Assessment order framed by AO without jurisdiction is void

Assessment order framed by AO without jurisdiction is void




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Assessment order framed by AO without jurisdiction is void

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”

(Virtual Court Hearing), BENCH KOLKATA

Before Shri Sanjay Garg, Judicial Member

I.T.A. No.339/Kol/2021
Assessment Year: 2016-17
Anderson Printing House Pvt. Ltd………………………………………………………… Appellant
C/o S.N. Ghosh & Associates, Advocates,
“Seben Brothers’ Lodge”,
P.O. Buroshibtala,
P.S. – Chinsurah, Dist.- Hooghly, West Bengal – 712105. [PAN:AACCA1977D]
vs.
ACIT, Circle-9(1), Kolkata…………………………………………………………………. Respondent
 
Appearances by:
Shri Somnath Ghosh, Advocate, appeared on behalf of the appellant.
Shri Jayanta Khanra, JCIT, Sr. DR, appeared on behalf of the Respondent.
Date of concluding the hearing : October 28, 2021
Date of pronouncing the order  : October 28, 2021
ORDER
 
The present appeal has been preferred by the assessee for the assessment year 2016-17 against the order dated 20.07.2021 Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal:
“1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)- NEAC failed to appreciate that none of the conditions precedent existed for the Ld. Assistant Commissioner of Income Tax, Circle 9(1). Kolkata for his specious action of assuming jurisdiction to issue notice u/s. 143(2) of the Income Tax Act, 1961 on 18-09-2017 and the purported assessment order framed u/s. 143(3) of the Act on 04-12-2018 without adhering to the mandatory tenets thereof is therefore ab initio void, ultra vires and ex- facie null in law.
2. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-NFAC considered improper facts, failed to consider proper position in law and came to an erroneous findings thereupon in upholding the impugned disallowance of Rs.11,57,572/- made by the Ld. Assistant Commissioner of Income Tax, Circle 9(1), Kolkata by erroneous
3. FOR THAT on a proper interpretation of the scope and ambit of the provisions of s. 43B of the Income Tax Act, 1961, the Commissioner of Income Tax (Appeals) – NFAC erred in upholding the action of the Ld. Assistant Commissioner of Income Tax. Circle 9(1). Kolkata in resorting to the impugned disallowance of Rs. 11,57,572/- in the instant case and the purported finding on that behalf is absolutely arbitrary, unreasonable and perverse.
4. FOR THAT the Ld. Commissioner of Income Tax (Appeals)- NFAC was absolutely in error in upholding the disallowance in the sum of Rs. 11,57,572/- made u/s. 2(24)(x) read with s. 36(1)(va) of the Income Tax Act. 1961 by the Ld. Assistant Commissioner of Income Tax, Circle 9(1). Kolkata relying upon the amendment by Finance Act, 2021 construing it retrospectively and the purported findings on that behalf is altogether unfounded, unjustified and untenable in
5. FOR THAT the Ld Commissioner of Income Tax (Appeals)-NFAC acted unlawfully in upholding the impugned disallowance in the sum of Rs.11,57,572/- made by the Assistant Commissioner of Income Tax, Circle 9(1), Kolkata by invoking the mischief of s. 36(1)(va) of the Act and such specious findings reached on that behalf is wholly illegal, illegitimate and infirm in law.”
  1. A perusal of the above grounds of appeal reveals that the assessee, inter alia, has contested the jurisdiction of the concerned Assistant Commissioner of Income Tax (ACIT) to frame the assessment order u/s 143(3) of the Income Tax Act (hereinafter referred to as the ‘Act’). Since this legal ground goes to the root of the case, hence I proceed to decide this legal ground
  2. The ld. Counsel for the assessee has submitted that the returned income of the assessee was less than Rs.30 lacs. The ld. Counsel has further submitted that as per the relevant statutory provisions not only the territorial jurisdiction but also the pecuniary jurisdiction of the Income Tax Officers/Assessing Officer has been fixed by the CBDT and that if the returned income is less than Rs.30 lacs in case of corporate assessee in metro cities, the jurisdiction to frame to assessment lies to the Income Tax Officer whereas if the returned is more than Rs.30 lacs, the jurisdiction lies with the concerned ACIT/JCIT. The counsel has submitted that the jurisdiction to pass assessment order in this case lies with Income Tax Officer, but the assessment has been done by ACIT who did not have the pecuniary jurisdiction to pass the assessment order in this case. The ld. DR has not disputed the aforesaid factual position. However, he has submitted that the concerned ACIT being the overall in-charge of the concerned ward was competent to frame the assessment.
  1. I have considered the rival contentions of both the ld. representatives of the Before proceeding further, it will be appropriate to refer to section 120 of the Act which, for the sake of ready reference, is reproduced as under:
“Jurisdiction of income- tax authorities
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 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 any one 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
  1. 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
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.
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 (Mofussil
Income Declared
areas)
(Metro cities)
ITOs
ACs/DCs
ITOs
DCs/ACs
Corporate returns
Upto
Rs. 20
lacs
Above
Rs. 20
lacs
Upto
Rs. 30
lacs
Above Rs. 30 lacs
Non-corporate
returns
Upto
Rs. 15
lacs
Above
Rs. 15
lacs
Upto
Rs. 20
lacs
Above Rs. 20 lacs
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.”
  1. 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
  • 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.
  1. 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 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 ITA No.2517/Kol/2019 and Others vide order dated 03.02.2021, wherein the Tribunal further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that the assessment framed by Assessing Officer who was not having pecuniary jurisdiction to frame such assessment was bad in law. The relevant part of the order dated 03.02.2021 passed in ITA No.2517/Kol/2019 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.
  1. The ld. D/R, on the other hand, submitted that the concurrent jurisdiction vests with the ITO as well as the ACIT and hence the assessment cannot be annulled simply because the statutory notice u/s 143(2) of the Act, was issued by the ITO and the assessment was completed by the 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.
  2. 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:-
  3. 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.
  1. This Bench of the Tribunal in the case of Shri Sukumar Sahoo vs. ACIT in ITA No. 2073/Kol/2016 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 09.2013.
ii. The ITO, Ward-1, Haldia taking note that the income returned was above 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014.
iii. On 09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia.
  1. 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 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.
  1. In the result, appeal of assessee is allowed.
9.1  This Bench of the Tribunal in the case of Krishnendu Chowdhury vs. ITO reported in [2017] 78 com 89 (Kolkata-Trib.) held as follows:-
“Return of income of assessee was Rs. 12 lakhs – As per CBDT instruction, jurisdiction for scrutiny assessment vested in Income- tax Officer and notice under section 143(2) must be issued by Income-tax Officer, Ward-I, Haldia and none other – But, notice was issued by Asstt. Commissioner, Circle Haldia much after CBDT’s instruction and knowing fully well that he had no jurisdiction over assessee – Whether, therefore, notice issued by Asstt. Commissioner was invalid and consequently assessment framed by Income-tax Officers becomes void since issue of notice under section 143(2) was not done by Income-tax Officers as specified in CBDT instruction No. 1/2011.”
 
9.2 The Hon’ble High Court of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range – I, reported in [2005] 278 ITR 218 (Cal.) has held as follows:-
“Section 254 of the Income-tax Act, 1961 – Appellate Tribunal – Powers of – Assessment years 1983-84 to 1987-88 – Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for first time before Tribunal – Held, yesWhether jurisdiction of Assessing Authority is not dependent on date of accrual of cause of action but on date when it is initiated – Held, yes – Whether once a particular jurisdiction is created, same must be prospective and cannot be retrospective and it has to be interpreted having regard to manner in which it has been sought to be created – Held, yes – Assessee”
 
9.3 The Hon’ble Supreme Court in the case of CIT Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC), held as follows:-
“7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BB would be a complete answer.
On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
  1. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon’s case (supra). The issue that however needs to be considered is the impact of Section 292BB of the
  2. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.”
  3. Respectfully following the propositions of law laid down in all these case-law and applying the same to the facts of the case, we hold that the assessment order is bad in law for the reason that the Assessing Officer having jurisdiction over the assessee, has not issued a notice u/s 143(2) of the Act as required by the statute. Notice issue by the officer having no jurisdiction of the assessee is null and void. When a notice is issued by an officer having no jurisdiction, Section 292BB of the Act, does not comes into Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee.”
  1. Respectfully following the propositions of law laid down in these orders stated above, we hold that the orders are bad in law for the reason that the assessing authority passed the order u/s 143(3) of the Act i.e. DCIT-13(1), Kolkata has not issued a notice u/s 143(2) of the Act and also for the reason that the jurisdiction of these cases lies with the ITO and not the DCIT. Hence all the orders passed by the ld. CIT(A) in these four cases are hereby quashed and the appeals of the assessees are allowed.”
  1. In view of the discussion made above and respectfully following the decision cited above, it is held that the assessment order passed u/s 143(3) of the Act by the ACIT being without jurisdiction is bad in law and the same is accordingly set
  2. In the result, the appeal of the assessee stands
Order is pronounced in the open court on 28.10.2021.
Sd/-
[Sanjay Garg]
Judicial Member
Dated: 28.10.2021
RS
Copy of the order forwarded to:
  1. Anderson Printing House Ltd
  2. ACIT, Circle-9(1), Kolkata
  3. CIT(A)-
  4. CIT- ,
  5. CIT(DR),
//True copy//
By order
Sr.PS/D.D.O,
Kolkata Benches




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