Assessment order quashed as ACIT lacked jurisdiction under Section 143(2) due to income threshold limits

ITAT Kolkata quashed an assessment order after finding that the ACIT, Circle-40, Kolkata lacked jurisdiction to issue notice u/s 143(2) and frame the assessment. The assessee's income was Rs. 16,44,900 in Kolkata metro city, requiring the ITO to handle the matter per Instruction No. 1/2011. The tribunal distinguished the SC decision in Kalinga Institute case, following coordinate bench precedent in Rupasi Bangla Agro Industries that favored the assessee on jurisdictional grounds. The appeal was allowed.

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Issues Involved:
1. Validity of assessment order framed by non-jurisdictional Assessing Officer (AO).
2. Issuance of notice u/s 143(2) by non-jurisdictional AO.

Summary:

1. Validity of Assessment Order Framed by Non-Jurisdictional AO:

The assessee filed a return of income on 28.11.2014 declaring a total income of Rs. 16,44,900/-. The case was selected for scrutiny, and notice u/s 143(2) was issued by ACIT, Circle-40, Kolkata. The assessment was framed by ACIT, Circle-40, Kolkata, by passing an order u/s 143(3) dated 29.12.2016. The assessee contended that the notice and assessment were invalid as they were issued and framed by a non-jurisdictional AO, violating Instruction No. 1/2011, which mandates that for income up to Rs. 20 lakhs in metro cities, the jurisdiction lies with the ITO and not ACIT/DCIT. The Tribunal noted that the assessment framed by ACIT, Circle-40, Kolkata, was in clear contravention of Instruction No. 1/2011 and thus without jurisdiction. The Tribunal referred to the decision in M/s Rupasi Bangla Agro Industries Pvt. Ltd. vs. ITO, where it was held that an assessment framed by an AO not having jurisdiction over the assessee is a nullity.

2. Issuance of Notice u/s 143(2) by Non-Jurisdictional AO:

The Ld. Counsel for the assessee argued that the notice u/s 143(2) should have been issued by the ITO as per Instruction No. 1/2011, and not by ACIT, Circle-40, Kolkata. The Ld. D.R. contended that the transfer of the case was within the jurisdiction of the concerned CIT, and the assessee had no locus standi to question it. The Tribunal observed that the notice u/s 143(2) issued by ACIT, Circle-40, Kolkata, was invalid as it was not issued by the competent authority as mandated by Instruction No. 1/2011. The Tribunal distinguished the decision of the Hon'ble Apex Court in DCIT(Exemption) & Another vs. Kalinga Institute of Industrial Technology, noting that the facts of the present case were different. The Tribunal concluded that the assessment order was a nullity and quashed it.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the assessment order framed by ACIT, Circle-40, Kolkata, on the grounds of being framed by a non-jurisdictional AO and issuance of notice u/s 143(2) by an unauthorized officer. The issues raised on merit were left open to be decided at a later stage if needed.

Order Pronounced:

The order was pronounced in the open court on 5th April, 2024.

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