143(2) of the Act, was issued on 29/09/2016, by the Income Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the jurisdiction over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the statutory period prescribed under the Act. Thus, he submits that the assessment is bad in law. 5.1. On merits, he rebutted the findings of the lower authorities. The ld. Counsel for the assessee relied on certain case-law, which I would be referring to as and when necessary.
6. The ld. D/R, on the other hand, submitted that the concurrent jurisdiction vests with the ITO as well as the ACIT and hence the assessment cannot be annulled simply because the statutory notice u/s 143(2) of the Act, was issued by the ITO and the assessment was completed by the ACIT. He further submitted that the assessee did not object to the issue of notice before the jurisdictional Assessing Officer and even otherwise, Section 292BB of the Act, comes into play and the assessment cannot be annulled. On merits, he relied on the orders of the lower authorities.
Rakshit Estates Pvt. Ltd. Vs. ITO 7. I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:- 8. I find that there is no dispute in the fact that the notice u/s 143(2) of the Act dt. 29/09/2016 has been issued by the ITO, Wd-1(1), Durgapur. Later, the case was transferred to the jurisdiction of the ACIT on 11/08/2017. Thereafter, no notice u/s 143(2) of the Act was issued by the Assessing Officer having jurisdiction of this case and who had completed the assessment on 26/12/2017 i.e., ACIT, Circle-1(1), Durgapur. Under these circumstances, the question is whether the assessment is bad in law for want of issual of notice u/s 143(2) of the Act.
This Bench of the Tribunal in the case of Shri Sukumar Ch. Sahoo vs. ACIT in order dt. 27.09.2017, held as follows:- "5. From a perusal of the above Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the 'non corporate returns' filed where income declared is only upto Rs.15 lacs ; and the ITO doesn't have the jurisdiction to conduct assessment if it is above Rs 15 lakhs. Above Rs. 15 lacs income declared by a non- corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of Rs.50,28,040/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the assessment order, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward-1, Haldia on 06.09.2013 and the same was served on the assessee on 19.09.2013 as noted by the AO. The AO noted that since the returned income is more than Rs. 15 lacs the case was transferred from the ITO, Ward-1, Haldia to ACIT, Circle-27 and the same was received by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of the Act on the same day. From the aforesaid facts the following facts emerged: i) The assessee had filed return of income declaring Rs.50,28,040/-. The ITO issued notice under section 143(2) of the Act on 06.09.2013. ii) The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014. 23 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) iii) On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia.
We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income of Rs.50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of 'non corporate returns' the ITO's increased monetary limit was upto Rs.15 lacs; and if the returned income is above Rs. 15 lacs it was the AC/DC. So, since the returned income by assessee an individual is above Rs.15 lakh, then the jurisdiction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only the AC/DC had the jurisdiction to assess the assessee. It is settled law that serving of notice u/s. 143(2) of the Act is a sine qua non for an assessment to be made u/s. 143(3) of the Act. In this case, notice u/s. 143(2) of the Act was Rakshit Estates Pvt. Ltd. Vs. ITO issued on 06.09.2013 by ITO, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the ACIT, Circle- 27, Haldia on 24.09. 2014 when the ACIT issued statutory notice which was beyond the time limit prescribed for issuance of notice u/s. 143(2) of the Act. We note that the ACIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the ACIT, Circle-27, Haldia after the limitation period for issuance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law and consequential assessment order passed u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law. Therefore, the legal issue raised by the assessee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised
by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed.
7. In the result, appeal of assessee is allowed.” Apart from that, we find that a similar view had been taken by the ITAT, Cuttack Bench, Cuttack in the case of Kshirod Kumar Pattanaik Vs. ITO, Angul Ward, Angul, dated 10.12.2020.
Consequent to our aforesaid deliberations, we are of the considered view that as in the present case before us the assessment had been framed by the Income Tax Officer, Ward-2(2), Bhilai u/s. 143(3), dated 30.03.2015 in clear contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, which divested him of his jurisdiction over the case of the assessee for the year under consideration i.e. AY 2012-13, therefore, the same cannot be sustained and is liable to be struck down in terms of our aforesaid observations. We, thus, in terms of our aforesaid observations 24 M/s. DurgaManikanta Traders, Vs. ITO, Ward-1(1) quash the order passed by the Income-Tax Officer, Ward-2(2), Bhilai for want of jurisdiction on his part.” 10. The ITO, Ward-3(4), Gurgaon having jurisdiction to frame the assessment, had framed the assessment u/s 143(3) of the Act without issuing mandatory notice u/s 143(2) of the Act, by following the ratio laid down by the Tribunal in the case of Durga Manikanta Traders (supra), we are of the opinion that the order of assessment cannot be sustained confirming the assessment order is hereby set aside by allowing the Additional Grounds No. 7 to 9 of the Assessee.
11. Since, we have set aside the order impugned by allowing the Additional Grounds No. 7 to 9 of the Assessee, other Grounds/additional Grounds of Appeal requires no adjudication.
In the result, Appeal of the Assessee is allowed.
Order pronounced in the open court on 29th October, 2025