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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI G D PADMAHSHALI
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-II, Raipur, dated 20.12.2018, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 29.12.2016 for assessment year 2014-15. The assessee has assailed the impugned order on the following grounds of appeal before us:
“GROUND NO.I.
1. That the ex-parte Appellate Order passed by the Learned Commissioner of Income Tax (Appeals)-II, Raipur ("the Ld.CIT(A)") is highly unjustified, bad in law, without providing reasonable opportunity of being heard, against the principles of natural justice and not in accordance with the provisions of law. It is prayed that the Appellate Order passed under section 250 of the Income Tax Act, 1961 ("the Act") may please be cancelled/set-aside on this ground alone. GROUND NO.II 2. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in confirming the addition of Rs.2,94,44,914/- made by the Learned Assessing Officer ("the Ld.AO") towards advances given to suppliers for purchase of material treating the same as bogus/non-genuine debts which is highly unjustified, unwarranted, uncorroborated, unsustainable, not proper on facts and not in accordance with the provisions of law. The Ld.CIT(A) has failed to appreciate that the advances to suppliers represents "assets"of the appellant being merely a case of utilization of funds and could never constitute "income" chargeable to tax, source of advancing funds to suppliers for purchase of material stands duly established & correlated with the funds received from creditors, the advances have been given through normal banking
3 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1) channels which has not been doubted by the Ld.AO and hence, by no stretch of imagination, advances to suppliers could be treated as unexplained. The Ld.CIT(A) further failed to appreciate that, in the absence of pointing out any defects, mistakes, omissions in the books of accounts duly audited under the provisions of section 44AB of the Act, the action of Ld.AO in rejecting the books of accounts invoking the provisions of section 145(3) of the Act is highly illegal, bad in law, misconceived, unjustified, untenable and not in accordance with the provisions of law. Hence, it is prayed that the addition of Rs.2,94,44,914/- confirmed by the Ld.CIT(A) may please be deleted. GROUND NO.III 3. That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of cross objection at the time of hearing of the appeal.”
Also, the assessee has raised an additional ground of appeal before us, which reads as under: “That the Assessment Order framed u/s.143(3) is bad in law, without jurisdiction & void ab initio since in view of the returned income of Rs.6,57,380, the assumption of jurisdiction u/s.143(2) vested with the Income Tax Officer as per the Instruction issued on 31.01.2011 by the Hon’ble CBDT whereas in the present case, mandatory notice u/s.143(2) dated 24.09.2015 was issued by the Ld. DCIT, Circle-2(1), Bhilai accordingly, the impugned assessment framed u/s.143(3) by the Ld. ITO, Ward-1(1), Bhilai ( Ld. AO) is without timely issuance of mandatory notice u/s.143(2) ( as the notice u/s. 143(2) had been issued by the Ld. AO only on 05.05.2016 i.e. after the expiry of six months from the end of the financial year in which the return was furnished i.e. 30.09.2015), accordingly, the Assessment order is bad in law & legally unsustainable hence, it is earnestly prayed that the Assessment order passed u/s. 143(3) may please be quashed and cancelled in limine.”
4 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
We shall first deal with the admissibility of the additional ground of appeal that has been raised by the assessee-appellant before us. As the assessee by raising the aforesaid additional ground had assailed the validity of the jurisdiction that was assumed by the A.O for framing of the assessment vide his order passed u/s. 143(3) dated 29.12.2016, which involves purely a question of law that would require looking no further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view that where an assessee had raised, though for the first time, an additional ground of appeal before the Tribunal which involves purely a question of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
Succinctly stated, the assessee firm which is engaged in the business of trading of rice husk had e-filed its return of income for the assessment year 2014-15 on 30.11.2014, declaring an income of Rs.6,57,380/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.
Assessment, was thereafter framed by the A.O vide his order passed u/s.143(3) of the Act, dated 29.12.2016, determining the income of the 5 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
assessee at Rs.3,01,02,300/- i.e. after making an addition of Rs.2,94,44,914/- towards bogus debts to the returned income.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
7. As the assessee has challenged the validity of the assumption of jurisdiction by the A.O for framing of the assessment u/s. 143(3) of the Act, dated 29.12.2016, therefore, we shall first deal with the same.
Shorn of unnecessary details, the assessee firm had e-filed its return of income for the A.Y.2014-15 on 30.11.2014 with the ITO, Ward-1(1), Bhilai. Notice u/s.143(2), dated 24.09.2015 was received by the assessee firm from the DCIT-2(1), Bhilai. Subsequently, the assessee was in receipt of a notice u/s. 143(2), dated 05.05.2016 from the ITO, Ward-1(1), Bhilai. On the basis of the aforesaid facts, it is the claim of the Ld. Authorized Representative (for short ‘AR’) that as pursuant to the CBDT Instruction No.1/2011, dated 31.01.2011 the jurisdiction over the case of the assessee firm which had filed its return of income declaring an income of Rs.6,57,380/- was vested with the ITO, Ward-1(1), Bhilai, therefore, in 6 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
absence of any notice having been issued by the said jurisdictional A.O u/s.143(2) of the Act, the assessment framed by him vide his order passed u/s.143(3), dated 29.12.2016 could not be sustained and was liable to be struck down for want of valid assumption of jurisdiction. Our attention was drawn by the Ld. AR to the aforesaid CBDT Instruction No.1 of 2011 dated 31.01.2011, Page 1 of APB.
9. On being queried by the Bench that now when the assessee was in receipt of a notice u/s.143(2) dated 24.09.2015 from the DCIT-2(1), Bhilai, who was vested with the concurrent jurisdiction over its case, then, on what basis the validity of the assessment was being assailed, it was submitted by the Ld. AR that as per the CBDT Instruction No.1/2011 dated 31.01.2011 the exclusive jurisdiction over the case of the assessee was vested with ITO, Ward-1(1), Bhilai, therefore, no valid jurisdiction could have been assumed on the basis of the notice issued u/s.143(2) of the Act by the DCIT-2(1), Bhilai i.e. a non jurisdictional officer. On being further queried as to whether the assessee had called in question the jurisdiction of the DCIT-2(1), Bhilai on receipt of notice u/s. 143(2), dated 24.09.2015 i.e. as per the mandate of sub-section (3) of Section 124 of the Act, the Ld. AR answered in negative. Elaborating on the aforesaid issue, it was submitted by the Ld. AR that as the assessee had not challenged the validity of the jurisdiction assumed by the DCIT-2(1), Bhilai for the reason
7 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1) that was not vested with the territorial jurisdiction over its case, but assailed the same for the reason that he was divested of his inherent pecuniary jurisdiction as per the CBDT Instruction No.1 of 2011, dated 31.01.2011, therefore, no obligation was cast upon it to raise any objection within the stipulated time period as contemplated in Section 124(3) of the Act. In order to buttress his claim that an obligation to call in question the jurisdiction of the A.O as per the mandate of Section 124(3) of the Act was only confined to a case where the territorial jurisdiction is challenged, and not otherwise, the Ld. AR had relied on the judgments of the Hon’ble High Court of Bombay in the case of Peter Vaz Vs. CIT (2021) 128 taxmann.com 180 (Bombay) and that of the Hon’ble High Court of Gujarat in the case of CIT Vs. Ramesh D Patel (2014) 362 ITR 492 (Guj.) Also, support was drawn by the Ld. AR from the recent order of the ITAT, Raipur in the case of Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai in dated 17.10.2022. It was submitted by the Ld. AR that the CBDT Instruction No.1 of 2011, dated 31.01.2011 was binding on the department and there could be no escape from the same. In support of his aforesaid contention reliance was placed by the Ld. AR on the judgment of the Hon’ble Supreme Court in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC). Also, in support of his contention that now when the notice u/s. 143(2) was issued by the DCIT-1(1), Bhilai, i.e., am A.O who pursuant
8 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1) to the CBDT Instruction No.1 of 2011, dated 31.01.2011 had no jurisdiction over the case of the assessee then, no valid assessment on the basis of such notice could have been framed, reliance was placed by the Ld. AR on 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.
Also, the Ld. AR in support of his aforesaid contentions had relied on the judgment of the Hon’ble High Court of Gujarat in the case of Pankajbhai Jay sukhlal Shah Vs. ACIT, Circle-2 (2019) 110 taxmann.com 51 (Guj.). It was submitted by the Ld. AR that in the aforesaid case, as notice u/s.148 was issued by the A.O who had no jurisdiction over the case of the assessee before them, therefore, the Hon’ble High Court had quashed the said notice by treating the same as being bad in law. It was submitted by the Ld. AR that the aforesaid judgment of the Hon’ble High Court had thereafter been upheld by the Hon’ble Supreme Court in the case of ACIT, Circle-1 Vs. Pankajbhai Jay sukhlal Shah[2020] 120 taxmann.com 318 (SC) and the SLP filed by the department was dismissed. It was, thus, the claim of the Ld. AR that as the notice u/s. 143(2), dated 24.09.2015 was issued by the DCIT-1(1), Bhilai i.e. a non jurisdiction A.O, therefore, no valid jurisdiction on the basis of the same could have been assumed for framing of the impugned assessment
9 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1) u/s.143(3), dated 29.12.2016 by the ITO-1(1), Bhilai i.e. the jurisdictional A.O.
Adverting to the notice u/s. 143(2), dated 05.05.2016 that was issued by the ITO, Ward-1(1), Bhilai i.e. jurisdictional Officer, it was submitted by the Ld. AR that as the said notice was issued after lapse of the stipulated time period, i.e., beyond a period of six months from the end of the relevant assessment year which expired on 30.09.2015, therefore, no valid jurisdiction could have been assumed on the basis of the same for framing the impugned assessment u/s 143(3), dated 29.12.2016. Also, it was averred by the Ld. AR that as held by the Hon’ble High Court of Chhattisgarh in the case of DCIT Vs. Sunita Finlease Ltd. (2011) 330 ITR 491 (C.G.) an Instruction issued by the CBDT is binding on the Income Tax Department, therefore, the aforesaid CBDT Instruction No.1 of 2011, dated 31.01.2011 vesting exclusive pecuniary jurisdiction over the case of the assessee for the year under consideration with the ITO, Ward-1(1), Bhilai was binding on the department and could not have been departed from. On the basis of his aforesaid contention, it was submitted by the Ld. AR that the as the ITO, Ward-1(1), Bhilai had framed the impugned assessment u/s. 143(3), dated 29.12.2016 de-hors issuance of any valid notice u/s. 143(2) of the Act, therefore, the assessment so framed by him could not be sustained and was liable to be struck down.
10 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. The Ld. DR had drawn support from the judgment of the Hon’ble Supreme Court in the case of the Pr. CIT Vs. I-Ven Interactive Limited (2019) 418 ITR 662(SC). However, on being called upon to explain that as to how the aforesaid judgment of the Hon’ble Apex Court which was in context of the validity of the jurisdiction that was assumed by an A.O on the basis of the address provided by an assessee in the PAN database, and was not in the context of the pecuniary jurisdiction that was vested with the A.O pursuant to the CBDT Instruction No.1 of 2011, dated 31.01.2011 would further the case of the present assessee, the Ld. DR failed to come forth with any reply. It was, however, submitted by the Ld. DR that as the A.O had validly assumed jurisdiction and framed the assessment vide his order passed u/s.143(3), dated 29.12.2016, therefore, no infirmity did emerge therefrom. Elaborating on his aforesaid contention, it was submitted by the Ld. DR that as the DCIT-1(1), Bhilai was vested with the concurrent jurisdiction over the case of the assessee, therefore, no infirmity did emerge from the assessment framed by the ITO-1(1), Bhilai u/s. 143(3), dated 29.12.2016 on the basis of notice issued by the DCIT-1(1), Bhilai u/s.143(2), dated 24.09.2015.
11 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
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 Income Declared (Mofussil areas) (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate Upto Rs.20 lacs Above Rs.30 Upto Rs.30 lacs Above Rs.30 returns lacs Lacs Non-corporate Upto Rs.15 lacs Above Rs.15 Upto Rs.20 lacs Above Rs.20 returns lacs lacs
12 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
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) 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. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
15. 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. Durga Manikanta 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 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 Pankajbhai Jaysukhlal 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. Durga Manikanta 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. Pankajbhai Jaysukhlal 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 multi- facet 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, Circle- 1, 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. Sunita Finlease 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. Durga Manikanta 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 Income- Tax 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 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, 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 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
17 M/s. Durga Manikanta 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 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 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.
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 18 M/s. Durga Manikanta 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 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. Durga Manikanta 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, ITA No.2634/Kol/2019; 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 I.T.A. No.339/Kol/2021 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.
20 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
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 Above Upto Rs.30 Above returns lacs Rs.30 lacs lacs Rs.30 Lacs Non- Upto Rs.15 Above Upto Rs.20 Above corporate lacs Rs.15 lacs lacs Rs.20 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.
7. 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 21 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
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: "5.2. The assessee relied on the recent decision of this Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd. vs. DCIT, in ITA No. 2634/Kol/2019, 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 ITA No. 462/Kol/2019; 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
22 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1) 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.
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. Durga Manikanta 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 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. Durga Manikanta 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.”
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.
25 M/s. Durga Manikanta Traders, Vs. ITO, Ward-1(1)
As we have quashed the assessment for want of valid assumption of jurisdiction by the A.O, therefore, we refrain from adverting to and therein adjudicating the other contentions that have been advanced by the Ld. AR qua the sustainability of the addition made by the A.O, which, thus, are left open.