ACIT's assessment proceedings declared void for issuing notice to assessee with income Rs. 2,70,140 instead of jurisdictionally correct ITO

ITAT Kolkata held that assessment proceedings were void due to jurisdictional defect. The notice u/s 143(2) and 142(1) was issued by ACIT Circle-47 instead of the jurisdictionally correct ITO for an assessee with income of Rs. 2,70,140 in Kolkata metro. The assessment was also framed by ACIT Circle-40, violating Instruction No. 1/2011. The tribunal distinguished the SC decision in Kalinga Institute case and followed coordinate bench precedent in Rupasi Bangla Agro Industries, ruling that non-jurisdictional officer's notice renders entire assessment proceedings null and void. Assessee's appeals were allowed.

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Issues Involved:

1. Validity of the assessment order due to jurisdictional error.
2. Issuance of notice u/s 143(2) by a non-jurisdictional AO.
3. Applicability of CBDT Instruction No. 1/2011.
4. Relevance of the assessee's objection timing to the notice.

Summary:

1. Validity of the assessment order due to jurisdictional error:
The assessee challenged the appellate order on the grounds that the assessment was framed by a non-jurisdictional AO, making the assessment order invalid. The Tribunal found that the assessment was indeed framed without proper jurisdiction, as the notice u/s 143(2) and 142(1) should have been issued by the ITO, not the ACIT, due to the returned income being Rs. 2,70,140/-. The Tribunal quashed the assessment order, deeming it invalid for want of jurisdiction.

2. Issuance of notice u/s 143(2) by a non-jurisdictional AO:
The Tribunal noted that the notice u/s 143(2) was issued by ACIT, Circle-47, Kolkata, which violated CBDT Instruction No. 1/2011. The instruction mandates that in metro cities, the ITO should issue notices if the returned income is up to Rs. 20 lacs. The Tribunal referenced several decisions, including M/s Rupasi Bangla Agro Industries Pvt. Ltd. vs. ITO and Jigna Chetan Mehta vs. ACIT, which supported the assessee's contention that the notice issued by a non-jurisdictional AO renders the assessment invalid.

3. Applicability of CBDT Instruction No. 1/2011:
The Tribunal emphasized the importance of CBDT Instruction No. 1/2011, which delineates the jurisdiction based on the returned income. The instruction specifies that in metro cities, the ITO should handle cases where the returned income is up to Rs. 20 lacs. The Tribunal found that the ACIT's issuance of the notice and subsequent framing of the assessment violated this instruction, thus invalidating the assessment.

4. Relevance of the assessee's objection timing to the notice:
The Revenue argued that the assessee did not object to the issuance of the notice by the ACIT within one month, as required by the decision in DCIT(Exemption) & Another vs. Kalinga Institute of Industrial Technology. However, the Tribunal distinguished the facts of the present case from the Kalinga Institute case, noting that the issue at hand was the jurisdiction of the AO framing the assessment order, not merely the timing of the objection. The Tribunal held that the assessment order was a nullity due to the lack of jurisdiction, regardless of the timing of the objection.

Conclusion:
The Tribunal allowed the appeals of the assessee, quashing the assessment orders for AY 2012-13 and 2013-14 due to the jurisdictional error and improper issuance of notices by a non-jurisdictional AO, in violation of CBDT Instruction No. 1/2011. The Tribunal's decision in ITA No. 1099/Kol/2023 was applied mutatis mutandis to ITA No. 1100/Kol/2023.

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