2022 (12) TMI 1492 - AT - Income Tax

Re-assessment order struck down for jurisdictional defects under CBDT Instruction No.1/2011 - section 148 notice invalid

Shri Chowaram Dhiwar Versus The Income Tax Officer-1 (2), Raipur (C.G.)

The ITAT Raipur held that a re-assessment order was invalid due to jurisdictional defects. Under CBDT Instruction No.1/2011, the ITO Ward 1(3) Raipur had ... Validity of Re-assessment order framed by non-jurisdictional officer - scope of instruction No.1/2011, dated 31.01.2011 as revising the earlier existing monetary limit for assigning the cases to ITOs/ACs/DCs w.e.f. 01.04.2011 - HELD THAT:- As per the CBDT Instruction No.1/2011, dated 31.01.2011 the jurisdiction over the case of the assessee who is located in a mofussil area i.e. Raipur and had in compliance to the notice u/s. 148, dated 18.06.2013 filed a non-corporate return on 05.07.2013 for the year under consideration, i.e., A.Y.2010-11 declaring an income of Rs. 9,47,500/- was vested with the ITO, Ward 1(3), Raipur [which w.e.f. 15.11.2014 was transferred to ITO-1(2), Raipur]. Although notice u/s. 148, dated 18.06.2013 was issued within the stipulated time period, however, the same was issued by the DCIT-1(1), Raipur, i.e., an A.O who pursuant to the CBDT Instruction No.1 of 2011, dated 31.01.2011 was not vested with jurisdiction over the case of the assessee for the year under consideration. On the other hand as the ITO, Ward-1(3), Raipur [succeeded by ITO, Ward-1(2), Raipur w.e.f. 15.11.2014] who as per the aforesaid CBDT Instruction (supra) was at the relevant point of time vested with the exclusive pecuniary jurisdiction over the case of the assessee for the year under consideration had not issued any notice u/s. 148 of the Act, and had proceeded with on the basis of the notice u/s. 148 dated 18.06.2013 issued by the DCIT-1(1), Raipur i.e. a non-jurisdictional Officer, therefore, no valid jurisdiction could have been assumed by him for framing the impugned assessment vide order passed u/s. 143(3)(sic), dated 31.03.2015. Thus the assessment framed in the case of the present assessee by the ITO-1(2), Raipur vide order u/s. 143(3)(sic) dated 31.03.2015 on the basis of notice u/s. 148 dated 18.06.2013 issued by the DCIT-1(1), Raipur i.e. a non-jurisdictional A.O, is devoid and bereft of any force of law, therefore, the same cannot be sustained and is liable to be struck down on the said count itself. Decided in favour of assessee. Issues Involved:1. Validity of the jurisdiction assumed by the Assessing Officer (AO) for framing the assessment.2. Errors in framing the assessment order under Section 147 without passing a speaking order.3. Incorrect estimation of sales and gross profit.4. Addition on account of personal expenses under Section 37(1).5. Disallowance of interest under Sections 36(1)(iii) and 37(1).6. Validity of the notice issued under Section 148 by a non-jurisdictional officer.7. Failure to issue notice under Section 143(2) before making the assessment.Detailed Analysis:1. Validity of the Jurisdiction Assumed by the AO:The primary issue raised by the assessee was the validity of the jurisdiction assumed by the Income Tax Officer (ITO), Ward-1(2), Raipur, for framing the assessment under Section 143(3) of the Income-tax Act, 1961. The assessee argued that the assessment was framed based on a notice under Section 148 issued by the Deputy Commissioner of Income Tax (DCIT)-1(1), Raipur, who did not have jurisdiction over the case. The CBDT Instruction No.1/2011, effective from 01.04.2011, revised the monetary limits for assigning cases to ITOs and DCs/ACs, indicating that the jurisdiction over the assessee's case, who declared an income of Rs. 9,47,500, was vested with the ITO, Ward-1(3), Raipur, later transferred to ITO-1(2), Raipur. Consequently, the notice issued by DCIT-1(1), Raipur, was invalid, and the assessment framed by ITO-1(2), Raipur, based on this notice, was quashed.2. Errors in Framing the Assessment Order under Section 147 Without Passing a Speaking Order:The assessee contended that the AO erred in framing the assessment order under Section 147 without passing a speaking order about any disagreement with the explanations provided by the assessee. The Tribunal did not delve into this issue in detail, as the primary ground of invalid jurisdiction was sufficient to quash the assessment.3. Incorrect Estimation of Sales and Gross Profit:The AO estimated the sales at Rs. 11,00,00,000 against the sales shown in the audited accounts at Rs. 9,97,97,240, without providing any basis for the estimation. Additionally, the AO made an addition of Rs. 8,99,546 by applying a gross profit rate of 6% on the estimated sales. The Tribunal did not address this issue separately due to the quashing of the assessment on jurisdictional grounds.4. Addition on Account of Personal Expenses Under Section 37(1):The AO made an addition of Rs. 4,00,000 on account of personal expenses under Section 37(1) of the Act. This issue was also not separately adjudicated by the Tribunal due to the primary ground of invalid jurisdiction.5. Disallowance of Interest Under Sections 36(1)(iii) and 37(1):The AO disallowed Rs. 9,90,902 on account of interest under Sections 36(1)(iii) and 37(1) of the Act. Similar to other issues, this was not separately addressed by the Tribunal due to the quashing of the assessment on jurisdictional grounds.6. Validity of the Notice Issued Under Section 148 by a Non-Jurisdictional Officer:The Tribunal emphasized that the notice under Section 148 was issued by DCIT-1(1), Raipur, who did not have jurisdiction over the assessee's case as per the revised monetary limits outlined in CBDT Instruction No.1/2011. The jurisdiction was vested with ITO-1(3), Raipur, later transferred to ITO-1(2), Raipur. Therefore, the notice issued by DCIT-1(1), Raipur, was invalid, and the subsequent assessment based on this notice was quashed.7. Failure to Issue Notice Under Section 143(2) Before Making the Assessment:The assessee also raised the issue of the AO's failure to issue a notice under Section 143(2) before making the assessment under Section 147 read with Section 143(3). The Tribunal did not address this issue separately, as the assessment was quashed on the primary ground of invalid jurisdiction.Conclusion:The Tribunal quashed the assessment framed by ITO-1(2), Raipur, under Section 143(3) dated 31.03.2015, on the basis of the notice under Section 148 dated 18.06.2013 issued by DCIT-1(1), Raipur, due to the lack of valid jurisdiction. Consequently, other contentions raised by the assessee were left open and not adjudicated. The appeal of the assessee was allowed.