2023 (9) TMI 1409 - AT - Income Tax

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 ... Jurisdiction of income- tax authorities to issue notice u/s 143(2) - ACIT or ITO - Validity of assessment framed by the A.O being ACIT Circle 29, Kolkata - as argued returned income of the assessee was less than Rs. 30,00,000/- the jurisdiction to issue notice u/s 143(2) and to frame the assessment u/s 143(3) was lying with the ITO - HELD THAT:- As decided in Shivam Finance [2023 (6) TMI 1341 - ITAT KOLKATA] it is a settled position of law that for carrying out an assessment proceedings u/s. 143(3) of the Act, statutory requirement of serving a valid notice u/s. 143(2) of the Act is a must and in absence of which the subsequent proceedings become invalid. In the present case before us, it is a fact that assessee has reported total income which exceeds the threshold prescribed in the CBDT Instruction no. 1/2011 read with revised monetary limit for issuing notice by ITO/DCs/ACs. Through this instruction, it stated that in case of metro cities, in case of corporate declared income above Rs. 30 lakh, the jurisdiction of such corporate assessee will lie with the DCs/ ACs. It is not in dispute that as on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs. 30 lakhs and the same was lying with the DCs/ACs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward 49(1), Kolkata. It is true that subsequently the assessment has been framed by ACIT, Circ1e-49, Kolkata but the point in dispute is that on the date of issuing a notice u/s. 143(2) of the Act, whether the ITO, Ward-49(1), Kolkata was having a valid jurisdiction to issue such notice u/s. 143(2) of the Act. We find that Hon'ble jurisdictional High Court in the recent judgment in the case of PCIT Vs. Shree Shoppers Ltd. [2023 (3) TMI 1432 - CALCUTTA HIGH COURT] has decided identical issue in favour of the assessee. 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.