2024 (2) TMI 1106 - AT - Income Tax

Assessment Officer lacks territorial jurisdiction to assess assessee residing in different state under section 143(2)

The ITAT Ranchi held that the AO in Deoghar, Jharkhand lacked territorial jurisdiction to assess an assessee residing in Gomti Nagar, Uttar Pradesh. The ... Territorial jurisdiction of AO - Validity of notice issued u/s 143(2) and assessment completed by ACIT, Circle-3, Deoghar - Whether curable defect u/s 292BB? - as argued assessment was completed by ACIT, Circle-3, Deoghar, Jharkhand whereas the assessee’s residential place is in Gomti Nagar, Uttar Pradesh which is covered in database of Income tax - grievance of the assessee is that the assessee has no territorial jurisdiction or any other jurisdiction u/s 127 before the Ld. AO, Deoghar, Jharkhand. HELD THAT:- Here the assessee’s jurisdiction is duly covered in assessment order and in appeal order clearly mentioned in the state of UP. There is no such any territorial jurisdiction of Ld. AO in Deoghar, Jharkhand on the jurisdiction of state of UP. So entirely the Ld. AO connected for violation of the jurisdiction. We fully rely on the order of Coordinate Bench in case of Rungta irrigation Ltd. (2019 (10) TMI 344 - ITAT KOLKATA] and M/s K.A. wires Ltd. (2020 (3) TMI 418 - ITAT KOLKATA] - AO had acted beyond the jurisdiction. We also relied the order of M/s Rupasi Bangla Agro Industries Pvt ltd [2023 (12) TMI 930 - ITAT KOLKATA]The notice which was issued U/s 143(2) by the ld. AO is beyond jurisdiction. The said notice is not curable U/s 292BB of the Act.The ld. DR was unable to show any different facts. The ld. AO has framed the assessment beyond the jurisdiction. Decided in favour of assessee. The issues involved in the judgment are:1. Disallowance of salary under Section 40A(2)(b).2. Enhancement of assessed income and disallowance of depreciation and interest.3. Jurisdiction of the Assessing Officer (AO) for issuing notice under Section 143(2).Issue 1: Disallowance of Salary under Section 40A(2)(b)The assessee contended that the Ld. CIT(A) was not justified in confirming the disallowance of Rs. 9,60,000/- out of the salary of Rs. 13,20,000/- under Section 40A(2)(b) of the Income Tax Act, 1961. However, this issue was not elaborated upon in the judgment as the jurisdictional issue was found to be decisive.Issue 2: Enhancement of Assessed Income and Disallowance of Depreciation and InterestThe assessee argued that the Ld. CIT(A) wrongly enhanced the assessed income by Rs. 80,46,083/- and unjustifiably invoked power of enhancement under Section 251(1)(a) of the Act. The Ld. CIT(A) disallowed Rs. 53,50,000/- out of depreciation and Rs. 29,96,083/- out of interest for the house property relating to business. However, these grounds were rendered academic due to the resolution of the jurisdictional issue.Issue 3: Jurisdiction of the AO for Issuing Notice under Section 143(2)The assessee raised an additional ground challenging the jurisdiction of the ACIT, Circle-3, Deoghar, Jharkhand, who issued the notice under Section 143(2) and completed the assessment. The assessee's residential address was in Gomti Nagar, Uttar Pradesh, which was outside the jurisdiction of the AO in Deoghar. The Tribunal accepted this additional ground for adjudication, referencing the Hon'ble Apex Court's decision in NTPC 229 ITR 383.The Tribunal found that the AO in Deoghar did not have territorial jurisdiction over the assessee, as the address in Uttar Pradesh was clearly mentioned in both the assessment and appeal orders. The Tribunal relied on precedents, including the Kolkata ITAT's judgment in M/s Rungta Irrigation Ltd. vs. ACIT and M/s K.A. Wires vs. ITO, which held that the absence of a valid notice under Section 143(2) by the jurisdictional AO renders the assessment order null and void.The Tribunal also considered Section 124(3) of the Act, which outlines the jurisdiction of AOs, and concluded that the AO in Deoghar acted beyond his jurisdiction. The Tribunal quashed the assessment order, rendering the revenue's cross-appeal infructuous.Conclusion:The appeal filed by the assessee was allowed, and the assessment order was quashed due to the AO's lack of jurisdiction. Consequently, the revenue's appeal was dismissed. The judgment emphasized the mandatory nature of jurisdictional requirements for issuing notices under Section 143(2) and upheld the principle that jurisdictional defects are not curable under Section 292BB of the Act. Order Pronouncement:The order was pronounced in the open court on 20th February, 2024.