Notice under s.148 by ACIT invalid where return filed; jurisdiction for notice lies with ITO per CBDT Instruction No.1/2011

ITAT KOLKATA - AT held that a notice issued under s.148 by an ACIT was invalid where the assessee had filed return and jurisdiction to issue the notice lay with the ITO per CBDT Instruction No.1/2011. Relying on a HC precedent, the Tribunal quashed the assessment framed by the AO for lack of jurisdiction and allowed the assessee's appeal.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether a notice issued under section 148 of the Income-tax Act, 1961 by an Assessing Officer lacking jurisdiction under CBDT Instruction No.1/2011 is valid.

2. Whether the notice issued after 01.04.2021 can be treated as notice under section 148A(b) and whether consequent proceedings under sections 148A(d)/147/144 can cure any jurisdictional defect in the original section 148 notice.

3. Whether the objection to the jurisdictional validity of the section 148 notice, not raised before the Assessing Officer and where the appeal to the first appellate authority proceeded ex parte, requires remand to lower authorities for fresh consideration.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of section 148 notice issued by an officer lacking jurisdiction under CBDT Instruction No.1/2011

Legal framework: The statutory scheme involves reopening assessments by issuing a jurisdictional notice under section 148. CBDT Instruction No.1/2011 prescribes monetary thresholds for allocation of cases between ITOs and DCs/ACs (metro and mofussil limits) and requires matters to be assigned to the appropriate officer according to declared income limits.

Precedent treatment: The Court relied on and followed a decision of the High Court holding that a section 148 notice issued by an officer who did not have jurisdiction under the CBDT instruction was invalid; that decision recognized the jurisdictional character of a section 148 notice and declared such a notice non-curable where issued by an unauthorized officer.

Interpretation and reasoning: The Tribunal examined the returned declared income (Rs.14,09,760) and compared it with the thresholds in CBDT Instruction No.1/2011. Given the declared income fell within the monetary limit prescribed for ITO jurisdiction, issuance of the section 148 notice by an ACIT (a higher authority) was inconsistent with the instruction. The Tribunal treated the instruction as determinative of which officer had authority to issue the jurisdictional notice. Following the High Court reasoning that a section 148 notice is jurisdictional, the Tribunal concluded the notice could not be validated when issued by an officer lacking assignment under the Board's instruction.

Ratio vs. Obiter: Ratio - where the statutory notice of reopening is issued by an officer without jurisdiction as per CBDT Instruction No.1/2011, the notice is invalid and the consequent proceedings are vitiated.

Conclusion: The section 148 notice issued by the ACIT was invalid for want of jurisdiction under CBDT Instruction No.1/2011; assessment framed pursuant to that invalid notice was quashed.

Issue 2 - Effect of treating post-01.04.2021 notice as issued under section 148A(b) and subsequent actions under sections 148A(d)/147/144

Legal framework: Amendments and judicial interpretation permit, in certain circumstances, a notice issued after 01.04.2021 to be treated as a notice under section 148A(b), with further procedural steps under section 148A(d) and consequential assessment under sections 147/144.

Precedent treatment: The Tribunal noted the assessee's case involved a notice dated 27.07.2022, and that the notice was "treated as issued notice u/s 148A(b)" in light of Supreme Court authority referenced in the record; however, the core legal question remained whether such treatment could cure a primary jurisdictional defect in issuance.

Interpretation and reasoning: The Tribunal acknowledged that the notice was treated as an 148A(b) notice and that 148A(d) proceedings had been conducted, but held that these procedural recharacterizations did not negate the initial jurisdictional infirmity where the officer issuing the original notice was not the officer assigned by the CBDT instruction. The Tribunal adopted the principle that a jurisdictional defect in issuance of the initiating notice is not cured by subsequent procedural steps taken by the same (unauthorized) officer.

Ratio vs. Obiter: Ratio - procedural recharacterization of a post-01.04.2021 notice as an 148A(b) notice and subsequent actions under 148A(d)/147/144 do not cure an incurable jurisdictional defect where the initiating notice was issued by an officer lacking jurisdiction under CBDT Instruction No.1/2011.

Conclusion: Treatment of the notice as one under section 148A(b) and subsequent steps under 148A(d)/147/144 did not validate the notice; the proceedings remained vitiated by lack of jurisdiction.

Issue 3 - Effect of non-raising of jurisdictional objection before the AO and ex parte appellate proceedings; whether remand required

Legal framework: Principles of procedure require issues to be raised before the appropriate authority for consideration; appellate bodies ordinarily consider only those grounds raised before the lower authority unless the appellate forum permits fresh grounds.

Precedent treatment: The Revenue urged restoration to the file of the lower authorities on the basis that the jurisdictional ground was not raised earlier and that the appeal to the CIT(A) had proceeded ex parte, implying procedural irregularity that might warrant remand for consideration in the first instance by the AO.

Interpretation and reasoning: The Tribunal considered the record and submissions, including the contention that the jurisdictional defect was apparent on the face of the notice and the CBDT instruction thresholds. The Tribunal found the jurisdictional issue sufficiently illustrated by the record (assessment return showing declared income within ITO limits and the notice issued by ACIT), and, in light of the settled principle that jurisdictional defects render a notice invalid, proceeded to decide the issue on its merits without remanding. The Tribunal accepted the appellant's reliance on the High Court authority and treated the matter as fit for direct adjudication.

Ratio vs. Obiter: Ratio - where a jurisdictional defect is apparent on the face of the record and is determinative of validity, the appellate authority may adjudicate the issue on record without remanding to the AO, notwithstanding that the ground was not previously pressed or that earlier proceedings were ex parte.

Conclusion: No remand was ordered; the Tribunal adjudicated the jurisdictional objection on record and quashed the assessment for lack of jurisdiction.

Ancillary observations and cross-references

1. The Tribunal explicitly relied on CBDT Instruction No.1/2011 to determine officer assignment by declared income; cross-reference: Issue 1 analysis.

2. The Tribunal followed High Court precedent declaring notices issued by officers without assignment under the instruction to be invalid; cross-reference: Issue 1 and Issue 2 analyses - the precedent was treated as binding in substance for the purposes of the present appeal.

3. The Tribunal treated the jurisdictional character of a section 148 notice as non-curable by subsequent procedural acts, including characterization as section 148A(b) and processing under section 148A(d)/147/144; cross-reference: Issue 2 analysis.

Disposition

The Tribunal allowed the appeal by quashing the assessment framed under sections 147/144 as based on a section 148 notice issued without jurisdiction under CBDT Instruction No.1/2011.

---