2024 (8) TMI 353 - AT - Income Tax

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

Sunil Chablani Versus Circle (Intl. Tax), Jaipur

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 ... Validity of reassessment proceedings - Income Tax officer, Ward 2(2), Ajmer's jurisdiction in terms of S.120 r/w 124 to issue notice - assessee is a non-resident Indian residing outside India since last almost more than 25 years - HELD THAT:- Assessee for the year under consideration has not filed any income tax return. The revenue was in possession of the information that the assessee had sold an immovable property for a sale consideration of Rs. 69,90,000/-. Since there was no ITR filed the transaction remained unverified. The assessee in the paper book filed submitted copy of pass port which was valid from 16.03.2015 to 13.03.2025 and place of issue is Dubai the details of old passport and place of issue shows Dubai. At page 17 of the paper book the jurisdictional details of the assessee is filed it shows the “Circle (Intl.Tax), Jaipur. Thus, the ld. AO while sending this report based on the submission has not controverted this aspect of the matter which establishes that the residential status of the assessee is undisputedly NRI as on the date of issue of notice u/s. 148 of the Act. Thus, based on this evidence placed on record and the same being not controverted we are of the considered view that when the assessee is non-resident as on the date of issue of notice u/s. 148 of the Act. The bench further noted from order sheet entry dated 16.03.2023 that Faceless Assessment Unit (FAU) requested through NaFAC to transfer out this case from them because the case is of non-resident individual or of a foreign company and can be assessed only at international charge. Thus, the contention raised by the assessee has already been observed by the FAU in the assessment proceeding when the case was transmitting from ITO, Ajmer to FAU. We are of the considered view that the ITO, Ward-2(2), Ajmer has no jurisdiction when the notice u/s. 148 was issued on 30.03.2022. Therefore, the in order to sustain the validity of the reassessment, a reassessment notice is required to be issued by an Assessing Officer having proper jurisdiction over the assessee to whom such notice has been issued. Based on the evidence placed on record and after giving sufficient time to the revenue to rebut the contention based on the set of evidence placed on record, but revenue could not demonstrate that when the notice issued on 30.03.2022, ITO, Ward 2(2), Ajmer, has valid jurisdiction. We quash the order of the assessment and ground no. 1 & 2 raised by the assessee is allowed. Considering the entire sale consideration as the Long Term Capital Gain (LTCG) - Additional evidence filed by the assessee has already been admitted by the ld. DRP and ld. AO did not consider even the original cost of the property sold for which all the evidence placed on record and the assessee has provide before the ld. DRP that there is no income left to charge the tax by filling the computation of capital gain but the ld. AO in the draft order taken one stand and after the direction of the ld. DRP added the sum without considering the fact and without issuing any fresh show cause notice. Thus, the order of the assessing officer is perverse and required to be quashed. 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.