Corporate assessee's assessment proceedings invalid due to jurisdictional defect under section 143(2) notice requirements

ITAT Kolkata held that assessment proceedings were invalid due to jurisdictional defect. The case involved corporate assessee with returned income exceeding Rs. 30 lakhs, which per CBDT Instruction required jurisdiction with DC/AC in metro cities. However, notice u/s 143(2) was issued by ITO instead of competent authority. Though assessment was subsequently framed by ACIT, the initial jurisdictional error invalidated entire proceedings. ITAT followed precedent from Calcutta HC in similar matter, emphasizing that valid notice u/s 143(2) is mandatory prerequisite for assessment u/s 143(3).

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Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Disallowance of Sundry Balance written off.
3. Disallowance of Public Relation Expenses.

Summary:

1. Jurisdiction of the Assessing Officer:
The primary issue was whether the Assistant Commissioner of Income Tax (ACIT), Circle-29, Kolkata had the jurisdiction to frame the assessment when the returned income of the assessee was less than Rs. 30,00,000/-. The assessee argued that the jurisdiction to issue notice u/s 143(2) and frame the assessment u/s 143(3) in such cases lies with the Income Tax Officer (ITO). The Tribunal upheld this view, citing the CBDT Instruction No.1/2011 and relevant case laws, including the decision of the Calcutta High Court in PCIT vs. Shree Shoppers Ltd. It was concluded that since the ACIT did not have the jurisdiction to issue the notice, the assessment framed was invalid and bad in law.

2. Disallowance of Sundry Balance written off:
The assessee challenged the disallowance of Rs. 29,30,046/- out of Rs. 29,38,748/- on Sundry Balance written off, confirmed by the CIT(A). The Tribunal did not delve into this issue in detail due to the primary jurisdictional issue rendering the assessment itself invalid.

3. Disallowance of Public Relation Expenses:
The assessee also contested the disallowance of Rs. 5,86,988/- out of Rs. 17,60,993/- being one-third of Public Relation Expenses on the grounds of personal use, confirmed by the CIT(A). Similar to the Sundry Balance issue, this was not adjudicated upon in detail due to the invalidity of the assessment on jurisdictional grounds.

Conclusion:
The Tribunal quashed the assessment framed by the ACIT due to lack of jurisdiction, rendering the other grounds of appeal academic and not requiring further adjudication. The appeal of the assessee was allowed on the primary jurisdictional issue.

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