ACIT lacks jurisdiction to assess corporate assessee with income below Rs 20 lakhs without proper transfer order

ITAT Kolkata held that assessment order framed by ACIT was without jurisdiction and nullified it. Corporate assessee with income below Rs. 20 lakhs should have been assessed by Income-tax Officer per CBDT Instruction No. 1/2011, not ACIT. No transfer order under section 127 existed. Assessment proceedings conducted by non-jurisdictional officer rendered entire process null and void. Tribunal relied on Deepak Kedia precedent establishing that notice under section 143(2) by wrong officer nullifies proceedings. Additional ground raised by assessee was allowed, assessment order quashed for lack of jurisdiction.

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Issues Involved:
1. Addition of Rs. 13,29,00,000/- as unexplained cash credit under Section 68.
2. Validity of the assessment order based on the jurisdiction of the Assessing Officer (ACIT).

Summary:

Issue 1: Addition of Rs. 13,29,00,000/- as Unexplained Cash Credit under Section 68

The assessee challenged the addition of Rs. 13,29,00,000/- made by the Assessing Officer (AO) and confirmed by the CIT(A) as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The assessee argued that it had provided the PAN of the share applicants, their registration details with the ROC, bank statements, and source declarations, thereby discharging its onus. The AO did not conduct further inquiries and added the amount without any evidence to the contrary. The CIT(A) upheld the AO's decision, stating that the share applicants did not appear in response to the notice under Section 131, which the assessee contended was irrelevant to proving the cash credit under Section 68.

Issue 2: Validity of the Assessment Order Based on Jurisdiction

The assessee raised an additional ground, arguing that the assessment completed by the ACIT was without jurisdiction, making the assessment order a nullity. The assessee cited CBDT Instruction No. 1/2011, which mandates that in cases where corporate returns declare income up to Rs. 20 Lakhs in mofussil areas, the jurisdiction for framing the assessment lies with the Income-tax Officers (ITO), not the ACIT. The Tribunal admitted this additional ground, referencing the Supreme Court judgments in Jute Corporation of India and National Thermal Power Corporation.

The Tribunal noted that the assessee's income was less than Rs. 20 Lakhs, and thus, the jurisdiction for assessing the income vested with the ITO. The assessment was framed by the ACIT, Circle-38, Midnapore, without any specific order under Section 127 of the Act transferring the case from the ITO to the ACIT. This made the assessment order a nullity. The Tribunal relied on similar cases, including Alpha National Trading Co. vs. ACIT and Deepak Kedia vs. ACIT, where assessments were quashed due to jurisdictional issues.

The Tribunal concluded that the assessment order dated 26/03/2016 was without jurisdiction and quashed it, rendering the grounds on quantum addition academic. The appeal of the assessee was allowed.

Order Pronounced:

The order was pronounced in the Court on 14th December, 2023, at Kolkata.

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