SHRI AMARJEET SINGH BHATIA,RAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1), RAIPUR

O R D E R

Per Arun Khodpia, AM :

1. That the original assessment was completed u/s143(3) and the notice issued u/s148 is beyond four years, hence, the same is illegal, bad in law and without jurisdiction as there is no failure on part of Assessee to produce relevant facts fully and truly.

2. That the Id CIT(A) has erred in facts as well as in law, in sustaining addition of Rs.21,49,054 on account of concealment of income.

3. The assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at the time of hearing of the appeal.

2. Further, vide letter dated 02.08.2022, the assessee has filed revised grounds of appeal, including the additional grounds, which read as under:- Revised Gr.No.l; "

1. On the facts and circumstances of the case and in law, reopening u/s.148 dt.21-3-14 is invalid as it is assessed u/s143(3) dt.24-12-09; it is beyond 4 years; there is no allegation on the reasons recorded that indicate any failure on the part of the 2 assessee to disclose fully & truly all material facts necessary for the assessment made u/s.143(3) dt.24-12-09; reopening u/s.148/147 is not permissible in the eyes of law as hit by first proviso to sec.147; is liable to be quashed." ........... Revised Gr.No.2; "2. On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining the addition of Rs.21,49,054 made by the Id AO on the count of income of the assessee for the AY07- 08 merely on presumption & surmises; which is unjustified, is liable to be deleted. Additional Gr.No.l: "1. On the facts and circumstances of the case and in law, reopening u/s148 & assessment made u/s.147, both are invalid & without having valid jurisdiction by the Id AOs i.e., DCIT-l(l)/ ACIT- 3(1), as they were not having pecuniary jurisdiction over the assessee for recording reasons u/s!48 on 19-3-14 & for making assessment u/s147 on 11-2-15, as returned income was Rs.5,22,820; CBDT Instruction No.1/2011, dt.31-1-11, much binding on IT authorities u/sl!9 and in contravention thereto, reopening u/s 148/147 by the Id AOs, who had not possessed valid jurisdiction over the assessee as on 19-3-14 at the time of recording reasons, is liable to be quashed." Additional Gr.No.2: "2. On the facts and circumstances of the case and in law, assessment made u/s!47 dt.11-2-15 is invalid on the count that the Id AO has not issued notice u/s143(2) before making assessment u/s147; in absence of notice u/s143(2), assessment made u/s147 is liable to be quashed." Additional Gr.No.3: "3. On the facts and circumstances of the case and in law, reopening u/s 148 dt.21-3-14 is invalid as it is based on mechanical approval granted by the Id PCIT u/s151(l) which is without application of mind on the part of the Id PCIT as he has not cared/ pointed out the glaring mistake of Id AO that Id AO was not having pecuniary jurisdiction for recording reasons & for making assessment u/s147 as returned income was Rs. 5,22, 820 which is in contravention to the CBDT Instruction No.1, dt.31-1-2011 which is much binding on IT authorities u/s.119; approval u/s151(l) is invalid; and thus, reopening u/s148/147 is liable to be quashed."

3. Ld. AR at the outset, argued only on the additional grounds. The revised grounds No.1 & 2 have not been pressed by the ld. AR of the 3 assessee before us and in this regard ld. AR has endorsed to it, therefore, both the grounds are dismissed as not pressed. 4. Ld. Sr.DR objected to the admissibility of additional grounds raised

by the assessee before the Tribunal as the same were never raised before the revenue authorities.

5. In view of the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd., reported in (1998) 229 ITR 383 (SC), it is open to the assessee to raise the points of law even before the Tribunal which was not raised earlier. Therefore, the arguments advanced by the ld. Sr. DR objecting to the additional ground of assessee, is not accepted and the legal grounds raised in the form of additional ground is admitted and taken on record.

6. Brief facts of the case are that the assessee derived income from liquor trading (retail) business. The assessee filed its return of income on 31.10.2007 declaring total income at Rs.5,22,820/-. The assessee’s case was reopened by the Assistant Commissioner of Income Tax, Circle-3(1), Raipur on the basis that during the course of assessment proceedings for the assessment year 2008-2009, the assessee has submitted copy of confirmation of accounts in the name of Merline Infrastructure and Smt. Kewar Bai Dheewar. It has been noticed that there is an opening balance as on 01.04.2007 in the case of Merline Infrastructure amounting to Rs.7,77,500/- and in the case of Smt. Kewar Bai Dheewar amounting to Rs.13,71,554/-but the same have not been reflected in the balance sheet of the assessee filed for 31.03.2007. Being satisfied with he aforesaid 4 observation, the AO has formed the reason to believe that Rs.21,49,054/- has escaped from assessment. In this case, the order u/s.143(3) of the Act was also passed on 24.12.2009 and the income was assessed at Rs.6,15,800/- on returned income of Rs.5,22,820/-. Due to restructuring and reallocation of jurisdiction, the case of the assessee was transferred from DCIT-1(1), Raipur to ACIT-3(1), Raipur and due to change of incumbent, notice u/s.142(1) of the Act dated 08.12.2014 along with questionnaire dated 09.12.2014 were issued to the assessee. No response was made by the assessee. After several opportunities, the authorized representative of the assessee submitted a written reply to the ld. AO on 08.01.2015 and explained that opening balance sheet for the alleged two accounts are duly reflected in the books of accounts of the assessee. Thus, there is no escapement of income which is chargeable to tax as escaped assessment in the year under consideration. The explanation submitted by the AR of the assessee was not supported with documents, books of accounts, therefore, the ld. AO has observed that the onus cast upon the assessee was not discharged and inferred that the assessee has no explanation on discrepancies as detected and the assessee does not want to show anything in this matter. Finally, the ld. AO has added the amount of Rs.21,49,054/- in the income of the assessee, thereby making the total assessed income as Rs.27,64,854/-.

7. Dissatisfied with the order of the ld. AO, the assessee preferred appeal before the Commission of Income Tax (Appeal) but without success the appeal of the assessee was dismissed.

8. Now, the assessee is in appeal before us to challenge the decision of the ld. CIT(A).

9. Ld. AR argued on the additional ground No.1 assailing the validity of jurisdiction of the ld. AO i.e. DCIT-1(1), Raipur/ACIT-3(1), Raipur mentioning the reason that the AO was not having pecuniary jurisdiction over the assessee for recording reasons u/s.148 of the Act on 19.03.2014 and for making assessment u/s.147 of the Act on 11.02.2015 as the returned income of the assessee was Rs.5,22,820/- only. Ld. AR placed his reliance on CBDT Instruction No.1/2011, dated 31.01.2011 placing the argument that the instruction of CBDT was binding on the revenue authorities u/s.119 of the Act and in contravention thereto reopening u/s.148/147 of the Act by the AO, who had not possessed valid jurisdiction over the assessee while proceeding for reopening of assessment u/s.147/148 of the Act, which is liable to be quashed. Instruction No.1/2011, dated 31.01.2011 issued by the CBDT reads as under :- INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-I)], ________________________________________________ SECTION 119 OF THE INCOME-TAX ACT, 1961 - INCOME-TAX AUTHORITIES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES 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.

6 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 Income Declared (Mofussil areas) (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate Upto Rs.20 lacs Above Rs.20 lacs Upto Rs.30 lacs Above Rs. 30 lacs Returns Non- Upto Rs.15 lacs Above Rs.15 lacs Upto Rs.20 lacsq Above Rs.20 lacs corporate 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.

10. Further, the ld. AR relied on the CBDT Instruction No.6/2011, dated 08.04.2011, wherein the Board has instructed the CCIT/DGIT to adjust the limits by an amount upto Rs.5 lakhs to ensure that the workload is equitably distributed amongst the Assessing Officers after recording reasons in this regard. The said Instruction No.6/2011 is as under :-

INSTRUCTION NO. 6/2011 [F.NO.187/12/2010-ITA-I], ______________________________________________ SECTION 119 OF THE INCOME - TAX ACT, 1961 - CENTRAL BOARD OF DIRECT TAXES - INSTRUCTIONS TO SUBORDINATE AUTHORITIES INSTRUCTIONS - REGARDING INCOME LIMITS FOR ASSIGNING CASES TO DEPUTY COMMISSIONERS/ASSISTANT COMMISSIONERS/ITOS INSTRUCTION NO. 6/2011 [F.NO.187/12/2010-ITA-I], DATED 8-4-2011 Reference may kindly be made to Board's Instruction No. 1/11, dated 31-1-2011 which lays down revised monetary limit of cases to be assessed by DCsIT/ACsIT in metro cities and mofussil areas w.e.f. 1-4-2011. Some CCsIT have expressed the view that the limit fixed in the aforesaid Instruction, if strictly enforced would lead to unequal distribution of workload between the ACITs and the ITO in some of the charges.

12. To explain the applicability of jurisdiction in accordance with the aforesaid instruction issued by the CBDT as well as the office of the CCIT, Raipur, the ld. AR submitted that the reasons for reopening were recorded by the DCIT-1(1), Raipur on 19.03.2014 for the assessment 8 year 2007-2008, since the assessee’s returned income for the relevant assessment year was Rs.5,22,820/-, which is below the monetary limit as prescribed by the CBDT, therefore, the reopening itself was invalid and nonest because the DCIT-1(1) Raipur was not having pecuniary jurisdiction over the assessee as on 19.03.2014. To support his contentions, ld. AR relied upon the various cases law and some of such cases laws having similar facts and circumstances which are as under :- i) Durga Manikanta Traders, ITA No.59/RPR/2019, order dated 12.12.2022, wherein the Tribunal has held as under:- 17. On the basis of our aforesaid observations, we are of the considered view that as in the case of the present assessee before us the impugned assessment had been framed by the ITO-1(1), Bhilai vide his order passed u/s.143(3) dated 29.12.2016 on the basis of a notice u/s. 143(2), dated 24.09.2015 that was issued by the DCIT-1(1), Bhilai, i.e., an A.O who at the relevant point of time was not vested with jurisdiction over the case of the assessee, therefore, the assessment so framed cannot be sustained and is liable to be struck down on the said count itself. Apropos the notice issued u/s.143(2) of the Act, dated 05.05.2016 by the ITO-Ward 1(1), Bhilai, we are of the considered view that as the said notice was issued after the lapse of the stipulated time period, i.e., beyond the specified time frame which expired as on 30.09.2015, therefore, the assessment order so framed would also not be saved on the said basis. To sum up, as the impugned assessment u/s. 143(3), dated 29.12.2016 had been framed by the ITO- Ward 1(1), Bhilai de-hors the issuance of a valid notice u/s. 143(2) of the Act, therefore, the same cannot be sustained is liable to quashed. We, thus, in terms of our aforesaid observations quash the assessment framed by the A.O u/s.143(3), dated 29.12.2016 for want of valid assumption of jurisdiction on his part. ii) Sudhir Kumar Agrawal, ITA No.158/RPR/2017, order dated 17.10.2022, wherein the Tribunal has held as under:- 17. 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 9 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 quash the order passed by the Income- Tax Officer, Ward-2(2), Bhilai for want of jurisdiction on his part. iii) Welcome Coir Industries, ITA Nos.266-269/Agra/2013, order dated 16.10.2017, wherein the Tribunal has held as under :- 11. Further, the issue that if there is an inherent defect in the jurisdiction of the AO over the assessee and in any particular year, during the assessment proceedings no objection was taken whether it would amount to acceptance of jurisdiction for other years, has been dealt with by the ITAT, Lucknow Bench, in the case of "M.I. Builders Pvt. Ltd. vs. ITO Lucknow", (2008) 115 ITD 419 (Luck) and it has been held that the validation of proceedings by virtue of section 124(3) of the Act is specific from proceeding to proceeding and section 124(3) cannot correct or create a jurisdiction in respect of other proceedings, if the Assessing Officer otherwise I.T.A No. 266 to 269/Agra/2013 does not have jurisdiction. Such defects also cannot get cured because of appearance of the present Director of the Company and the Counsel during the assessment proceedings for AY 2008-09, because as held in the case of "M I Builders Pvt. Ltd. vs. ITO Lucknow" (supra), the principles of estoppel are not applicable to income-tax proceedings and what may be acceptable or held in one year or in one proceeding cannot be in general held to be applicable to other proceedings. The reliance of the AO for validation of jurisdiction in the three assessment years on the basis of compliance made by the assessee in AY 2008-09, is, as correctly held by the CIT(A), also not legally tenable because erroneous assumption of jurisdiction cannot, in general, be validated. Such validation is specific in section 124(3) and failure of the assessee to object within the time allowed under section 124(3) is available to specific proceedings and not to every proceeding as also held in "M.I. Builders" (supra).

13. In view of the above submissions, it was the prayer of the ld. AR that since the reopening itself was invalid, the assessment order u/s.147 r.w.s143(3) of the Act, dated 11.02.2015 passed by the ld. AO having no pecuniary jurisdiction was invalid, nonest, bad in law, and deserve to be quashed.

12 The AO issued query u/s 142(1) in continuation of reassement proceedings transferred from the predecessor AO. The assesee failed to comply with the notice served on 8-12-2014. The assesee failed to comply with fixation notice served to him on 01-01-2015 and 15-01-2015. The assesse furnished reply on 08-01-2015, denied escaped income, and explained that the assesse has reflected the same in his balance sheet but no enclosure or evidences. The AO categorically stated that the explanation of the assesse is not supported with the evidences and is contrary to the confirmation furnished during regular assessment proceedings. The assesse also failed to produce books of accounts. The assesse failed to discharge his onus. The burden of proof was shifted to the assesse by notice issued u/s 142(1), it was also not responded. ( Para-2 page -2) Hence the addition of Rs.21,49,054/- The assessee failed to explain the escaped income, non-complied to the notices, and failed to discharge onus, hence addition was made.

17. We have considered the rival submissions, perused the material available on record and the case laws pressed into our service. Regarding admissibility of additional legal ground of the assessee with respect to challenging the jurisdiction of the AO which was not challenged before the AO under the provisions of Section 124(3) of the Act within the stipulated time period of one month from the date of which the notice u/s.143(2) of the Act was served upon the assessee, as opposed by the ld.Sr. DR, we take guidance from the observation of the coordinate bench of this Tribunal in the case of Sudhir Kumar Agrawal, in ITA No.158/RPR/2017, order dated 17.10.2022, wherein it has been observed in para 14 as under :- 14. 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 Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai ITA No. 158/RPR/2017 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 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)

14 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, sub-section (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 Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai ITA No. 158/RPR/2017 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 sub-section (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 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 Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai ITA No. 158/RPR/2017 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 Income-Tax 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 15 by him in contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, therefore, the provisions of sub- section (3) of Section 124 would not assist the case of the revenue.