Facts of the Case

The assessee, ABC India Limited, filed its return of income for Assessment Year 2015-16 on 29.09.2015 declaring nil income. The case was selected for scrutiny and notice under Section 143(2) dated 28.09.2016 along with notice under Section 142(1) dated 18.07.2017 were issued by the Deputy Commissioner of Income Tax, Circle-11(1), Kolkata. The assessment was completed under Section 143(3) on 27.12.2017 making additions aggregating to ₹54,22,108. The assessee challenged the validity of the assessment on the ground that the notice under Section 143(2) was issued by an Assessing Officer who lacked pecuniary jurisdiction.

Issues Involved

Whether the notice issued under Section 143(2) by the DCIT was valid when the returned income was nil, whether violation of CBDT Instruction No. 1/2011 relating to pecuniary jurisdiction invalidates the assessment, and whether Section 292BB can cure a jurisdictional defect arising from issuance of notice by a non-jurisdictional Assessing Officer.

Petitioner’s Arguments

The assessee contended that as per CBDT Instruction No. 1/2011 issued under Section 119 of the Income-tax Act, cases where returned income is up to ₹20 lakhs in metro cities fall within the jurisdiction of the Income Tax Officer. Since the returned income was nil, the DCIT lacked jurisdiction to issue notice under Section 143(2). It was argued that issuance of notice under Section 143(2) by the jurisdictional Assessing Officer is mandatory and a condition precedent for framing a valid assessment. Reliance was placed on binding judicial precedents holding that such jurisdictional defects render the assessment void.

Respondent’s Arguments

The Revenue submitted that the case was transferred within the administrative jurisdiction of the Commissioner and therefore the assessee could not challenge the jurisdiction of the DCIT. It was further argued that since the assessee participated in the assessment proceedings, Section 292BB applied to cure any defect in the notice.

Court Order / Findings

The ITAT Kolkata held that the DCIT was not the jurisdictional Assessing Officer in terms of CBDT Instruction No. 1/2011, as the returned income was nil. The notice issued under Section 143(2) by an officer lacking pecuniary jurisdiction was held to be invalid, and consequently, the assessment framed under Section 143(3) was declared void and unenforceable. The Tribunal further held that Section 292BB does not cure a complete absence of jurisdiction. Participation by the assessee does not validate a notice issued by an Assessing Officer who had no authority to assume jurisdiction. Following jurisdictional High Court rulings and coordinate bench decisions on identical issues, the assessment was quashed.

Important Clarification

The Tribunal clarified that jurisdiction under the Income-tax Act can be determined based on income thresholds prescribed through binding CBDT instructions. Any assessment framed in violation of such instructions is without jurisdiction and void in law. Section 292BB applies only to defects in service of notice and does not cure the complete absence of a valid notice issued by the jurisdictional Assessing Officer.

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 2015-16 was quashed as being without jurisdiction and void ab initio.

Source Link- https://itat.gov.in/public/files/upload/1768388014-UFpwNz-1-TO.pdf

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