Facts of the Case

The assessee, APE Power Pvt. Ltd., filed its return of income for Assessment Year 2015-16 on 29.09.2015 declaring total income of ₹49,24,210. The case was selected for scrutiny under CASS and notice under Section 143(2) dated 11.04.2016 along with notice under Section 142(1) dated 30.07.2017 were issued by the Income Tax Officer, Ward-7(1), Kolkata. The assessment was completed under Section 143(3) on 30.12.2017 making additions and disallowances aggregating to ₹6,71,36,837. The assessee challenged the validity of the assessment on the ground that the notice under Section 143(2) was issued by an officer lacking pecuniary jurisdiction.

Issues Involved

Whether the notice under Section 143(2) issued by the ITO was valid when the returned income exceeded the pecuniary jurisdiction prescribed under CBDT Instruction No. 1/2011, whether issuance of notice by a non-jurisdictional Assessing Officer renders the assessment void, and whether Section 292BB can cure such jurisdictional defects.

Petitioner’s Arguments

The assessee submitted that as per CBDT Instruction No. 1/2011 issued under Section 119 of the Income-tax Act, in metro cities, corporate cases where returned income exceeds ₹20 lakhs fall within the jurisdiction of the DCIT/ACIT. Since the returned income was ₹49,24,210, the ITO, Ward-7(1), Kolkata had no 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 the jurisdictional High Court decision in Kusum Goyal vs ITO and various coordinate bench rulings including Amiya Gopal Dutta vs DCIT and Raghvendra Mohta vs ACIT.

Respondent’s Arguments

The Revenue contended that the income was only marginally above ₹20 lakhs and that the assessee never raised the jurisdictional objection before the Assessing Officer or before the CIT(A). It was argued that CBDT instructions are administrative in nature and cannot override statutory provisions. The Revenue relied on decisions including CIT vs Shankar Lall Goenka and C. Krishnan vs ITO to contend that the matter should be restored to the file of the Assessing Officer.

Court Order / Findings

The ITAT Kolkata held that the notice under Section 143(2) dated 11.04.2016 was issued by the ITO, Ward-7(1), Kolkata in clear violation of CBDT Instruction No. 1/2011, as the returned income exceeded the pecuniary limits prescribed for ITOs in metro cities. The Tribunal held that the notice was issued by a non-jurisdictional Assessing Officer and therefore the entire assessment framed under Section 143(3) was invalid and unsustainable in law. The Tribunal relied upon the jurisdictional Calcutta High Court decision in PCIT vs Shree Shoppers Ltd. and earlier Tribunal rulings affirmed by the High Court, holding that jurisdictional defects strike at the root of the assessment. It was further held that Section 292BB does not cure a complete lack of jurisdiction.

Important Clarification

The Tribunal clarified that CBDT instructions issued under Section 119 of the Act are binding on the Income-tax authorities and determine pecuniary jurisdiction. Any notice issued in violation of such binding instructions is void ab initio. Participation by the assessee in assessment proceedings does not confer jurisdiction on an officer who inherently lacks authority to issue statutory notice under Section 143(2).

Final Outcome

The appeal filed by the assessee was allowed, and the assessment framed 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/1768387883-KadJTB-1-TO.pdf

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