Assessment order under section 143(3) quashed due to invalid notice issued by officer lacking jurisdiction over corporate assessee

ITAT Raipur held that assessment order passed u/s 143(3) by DCIT Circle-2(1), Bilaspur was invalid as the mandatory notice u/s 143(2) was issued by ITO Ward-1(1), Bilaspur who lacked jurisdiction over corporate assessee with returned income of Rs. 21,44,050 exceeding Rs. 15 lacs threshold. Since cases above Rs. 15 lacs fall under ACIT/DCIT jurisdiction per CBDT instructions, and the jurisdictional DCIT never issued proper notice u/s 143(2), the assessment founded on invalid notice was quashed. Appeal allowed.

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Issues Involved:
1. Validity of the jurisdiction assumed by the Assessing Officer (AO) who issued the notice under Section 143(2).
2. Disallowance of various expenses by the AO, including development expenses, stamp expenses, registry expenses, and typing expenses.

Detailed Analysis:

1. Validity of the Jurisdiction Assumed by the AO:
The primary issue raised by the assessee was the validity of the jurisdiction assumed by the AO who issued the notice under Section 143(2) of the Income Tax Act, 1961. The assessee argued that the notice dated 17.03.2016 was issued by the ITO, Ward 1(1), Bilaspur, who did not have the jurisdiction over the case as the returned income was more than Rs. 15 lakhs, which meant the jurisdiction should have been with the ACIT/DCIT.

The Tribunal noted that the jurisdiction for cases with a returned income above Rs. 15 lakhs for corporate assessees lies with the ACIT/DCIT as per CBDT Instruction No. 1/2011 dated 31.01.2011 and the subsequent instruction by the CCIT, Raipur. The ITO, Ward 1(1), Bilaspur, issued the notice under Section 143(2) without proper jurisdiction, and no subsequent notice was issued by the jurisdictional AO, i.e., DCIT, Circle-2(1), Bilaspur, who eventually passed the assessment order.

The Tribunal referred to several judgments, including "Mata Road Carriers vs DCIT" and "Durga Manikanta Traders vs ITO," which held that assessments framed on the basis of notices issued by non-jurisdictional officers are void ab initio. The Tribunal concluded that the assessment order passed by DCIT, Circle-2(1), Bilaspur, based on the notice issued by ITO, Ward 1(1), Bilaspur, was illegal and void ab initio.

2. Disallowance of Various Expenses:
The AO disallowed several expenses claimed by the assessee, including:
- Development Expenses: Rs. 1,16,73,020/-
- Stamp Expenses: Rs. 27,65,260/-
- Registry Expenses: Rs. 4,20,181/-
- Typing Expenses: Rs. 88,000/-

The assessee argued that these expenses were genuine and supported by bills and vouchers. However, the AO did not find the explanations convincing and made the disallowances. The CIT(A) upheld the AO's disallowances, noting that the assessee failed to provide sufficient evidence to rebut the AO's findings. The AO observed discrepancies in the books of accounts, bills, and vouchers and noted that some notices issued under Section 133(6) returned unserved.

The Tribunal, however, did not delve into the merits of these disallowances as it quashed the assessment order for want of valid jurisdiction. Therefore, the issues related to the disallowance of expenses were left open.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order passed under Section 143(3) dated 23.12.2017 by DCIT, Circle-2(1), Bilaspur, on the grounds that the initial notice under Section 143(2) was issued by an officer without valid jurisdiction. The Tribunal refrained from addressing the other contentions related to the disallowance of expenses, leaving them open for consideration if required in future proceedings.

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