Non-resident Indian successfully challenges tax notice under section 148A due to jurisdictional error by wrong officer

The ITAT Kolkata ruled in favor of a non-resident Indian assessee challenging the jurisdiction of AO Surat in issuing notice under section 148A. The assessee's address was recorded as Bokaro, Jharkhand in both the assessment order and income tax return. Following the precedent in Cosmet Traders Pvt. Ltd, the tribunal held that ITO Surat lacked jurisdiction to issue the notice, declaring it invalid. Consequently, the subsequent assessment order was set aside, and the appeal was allowed in favor of the assessee.

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Issues Involved:

1. Validity of jurisdiction in issuing notice under Section 148A of the Income Tax Act.
2. Legality of the assessment order based on a notice issued without jurisdiction.
3. Consideration of additional grounds raised by the assessee regarding jurisdiction.

Detailed Analysis:

1. Validity of Jurisdiction in Issuing Notice:

The primary issue in this case revolves around the jurisdiction of the Income Tax Officer (ITO) in Surat to issue a notice under Section 148A of the Income Tax Act to a non-resident Indian whose address is in Bokaro, Jharkhand. The assessee argued that the notice was issued without jurisdiction, as per Notification No. 56/2014, which vests jurisdiction over non-resident Indians in the territorial limits of several states, including Jharkhand, with the Commissioner of Income-tax (International Taxation and Transfer Pricing)- Kolkata. The Department admitted this fact by transferring the assessee's file from Surat to Kolkata, indicating that the Surat officers did not have jurisdiction over the case. The Tribunal found merit in the assessee's argument, citing that the proper jurisdiction was indeed with the officers under the Commissioner of Income-tax (International Taxation and Transfer Pricing)- Kolkata.

2. Legality of the Assessment Order:

The Tribunal examined the legality of the assessment order, which was based on the notice issued by the ITO in Surat. It was argued that since the notice was without jurisdiction, any subsequent order based on such notice would also be invalid. The Tribunal supported this view by referring to the decision of the Gujarat High Court in the case of Anand Kumar Dugar vs. ITO, where it was held that a notice issued by an officer without jurisdiction is invalid. The Tribunal further noted that the reassessment proceedings were set aside in similar cases, reinforcing the principle that jurisdictional errors cannot be overlooked.

3. Consideration of Additional Grounds:

The Tribunal also addressed the issue of whether the assessee could raise the jurisdictional issue at a later stage, despite participating in the proceedings initially. The Department argued that the assessee did not raise the issue before the Assessing Officer and thus should not be allowed to raise it later. However, the Tribunal, citing the decision in PCIT-2, Kolkata vs. Cosmet Traders Pvt. Ltd., held that there can be no estoppel against the statute, and jurisdictional issues can be raised at any stage. The Tribunal emphasized that the assessee had sought leave to raise additional grounds, which was granted, and the issue of jurisdiction goes to the root of the proceedings.

Conclusion:

The Tribunal concluded that the notice issued under Section 148A by the ITO in Surat was invalid due to lack of jurisdiction. Consequently, the assessment order based on such notice was also set aside. The appeal filed by the assessee was allowed, and the order pronounced in open court on 22nd November 2024, underscored the importance of adhering to jurisdictional mandates in tax proceedings.

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