Facts of the Case

The assessee filed a revised return of income for Assessment Year 2017-18 on 27.03.2018 declaring total income of ₹47,89,100. The case was selected for scrutiny through CASS for examination of capital gains and investment in immovable property. Notice under Section 143(2) dated 09.08.2018 was issued by ITO Ward-2(3), Kolkata, followed by notice under Section 142(1). The assessment was completed by the same ITO by making additions of ₹63,41,000 on account of difference between purchase price and stamp duty valuation and ₹8,00,000 towards brokerage expenses. The assessee challenged the assessment on the ground that the ITO lacked pecuniary jurisdiction to frame the assessment.

Issues Involved

Whether the assessment framed by the ITO was valid when the returned income exceeded the pecuniary limits prescribed under CBDT Instruction No. 1/2011, whether absence of a valid jurisdictional transfer order under Section 127 vitiates the assessment, and whether failure to raise jurisdictional objection within the time prescribed under Section 124(3) cures a defect of inherent lack of jurisdiction.

Petitioner’s Arguments

The assessee contended that as per CBDT Instruction No. 1/2011 issued under Section 119, cases where returned income exceeds ₹20 lakhs in metro cities fall within the jurisdiction of ACIT/DCIT and not the ITO. Since the returned income was ₹47,89,100, the ITO Ward-2(3), Kolkata lacked jurisdiction to issue notice under Section 143(2) and frame the assessment. It was further argued that no valid transfer order under Section 127 existed transferring jurisdiction from ACIT to ITO. Reliance was placed on the jurisdictional Calcutta High Court decision in Kusum Goyal and multiple coordinate bench decisions holding that assessments framed by non-jurisdictional officers are void.

Respondent’s Arguments

The Revenue supported the order of the CIT(A) and argued that the assessee had not raised the objection regarding jurisdiction within one month of issuance of notice under Section 143(2) as required under Section 124(3). It was contended that the objection stood waived and that Section 292BB cured any defect in jurisdiction.

Court Order / Findings

The ITAT Kolkata held that the ITO Ward-2(3), Kolkata was not the jurisdictional Assessing Officer in terms of CBDT Instruction No. 1/2011, as the returned income exceeded the prescribed pecuniary limit. The Tribunal further held that there was no valid transfer order under Section 127 authorising the ITO to assume jurisdiction. It was held that inherent lack of jurisdiction cannot be cured by Section 292BB and that failure to raise objection under Section 124(3) does not validate an assessment framed by an officer lacking jurisdiction. Following binding decisions of the jurisdictional High Court and coordinate benches, the assessment was held to be void ab initio.

Important Clarification

The Tribunal clarified that pecuniary jurisdiction determined through CBDT instructions issued under Section 119 is binding on tax authorities. Absence of a valid transfer order under Section 127 renders any assumption of jurisdiction illegal. Jurisdictional defects go to the root of the assessment and are not curable by participation of the assessee or by deeming provisions under Section 292BB.

Final Outcome

The appeal filed by the assessee was allowed, and the assessment order passed under Section 143(3) of the Income-tax Act for Assessment Year 2017-18 was quashed as being without jurisdiction and void ab initio.

Source Link- https://itat.gov.in/public/files/upload/1767782200-vVRQfK-1-TO.pdf

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