ITO lacks jurisdiction to issue reassessment notice under section 148 to non-resident Indian abroad 25 years

The ITAT Jaipur held that the ITO Ward 2(2), Ajmer lacked jurisdiction to issue reassessment notice u/s 148 to a non-resident Indian who had been residing outside India for over 25 years. The assessee's passport showed Dubai as place of issue, and jurisdictional details indicated Circle (Intl.Tax), Jaipur. The Faceless Assessment Unit had also requested case transfer recognizing it involved a non-resident requiring international taxation jurisdiction. The tribunal quashed the assessment order, finding the reassessment notice invalid due to lack of proper jurisdiction. Additionally, the AO's treatment of entire sale consideration as long-term capital gains without considering original property cost was deemed perverse.

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Issues Involved:
1. Jurisdiction of the Assessing Officer (AO).
2. Validity of the notice issued under Section 148.
3. Approval for the issuance of notice under Section 148.
4. Validity of the assessment order under Section 147 read with Section 144.
5. Opportunity to the assessee to present evidence.
6. Computation of Long Term Capital Gain (LTCG).
7. Charging of tax under Section 115BBE.
8. Document Identification Number (DIN) on DRP directions.
9. Conducting assessment in a faceless manner.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO):
The assessee contended that the ITO, Ward-2(2), Ajmer did not have jurisdiction to issue the notice under Section 148 as the jurisdiction lay with the International Taxation Charge, Jaipur, given the assessee's status as a non-resident Indian (NRI). The PAN profile showed the jurisdictional AO as Circle (Intl. Tax), Jaipur. The Tribunal found that the ITO, Ajmer had no jurisdiction when the notice was issued on 30.03.2022, and thus, the reassessment notice was invalid. The Tribunal quashed the assessment order on this ground.

2. Validity of the Notice Issued under Section 148:
The notice under Section 148 dated 30.03.2022 was served to the assessee on 13.04.2022. The Tribunal noted that the notice was issued beyond the three-year period and without the necessary approval from the Chief Commissioner or Director General, making it invalid. The Tribunal relied on the decision of the Hon'ble Allahabad High Court in Daujee Abhushan Bhandar (P.) Ltd. v. Union of India, which held that a notice issued after the limitation period is time-barred.

3. Approval for the Issuance of Notice under Section 148:
The Tribunal observed that the approval for the issuance of the notice was taken from the PCIT, Udaipur, instead of the Chief Commissioner or Director General, as required for notices issued beyond three years. This procedural lapse rendered the notice invalid.

4. Validity of the Assessment Order under Section 147 read with Section 144:
The Tribunal found that the AO had initially proposed an addition under Section 69A in the draft order but later shifted to adding the amount as LTCG in the final order without issuing a fresh show-cause notice. This change in stance without giving the assessee an opportunity to respond violated principles of natural justice, rendering the assessment order invalid.

5. Opportunity to the Assessee to Present Evidence:
The assessee argued that adequate opportunity was not provided to present evidence. The Tribunal noted that the DRP had directed the AO to consider the evidence submitted by the assessee. However, the AO failed to consider the evidence properly, leading to an unjust assessment.

6. Computation of Long Term Capital Gain (LTCG):
The AO assessed the entire sale consideration of Rs. 69,90,000/- as LTCG without allowing the indexed cost of acquisition and improvement. The Tribunal found that the AO did not consider the material on record and the mandatory statutory provisions of Sections 45 and 48, which require reducing the cost of acquisition and improvement from the sale consideration. The Tribunal held that the entire addition on account of LTCG was unjustified.

7. Charging of Tax under Section 115BBE:
The AO charged tax under Section 115BBE, treating the amount as unexplained income. The Tribunal observed that the AO himself had categorized the amount as LTCG, and therefore, invoking Section 115BBE was incorrect. The Tribunal held that the AO could not change the head of income arbitrarily.

8. Document Identification Number (DIN) on DRP Directions:
The assessee contended that the DRP's directions did not have a DIN, making them invalid. The Tribunal noted that the DRP had issued a separate letter with a DIN, but this did not comply with the mandatory requirement of mentioning the DIN in the order itself. The Tribunal relied on the decision in Practo Technologies Pvt. Ltd. vs. DCIT, which held that an order without a DIN is invalid.

9. Conducting Assessment in a Faceless Manner:
The assessee argued that the assessment was not conducted in a faceless manner as mandated by the CBDT's notification dated 29.03.2022. The Tribunal found that the notice under Section 148 was issued manually, violating the binding notification requiring assessments to be conducted in a faceless manner. This procedural lapse further invalidated the assessment.

Conclusion:
The Tribunal quashed the assessment order on multiple grounds, including lack of jurisdiction, invalid notice under Section 148, improper approval, failure to provide an opportunity to present evidence, incorrect computation of LTCG, wrongful invocation of Section 115BBE, absence of DIN in DRP directions, and non-compliance with the faceless assessment mandate. The appeal of the assessee was allowed.

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