ACIT lacks jurisdiction under section 143(2) when corporate assessee's returned income below Rs. 30 lakh

ITAT Kolkata held that ACIT lacked jurisdiction to issue notice under section 143(2) and frame assessment when assessee's returned income was below Rs. 30 lakh. The case involved scrutiny selection through CASS based on Investigation wing information regarding suspicious long-term capital gains in penny stocks. Following Calcutta HC precedent in PCIT vs. Shree Shoppers Ltd., the tribunal ruled that for corporate assessees in metro cities with returned income under Rs. 30 lakh, jurisdiction lies with ITO, not ACIT. The assessment proceedings were deemed without jurisdiction and decided in favor of the assessee.

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Issues Involved:
1. Jurisdiction of the Assessing Officer to issue notice and frame the assessment.
2. Validity of the assessment order based on the jurisdictional issue.

Summary:

Issue 1: Jurisdiction of the Assessing Officer to issue notice and frame the assessment.
The assessee challenged the jurisdiction of the Assessing Officer (AO) to issue notice under section 143(2) of the Income Tax Act and frame the assessment. The return of income filed by the assessee was less than Rs. 30 Lakh, which according to the assessee, meant that the jurisdiction to issue notice and frame the assessment lay with the Income Tax Officer (ITO) and not the Assistant Commissioner of Income Tax (ACIT). The assessee relied on the decision of the Hon'ble Jurisdictional High Court in the case of PCIT vs. Shree Shoppers Ltd. and the Coordinate Bench in the case of Alpha National Trading Co. vs. ACIT, which supported the contention that the ACIT did not have jurisdiction in such cases.

Issue 2: Validity of the assessment order based on the jurisdictional issue.
The Tribunal examined the facts and noted that the returned income of the assessee was less than Rs. 30 Lakh, and hence, the jurisdiction to issue notice under section 143(2) and frame the assessment lay with the ITO. The Tribunal referred to various judicial precedents, including the Hon'ble Supreme Court's decision in ACIT vs. M/s Hotel Blue Moon, which emphasized the mandatory nature of issuing a notice under section 143(2) by the competent jurisdictional officer to assume jurisdiction to frame the assessment under section 143(3). The Tribunal concluded that since the ACIT issued the notice and framed the assessment without having the jurisdiction, the assessment order was invalid and liable to be quashed. The Tribunal quashed the assessment order and allowed the appeal filed by the assessee. Other issues raised on merits were not adjudicated in view of the decision on the jurisdictional issue.

Conclusion:
The Tribunal held that the ACIT did not have the jurisdiction to issue the notice under section 143(2) and frame the assessment, rendering the assessment order invalid and quashed. The appeal filed by the assessee was allowed, and other issues on merits were not adjudicated.

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