2025 (3) TMI 1600 - AT - Income Tax

Territorial jurisdiction for income tax assessments: PAN does not confer jurisdiction, so assessment quashed if officer lacked jurisdiction and valid notice.

Territorial jurisdiction for assessing a business is governed by the place where business is carried on or the principal place of business, and a PAN ... Valid jurisdictional of assessing officer - ITO Ward-21(1), Delhi OR DCIT, CC-1, Faridabad - determination of jurisdiction - test for territorial jurisdiction - transfer of the case to the valid jurisdictional assessing officer HELD THAT:- As during the assessment proceedings for AY 2009-10, the proceedings were initiated by ITO Ward-21(1), Delhi vide notice u/s 143(2) of the Act dated 19.08.2010 then a request was made by the assessee vide letter dated 06.09.2010 to transfer the case to the valid jurisdictional assessing officer, i.e., DCIT, CC-1, Faridabad. On receipt of such request, the ITO Ward-21(1), Delhi transferred the case vide his letter dated 20.10.2010 to the DCIT, CC-1, Faridabad. This fact shows that the point of jurisdiction was well accepted by both the authorities at Delhi as well as at Faridabad that jurisdiction of the assessee company lies at DCIT, CC-1, Faridabad. This transfer of jurisdiction is evident from the assessment order for AY 2009-10 itself and the same reference of transfer of jurisdiction from Delhi to Faridabad has been noticed in the assessment orders framed for AY 2014-15 and AY 2015-16 as well. It appears that the authorities at Delhi were under misconception for assuming jurisdiction of the assessee company based on the PAN history or PAN database. We concur with the argument of assessee that jurisdiction is not determined on the basis of PAN data rather territorial jurisdiction is determined on the basis of the provisions of Sec. 124 of the Act. As per the provisions of Sec. 124, the principal place of business has to be seen while exercising jurisdiction over an assessee who derives income from business or profession. In the instant case, as submitted by the Ld. AR, the principal place of business of the assessee company is also located at Faridabad only which means that in no case, the jurisdiction could have been validly assumed by the authority or an officer at Delhi over the assessee company. We are of the opinion that the Ld. Addl. CIT, Range-17, New Delhi has framed the impugned assessment order without assuming a valid jurisdiction and we thus allow the ground no. 1 raised by the assessee challenging the validity of assessment framed by the Ld. Addl. CIT, Range-17, New Delhi and accordingly quash the assessment so framed,without jurisdiction, being bad in law, non-est and void-ab-initio. Issues: Whether the assessment order framed under section 143(3) of the Income-tax Act, 1961 for AY 2011-12 by Addl. CIT, Range-17, New Delhi is void-ab-initio for lack of jurisdiction and for failure to issue a valid notice under section 143(2) of the Income-tax Act, 1961 and whether the assessment is thereby required to be quashed.Analysis: The issue turns on the territorial jurisdiction rules in Section 124 of the Income-tax Act, 1961 and the sequence of statutory steps required to initiate and conclude a scrutiny assessment under sections 143(2) and 143(3) of the Income-tax Act, 1961. Relevant material on record shows that from AY 2009-10 onwards the assessee's principal place of business and assessment history were with DCIT, Central Circle-1, Faridabad; the assessee provided documentary evidence (places of business, bank accounts, tax audit Form 3CD entries) showing Faridabad as the principal place of business. The record also shows transfer of jurisdiction for earlier years from the Delhi officer to Faridabad and that assessments for years before and after AY 2011-12 were framed by Faridabad authorities. The assessment for AY 2011-12 was framed by Addl. CIT, Range-17, New Delhi without production of any order under section 127 or any Board/Commissioner direction under section 120(4)(b) vesting jurisdiction in the Additional Commissioner; no valid notice under section 143(2) issued by the officer who concluded the assessment is on record and the Department did not controvert the assessee's primary factual showing. The Tribunal applied Section 124 of the Income-tax Act, 1961 as the governing provision to determine territorial jurisdiction and found that PAN history alone does not confer jurisdiction. Because the assessment was framed by an officer who lacked jurisdiction and the mandatory notice procedure under section 143(2) was not validly followed by that officer, the assessment proceedings were held to be null and void.Conclusion: The assessment order dated 26.03.2014 framed under section 143(3) of the Income-tax Act, 1961 by Addl. CIT, Range-17, New Delhi is quashed as being without jurisdiction and void-ab-initio; the assessee's appeal is allowed.Ratio Decidendi: Territorial jurisdiction for assessment of a person carrying on business is determined by Section 124 of the Income-tax Act, 1961 based on the place where business is carried on or the principal place of business; PAN address alone does not determine jurisdiction, and an assessment framed by an officer lacking jurisdiction and without a valid notice under section 143(2) is void-ab-initio.