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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
Per Shri Duvvuru RL Reddy, Judicial Member :
This appeal is filed by assessee against the order of the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]-2, Guntur in ITA No.10147/GNT/CIT(A)-2/2014-15 dated 27.08.2019 for the Assessment Year (A.Y.) 2011-12. 2 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
The assessee has raised the following grounds of appeal :
Order of the Commissioner of Income Tax (Appeals), Guntur is against the facts of the case and law.
The CIT(A) is not justified in deciding the appeal ex-party, without giving reasonable opportunity of hearing to the appellant, more so when petition for adjournment was filed before the CIT(A).
The Ld.CIT(A) is not justified in confirming the addition of Rs.2,70,994/- towards capital gains (on the ground that no evidence was produced) without giving opportunity to the appellant. Hence the appellant prays for relief.
The CIT(A) has erred in his finding that the credit in the bank account amounting to Rs.55,00,000/- was not proved though the appellant has proved it by filing confirmation letter. Hence, the appellant prays for relief.
For these and such other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the addition of Rs.57,70,994/- may be directed to be deleted.
The assessee has also filed a petition, pleading for admission of following additional grounds :
For that the assessing officer issuing the notice u/s 143(2) of the IT Act 1961 did not have juri iction over the case of the assessee, hence the notice is bad in law and the assessment order passed on the basis of such notice is bad in law and should be quashed. a. For that the assessment order was passed without service of any valid notice u/s 143(2) of the IT Act 1961 and therefore the assessment order passed is bad in law and should be quashed. b. That in the facts and circumstances of the case, the assessment order u/s 143(3) of the IT Act 1961 was without
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juri iction and bad in law and thus the entire assessment order be quashed and or cancelled.
The AO has expanded the scope of limited scrutiny without prior approval of appropriate authority and the assessment is a nullity and beyond juri iction. a. That the CBDT vide circular F.No.225/402/2018/ITA.II states that the assessing officer cannot increase the scope of a limited scrutiny assessment to go beyond the issues and reasons for which the case was selected for scrutiny under CASS. Thus the additions made are bad in law and illegal. Since the additional grounds filed by the assessee are legal in nature, we admit the additional grounds for adjudication.
Brief facts of the case are that the assessee has filed her return of income for the A.Y.2011-12 on 23.03.2013 declaring income of Rs.1,77,478/-. The case was selected for scrutiny under CASS, accordingly, notices u/s 143(2) and 142(1) of Income Tax Act, 1961 (in short ‘Act’) were issued on 19.12.2013 and served on the assessee, calling for books of accounts, bills and vouchers and other information. On verification, the Assessing Officer(AO) observed that the assessee has deposited in ING Vysya Bank an amount of Rs.55,00,000/- on various dates. The assessee submitted that she has raised loans of Rs.1,00,000/- during the F.Y.2005- 06, Rs.12 lakhs during F.Y.2006-07 from M/s Mirpuri Finance and Rs.42 lakhs during F.Y.2009-10 from M/s MKA Associates. These funds
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were given in cash during November, 2009 and January, 2010 to Sri P.Janardhan Reddy, Nellore for purchase of site to construct a building for school. However, since the transaction was not materialized, Sri P.Janardhan Reddy has paid back in cash to the assessee during February 2011 and the same was deposited into ING Vysya Bank. The assessee has produced confirmation letters from M/s Mirpuri Finance for an amount of loan of Rs.13,00,000/- but failed to produce from M/s MKA Associates for Rs.42,00,000/- and the source remained unexplained. The AO observed that Sri P.Janardhan Reddy issued confirmation letter stating that he had received Rs.55,00,000/- from the assessee during March and April 2010 for purchase of site to construct a building for school. Whereas the assessee has stated that she has given Rs.55,00,000/- to Sri P.Janardhan Reddy in November 2009 and January 2010. He has also confirmed that he is an agriculturist and no interest was paid to the assessee. The assessee has not furnished any verifiable evidence with regard to advancing or receiving the amount except letter from Sri P.Janardhana Reddy. Further Sri P.Janardhana Reddy also could not furnish any proof in support of his claim of receipt or payment of such amount. The AO held that all the discussions and circumstances mentioned clearly indicates that the cash transaction claimed to have been 5 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
made between Sri P.Janardhana Reddy and the assessee are not genuine and in the absence of any verifiable proof in support of the payment and receipt of amount from Sri P.Janardhana Reddy, it is clear that the cash deposits made by the assessee are nothing but her own funds which were not accounted for. Accordingly added to the income returned by the assessee as unexplained cash.
We first take up the core issue of juri iction involved in this case. The Ld.AR submitted that it is apparent from the order sheet entries filed in the paper book that the AO, ITO, Ward-2(3) had issued notice to the assessee u/s 143(2) of the Act on 27.09.2013. Later on, the case was transferred to ITO, Ward-1(4), Visakhapatnam which was further transferred to the, ITO, Ward-1(2), being the juri ictional officer. The Ld.AR submitted that the AO, ITO, Ward-2(3) had issued notice u/s 143(2) without having any juri iction over the case of the assessee. The Ld.AR further submitted that the ITO, Ward-1(2), being the juri ictional officer passed assessment order u/s 143(3) without issuing statutory notice u/s 143(2) of the Act, therefore, the order passed u/s 143(3) is bad in law and should be quashed.
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Per contra, the Ld.DR has submitted that the AO, ITO, Ward-2(3) had issued notice, thereafter, it was transferred to ITO, Ward-1(4), Visakhapatnam and further transferred to the juri ictional AO, ITO, Ward-1(2) on 16.12.2013. The Ld.DR submitted that though the AO who had passed the assessment order i.e. ITO, Ward-1(2), Visakhapatnam has not issued any notice, but since the erstwhile AO had issued notice and served on the assessee, the notice is valid, though he was not having any juri iction over the assessee. He further argued that the assessment order passed by the ITO, Ward-1(2), Visakhapatnam u/s 143(3) is valid order and the Ld.CIT(A) has also considered all the aspects and passed the order, therefore, the order passed by the lower authorities to be confirmed.
We have heard both the parties and perused the material placed on record. The issue before us is whether the non-issuance of notice u/s 143(2) of the Act, by the Assessing Officer having juri iction over the assessee makes the assessment bad in law. It is an undisputed fact that the notice u/s 143(2) was issued by the ITO, Ward- 2(3) on 27.09.2013 and the same was served on the assessee on 30.09.2013. The case was received by ITO, Ward-1(2), being the 7 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
juri ictional officer on 16.12.2013, on transfer from ITO, Ward-1(4), Visakhapatnam, which was originally received from ITO, Ward-2(3), Visakhapatnam. Due to change in incumbency, notices u/s 143(2) and 142(1) were issued to the assessee on 19.12.2013 calling for books of accounts, bills and vouchers and other information. It is also an admitted fact that the file was transferred to ITO, Ward-1(4) who has no juri iction over the case of the assessee. Subsequently, the ITO, Ward-1(4) came to know about lack of juri iction and transferred the case to ITO, Ward- 1(2). ITO, Ward-1(2) without issuing notice u/s 143(2) and without giving any opportunity to the assessee passed assessment order u/s 143(3). The matter of transfer of the assessee’s case was neither intimated to the assessee by the concerned AO nor the Ld.CIT(A) has passed any order as required u/s 127 of the Act by giving an opportunity of being heard to the assessee after recording the reasons. Therefore, the contention of the assessee is that the order passed u/s 143(3) is bad in law, void-ab-initio and it is not a valid assessment order. The Ld.Counsel for the assessee relied on the decisions of the coordinate bench of ITAT in the case of Hillman Hosiery Mills Pvt. Ltd. Kolkata Vs. DCIT, Circle-11(1), Kolkata in ITA 2634/KOL/2019 dated 12.01.2021. “10. In this case, the ITO Ward-3(3), Kolkata, issued notice u/s 143(2)
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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 juri iction 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:- "
After hearing rival contentions, I admit this additional ground as it is a legal ground, raising a juri ictional issue and does not require any investigation into the facts. The Id. 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 juri iction 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 juri iction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the juri iction 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.
On merits, he rebutted the findings of the lower authorities. The Id. Counsel for the assessee relied on certain case-law, which I would be referring to as and when necessary.
The Id. D/R, on the other hand, submitted that the concurrent juri iction 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 juri ictional 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:-
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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 juri iction of the ACIT on 11/08/2017. Thereafter, no notice u/s 143(2) of the Act was issued by the Assessing Officer having juri iction 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 ITA No. 2073/Kol/201 6 order dt. 27.09.2017, held as follows:- "
From a perusal of the above Instruction of the CBDT it is evident that the pecuniary juri iction 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 juri iction 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 juri iction 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 A0. The A0 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 Acton 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. iii) On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia.
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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 juri iction to assess the assessee lies only by AC/DC and not ITO. So, therefore, only the AC/DC had the juri iction 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 juri iction to assume juri iction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary juri iction 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 juri iction 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.
In the result, appeal of assessee is allowed.” The Ld.AR also relied on the decision of K.A.Wires Ltd. Kolkata Vs. I.T.O.Ward-8(3), Kolkata in ITA No.1149/Kol/2019 dated 22.01.2020. Relevant part of the order is extracted below for the sake of clarity and convenience.
“6. We 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, we hold as follows:
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The address of the assessee as given in the return of income and as given in the PAN Card, has not undergone any change for the previous assessment years, this year and for the subsequent assessment years. A perusal of the copy of return of income field by the assessee for the Assessment Year 2010-11, 2011-12, 2012-13 & 2013-14, demonstrate that it was filed with the same address, before the ITO, Ward-8(3), Kolkata. There is no dispute that it was only the ITO, Ward-8(3), Kolkata, who had and continued to have the juri iction over the assessee company. The PAN card also has the same address for all these years. There is no change in address of the assessee company.
It is also not in dispute that the notice u/s 143(2) of the Act dt. 06/08/2013 was issued by the ITO Ward-33(1), Kolkata. The assessee does not fall under the juri iction of this officer. A perusal of the order sheet entries demonstrate that, after issuance of notice u/s 143(2) of the Act on 06/08/2013, the ITO, Ward- 33(1), Kolkata, transferred the file to ITO, Ward-8(3), Kolkata on 03/02/2014. Thereafter, ITO, Ward- 8(3), Kolkata, issued notice u/s 143(1) on 10/10/2014 and completed the assessment u/s 143(3) of the Act on 30/03/2015. The ITO Ward- 8(3), Kolkata, who had the juri iction over the assessee, did not issue notice u/s 143(2) of the Act to the assessee. The issue before us is whether the non-issual of notice u/s 143(2) of the Act, by the Assessing Officer having juri iction over the assessee makes the assessment bad in law.
We 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, we hold as follows:-
Juri iction of the Income Tax Authorities is conferred by the Board (Central Board of Direct Tax) u/s. 120(1) & (2) of the LT. Act, 1961. The Section reads as follows:
(1) income-tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. Explanation. - For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1). (2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of 12 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
the other income- tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to anyone or more of the following criteria, namely:- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. (4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein, - (a) authorise any '[Principal Director General or] Director General or 14[Principal Director or] Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the '[Principal Director General or] Director General or 14[Principal Chief Commissioner or] Chief Commissioner or 14[Principal Commissioner or] Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made there under to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or Joint Director by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply.
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(6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made there under by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.
From a plain reading of the above, it is clear that u/s 120(1) of the Act, the Income Tax Authorities will have to exercise Acts only in accordance with the juri iction conferred by the Board. U/s 120(3) of the Act, such powers can be conferred by the Board having regard to the territorial area, class of person, income or class of the cases. The CBDT under sec. 120(5) of the Act, can also confer juri iction on two or more Assessing Officers (concurrent juri iction). The CBDT can also by notification confer powers on the authorities for the purpose of assessment as may be notified in the notification. This shows that concurrent juri iction can be exercised only when CBDT confers such juri iction u/s 120(4) and 12 0(5) of the Act.
In accordance with the powers conferred u/s. 120 (1) and 120(2) of the Act, the CBDT issued notification on no. 191/2002(F.No.187/9/2002-ITA-1 dated 30.7.2002) whereby the CBDT conferred the juri iction by specifying the Designation of the specific Income Tax Authorities, its Head Quarters, Territorial Area, Persons or classes of persons and cases or class of cases.
As per the above referred notification, the assessee's being a company, the case fell under the juri iction of Commissioner of Income Tax, Kolkata-Ill, Kolkata vide serial no. 205 of the notification. The juri iction of the assessee fell with the Assessing Officer being ITO ward 8(3), Kolkata, who was under the charge of Commissioner of Income tax -Kolkata III.
The Authorities under the Income Tax, after the juri iction is conferred in them by virtue of notification u/s 120(1) and 120(2) of the Act, have to perform their functions as per sec. 124 of the Act. Section 124 of the Act, reads as under:
(1) Where by virtue of any direction or order issued under sub- section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with juri iction over any area, within the limits of such area, he shall have juri iction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and 14 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
(b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has juri iction to assess any person, the question shall be determined by the Principal Director General or Director General or the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner; or where the question is one relating to areas within the juri iction of different Principal Director General or Directors General or Principal Chief Commissioners or] Chief Commissioners or Principal Commissioners or Commissioners, by the Principal Director General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or] Commissioners concerned or, if they are not in agreement, by the Board or by such Principal Director General or] Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the juri iction of an Assessing Officer- (a) where he has made a return under sub-section (1) of section 115WD or under sub- section (1) of section 139, after the expiry 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 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub- section (2) of section 1 15W or sub-section (1) of section 142 or under sub- section (1) of section 1 15W or under section 148 for the making of the return or by the notice under the first proviso to section 1 15W or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier. (c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under subsection (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier. (4) Subject to the provisions of sub-section (3), where an assessee calls in question the juri iction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made. (5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with juri iction by virtue of the directions or orders issued under subsection (1) or sub- section (2) of section 120..
The clear and unambiguous words used in section 124(1) of the Act, are that the Assessing Officer should be vested with the Juri iction by virtue of an order, notification or directions issued u/s. 120(l) or u/s. 12 0(2) of the Act. Therefore, only the Officer who has been vested with the juri iction conferred u/s 120(1) and 120(2) of the Act can act as Assessing Officer and 15 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
issue notice under sec. 143(2) of the Act, since "he shall have juri iction" are the words as has been used in sec. 124(1) of the Act.
Even though the Assessing Officer have been vested with the Juri iction u/ s. 124(1) of the Act, by the Board, yet the assessee may dispute such juri iction vested u/s 124(1) of the Act, in the Assessing Officer. Such dispute can be raised u/s. 124(3) of the Act, within one month of the issue of notice u/s. 143(2) of the Act. This sub section, therefore, clearly stipulates that the assessee can dispute the juri iction of the Assessing Officer to issue notice even though such juri iction was vested in him by the direction or order issued u/ s. 120(1) or 120(2) of the Act, for some reasons.
In this case, the juri iction of the assessee was never vested with the Assessing Officer, Ward 33(1) , (non corporate assessee ward) who issued notice u/s. 143(2) of the Act. In fact, the assessee also filed return before ITO, Ward-8(3), Kolkata who was having juri iction over the assessee as per the Boards Notification, which fact is evident from the copy of acknowledgements of return of income for the last few years. The notice under sec. 143(2), however, was issued in this case by ITO, Ward 33(l), Kol who has not been vested with the juri iction over the assessee company by CBDT.
Under the scheme of "e" filing of return, the assessee has to fill PAN on the return. It has to also fill its address and some of the details are picked-up by the assessee. If the Department's system fails to correctly transfer the return to the juri ictional Assessing Officer and transfer the same to a Assessing Officer though who has no juri iction as per the CBDT's notification, such mistake cannot confer the juri iction on such an Assessing Officer. Juri iction can be conferred only by notification u/ s 120(1) and 120(2) of the Act only.
The Ld DR submitted that there was transfer order of the assessee's case for the assessment year in question, from ITO Ward 33(1) to ITO Ward 8(3). There can be a valid transfer order from ITO Ward 33(l) only if he was vested with the juri iction over the assessee. As he was never vested with the juri iction either by the notification of the CBDT or by any order of the Commissioner of Income tax earlier to the issue of notice u/ s 143(2) of the Act, he could not have validly transferred the case to ITO, Ward-8(3), Kolkata. The file/case was restored to its juri ictional area. When the said ITO Ward 33(1) was not having valid juri iction at the time of issue of notice u/ s 143(2) of the Act, then the notice is bad in law. The transfer of the folder from ITO Ward 33(l) to ITO Ward 8(3) in fact establishes that the revenue realised that the ITO Ward 33(1) had no juri iction.
The Ld DR also raised the issue that u/s 120(4) and 124(5) of the Act, there can be concurrent juri iction. There is no dispute over that. However there is no direction or order or notification u/ s 120(1) or 120(2) of the Act, conferring concurrent juri iction to the ITO Ward 33(1) along with ITO
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Ward 8(3) u/ s 120(1) or u/ s 120(2) of the Act, which is the condition mentioned in section 120(4) and 120(5) of the Act.
The Ld DR for the purpose of his submission also read out para 19 of the decision of ITAT in the case of Rungata Irrigation in ITA No 1224/K/2019 dated 6.9.2019. The said decisions is in favour of the assessee. The Ld CIT(DR) has relied on para 19 which is in fact in favour the assessee. The Tribunal has fully analyzed the entire provisions of section 120, 124 and 127 of the Act, in para 13, 14,15,17, 18, 21 of the order with regard to the issue of vesting of juri iction and transfer etc and held that the issue of notice by non- juri ictional AO was bad in law and without juri iction.
The Ld DR argued that the assessee did not dispute the juri iction u/ s 124(3) of the Act and hence by not disputing the same, the right to challenge the juri iction is lost forever. This would have been so, had the ITO, Ward- 33(1), Kolkata, had original juri iction over the assessee. This is not the case. When an authority does not have juri iction, then the act done by such authority is bad in law and is void ab-initio
This issue came up for consideration in the following cases: (i) Rungta Irrigation Ltd. referred to above with relevant paragraphs and paragraph 36. (ii) Smriti Kedia Calcutta High Court 339 ITR page 37 (iii) Indorama Software Solutions Ltd. Mumbai Bench ITA No. 5211 and 5290(Mum) of 2011 dated 7.9.2012
In the case of Mahalchand Motilal Kothari & Co (ITA No. 1851/1852/Ko1j2002, ITAT, D-Bench, Kol dated 28.7.2006 wherein the Tribunal considered the notification dated 30.7.2 002 and held that after issue of the notification the Assessing Officer who was earlier vested the juri iction lost the juri iction and even though the order of the CIT(A) was received by him at the time when he was having juri iction, yet the Assessing Officer who has been divested of the juri iction on 30.7.2002 cannot file the appeal after the said date. In that case even the authorization was also granted for filing the appeal by the CIT-XIII, Kolkata who lost the juri iction after the notification. In that case after the dismissal of the appeal of the Department by the Tribunal on the aforesaid ground of juri iction, the Revenue filed an appeal before the Hon'ble High Court but the same was dismissed. The Revenue thereafter came up with condonation petition and a filed fresh appeal before the ITAT but the same was also dismissed in ITA No. 1768 and 1769/Kol/2006, B-Bench on 15.9.2014. The Revenue filed an appeal before the Hon'ble High Court which was dismissed with the following observations:
"The appeal carried by theACIT-39 to the Appellate Tribunal was dismissed as not competent. The order of the Appellate Tribunal was challenged by the Revenue in this Court. This Court did not interfere with the order of the Tribunal and the matter rested there without this Court's order being challenged by the Revenue
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before the Supreme Court. In the present case, the matter pertains to the same assessment year when the ITO-44 has preferred an appeal where the initial assessment was not done by the ITO-44 but such assessment 'was conducted by the ACIT-39 at a point of time when AC1T-39 lost juri iction over the assessee pursuant to the said CBOT Notification 2002 Since there was a fundamental error, the Appellate Tribunal dismissed the appeal as incompetent since the order of the Assessing Officer who had no juri iction to undertake the assessment qua the assessee could never have been found to be legal or resurrected."
While deciding the issue in the case of Mahalchand Motilal Kothari & Co., (supra) the ITAT relied on the Judgement of Calcutta High Court in the case of "West Bengal State Electricity Board"278 ITR 218. In that case the Hon'ble Calcutta High Court held that juri iction cannot be conferred by default or by agreement and the decision without juri iction is a nullity. The Hon'ble High Court also relied on a number of Judgements while arriving at such a conclusion.
The Hon'ble Allahabad High Court in the case of V.P. Electronics Corporation Ltd in ITA No. 79 of 2015 dated 1.3.2017 has also taken similar view wherein the provisions of sec. 12 4(3) were also referred to. It was held that when the notice was not issued by the competent authority, i.e an Assessing Officer having juri iction, then the assessment is a nullity.
In the case of Deepchand Kothari reported in 171 ITR 381 (Raj) it was held that the Assessing Officer who was having no juri iction to initiate the proceedings then such proceedings are ab-intio- void. Further the Hon'ble High Court relying on the Judgement of the Hon'ble Supreme Court in the case of Kiran Singh Vs Chaman Paswan, it was held that the Juri ictional issue can be taken up at any stage of the proceedings, even at the time of execution of decree.
The ITAT, Kolkata in the case of Ganesh Reality and Mall in ITA No. 581/Kol/201 7 held that if no juri iction was conferred on a particular authority the issue of notice or completion of assessment by such authority is illegal.
In the case of P.V. Doshi Vs CIT the Gujarat High Court held that the juri ictional issue can be taken up at any stage of the proceedings.
In the case of Rajmandir Estates (386 ITR 162) the Hon'ble Calcutta High Court held that if the Commissioner Income tax issuing notice u/ s. 263 has lost the Juri iction then the notice and order issued by him is a nullity.
The Lucknow Bench of the ITAT in ITA No. 89 and 90/LKW/2015 dated 16.4.2015 in the case of Md Rizwan held that notice u/ s 143(2) issued by non- juri ictional Assessing Officer is a nullity.
Same view have been taken a number of other cases some of which are under:-
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A.L. Ahuja v/s. DCIT If at the time of issue of notice u/s. 158BC SOT (2003) page 475 at page 480 the Assessing Officer had no juri iction the assessment is illegal.
Income Tax officer vs. Sarkar& Co. 1954 If at the time of filing, of the appeal the ITO AIR 613 Calcutta. had no seisin over he assessee's case and case is transferred by the Commissioner of Income Tax from ITO Ward-III(2) to some other Officer, on the date of filing of the Appeal, the ITO Ward 111(2) cannot file the Appeal and the appeal of the department rightly dismissed by the ITA T.
Ram Krishna Ramnath vs. Commissioner Sarkar & Co. 1954 AIR 613 Calcutta was reported in 66 ITR page 367
The Hon'ble Gujarat High Court in the case of Jolly Fantasy World Ltd., Tax appeal no. 1254 of 2014,judgement dated 9.3.2015 held that there cannot be waiver of Juri iction, even if the assessee has participated in the proceedings.
Consent cannot confer juri iction and if the notice issued is without juri iction it is invalid as was held in Resham Petrotech Ltd.
The Hon'ble Bombay High Court in ITA No.127 OF 2006 in the case of The Commissioner of Income Tax-I, Lalit Kumar Bardia, judgement dt. 11.7.2017, held that the transfer of juri iction subsequently cannot validate the action already taken.
The Ld. DR cited the judgement of the Hon'ble Supreme Court in the case of I - Ven Interactive Limited (Civil Appeal No. 8132 of 2019 dated 18.10.2019). This judgement is not on the issue of juri iction of the 19 ITA No.602/Viz/2019, A.Y.2011-12 D.Usha Reddy, Visakhapatnam
Assessing Officer. In that case, there is no dispute that the assessing officer issuing notice had juri iction over the assessee. In that case the selection of the return for scrutiny was generated under automated system of the Income Tax Department which picks up the address of the assessee from the PAN database. The notice u/ s 143(2) was sent at the assessee's address available as per the PAN database. Intimation for further hearing and three more notices were sent at the same address as available in the PAN. Finally, the assessee appeared before the tax authority but challenged the notices saying that these notices were not served upon him and that he never received notice u/s 143(2) of the Act and that further subsequent notices served and received by the assessee were beyond the period of limitation prescribed under the law. The assessee submitted that he changed his address and the new address was mentioned in the return of income filed for subsequent years. The assessee also submitted that he filed Form No.18 with