Assessment Officer lacked territorial jurisdiction to pass order when assessee resided and conducted business in different jurisdiction under Sections 120 and 124

ITAT Mumbai ruled that the AO Ward 19(2)(4), Mumbai lacked territorial jurisdiction to pass the assessment order since the assessee resided and carried on profession in Bangalore. The tribunal held that territorial jurisdiction is determined by place of residence/business as per Sections 120 and 124 of the Act. The CIT(A) failed to address this jurisdictional objection raised within stipulated time. An order passed without jurisdiction is non est in law. The assessment order was therefore invalid due to lack of territorial jurisdiction.

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Issues Involved:

1. Territorial jurisdiction of the Assessing Officer (AO).
2. Validity of the assessment order passed by the AO without jurisdiction.

Issue-wise Detailed Analysis:

1. Territorial Jurisdiction of the Assessing Officer (AO):

The primary issue in this appeal is the challenge to the territorial jurisdiction of the AO, Ward 19(2)(4), Mumbai, who passed the assessment order for the assessment year 2017-18. The appellant contended that the AO lacked jurisdiction as the assessee was a resident and carried on her profession in Bengaluru, Karnataka, not Mumbai. The appellant relied on Sections 120 and 124 of the Income Tax Act, 1961, which govern the jurisdiction of income tax authorities based on the place of residence or business of the assessee. The appellant argued that the AO in Mumbai had no authority to issue a notice under Section 143(2) and pass an assessment order under Section 143(3) since the assessee's principal place of residence and profession was Bengaluru.

The appellant's counsel emphasized that the PAN migration to Bengaluru was completed on 26.02.2021, and the AO had been informed of the change of address prior to the assessment order. The counsel also highlighted that the field in the return of income mentioning the AO as Ward 19(2)(4), Mumbai, was auto-filled by the system based on the PAN, and not a voluntary act by the assessee. The Tribunal, after considering the submissions and the statutory provisions, concluded that the AO in Mumbai lacked territorial jurisdiction as the assessee was residing and carrying on her profession in Bengaluru at the time of assessment.

2. Validity of the Assessment Order Passed by the AO Without Jurisdiction:

The Tribunal examined whether the assessment order passed by the AO in Mumbai was valid, given the lack of jurisdiction. It was noted that the appellant had raised an objection to the AO's jurisdiction within the stipulated time under Section 124(3) of the Act. The Tribunal referred to Section 124(1) of the Act, which specifies that an AO has jurisdiction over an area based on the place where the assessee carries on business or resides. The Tribunal found that the jurisdiction of ITO Ward 19(2)(4), Mumbai, did not extend to Bengaluru, where the assessee was residing and practicing law.

The Tribunal cited relevant case law, including decisions by the Madras High Court and the Pune Bench of the Tribunal, which supported the view that an assessment order passed without proper jurisdiction is invalid. The Tribunal emphasized that jurisdictional issues go to the root of the matter, and an order passed without jurisdiction is non est in the eyes of law. Consequently, the Tribunal held that the assessment order was invalid due to the lack of territorial jurisdiction by the AO in Mumbai.

In conclusion, the appeal was allowed on the grounds of lack of jurisdiction, and the assessment order was set aside. The Tribunal did not address the merits of the assessment, as the jurisdictional issue was sufficient to dispose of the appeal. The order was pronounced in open court on 15/01/2024.

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