Assistant Commissioner lacks jurisdiction over non-resident assessee, reassessment proceedings under Section 148A invalid

The Bombay HC set aside reassessment proceedings initiated by an Assistant Commissioner who lacked jurisdiction over a non-resident assessee. The petitioner, filing returns as NRI for six years with residential status shown as non-resident in IT portal and intimations, challenged the Section 148A(b) notice. The AO admitted lack of jurisdiction but proceeded due to time constraints before limitation expired. The HC held that shortage of time cannot confer jurisdiction on a non-jurisdictional officer, declaring the notice invalid ab-initio. Transfer of proceedings cannot validate initially invalid actions. Petition allowed in assessee's favor.

---

---

Issues Involved:
1. Validity of the notice issued u/s 148A(b) of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) in issuing the notice.
3. Treatment of loan transactions as income.

Summary:

1. Validity of the Notice Issued u/s 148A(b):
The Petitioner, an NRI, received a notice dated 25th March 2023 u/s 148A(b) of the Income Tax Act, 1961, alleging escaped income for AY 2016-2017 based on information from a search action u/s 132 involving fictitious loan transactions with Secure Exim Pvt. Ltd. The Petitioner denied these allegations and claimed only a Rs. 40,00,000/- loan, repaid in the next financial year, arguing that the notice was invalid as it was issued beyond the three-year limit specified u/s 149(1)(d).

2. Jurisdiction of the Assessing Officer:
The Petitioner contended that the notice was issued by an officer without jurisdiction, as he had been an NRI for six years, and jurisdiction lay with the Income Tax Officer (International Taxation), Ward-3(2)(1). The AO admitted the lack of jurisdiction but proceeded due to time constraints, which the Court found unacceptable and dishonest. The Court referenced the case of M.I. Builders (P.) Limited, holding that a notice issued by a non-jurisdictional officer is invalid and subsequent proceedings cannot validate it.

3. Treatment of Loan Transactions as Income:
The AO failed to explain how a Rs. 40,00,000/- loan could be treated as income or how payments totaling Rs. 1,30,66,755/- could be considered income in the hands of the Assessee. The Court found no substantial evidence to support the AO's claims and deemed the AO's stand dishonest.

Conclusion:
The Court ruled in favor of the Petitioner, making the rule absolute in terms of prayer clause (a), which quashed the notices and orders issued u/s 148, 148A(d), and 148A(b) of the Act. The Court dismissed the petition with no order as to costs and allowed the Revenue to take steps in accordance with the law.

---