TaxTMI 
TaxTMI 
2023 (1) TMI 1099
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....llate Order passed under section 250 of the Income Tax Act, 1961 ("the Act") may please be cancelled/set-aside on this ground alone. GROUND NO.II 2. On the facts and circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in confirming the addition of Rs.2,94,44,914/- made by the Learned Assessing Officer ("the Ld.AO") towards advances given to suppliers for purchase of material treating the same as bogus/non-genuine debts which is highly unjustified, unwarranted, uncorroborated, unsustainable, not proper on facts and not in accordance with the provisions of law. The Ld.CIT(A) has failed to appreciate that the advances to suppliers represents "assets"of the appellant being merely a case of utilization of funds and could never constitute "income" chargeable to tax, source of advancing funds to suppliers for purchase of material stands duly established & correlated with the funds received from creditors, the advances have been given through normal banking channels which has not been doubted by the Ld.AO and hence, by no stretch of imagination, advances to suppliers could be treated as unexplained. The Ld.CIT(A) further failed to appreciate that, in the a....
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....on of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). 3. Succinctly stated, the assessee firm which is engaged in the business of trading of rice husk had e-filed its return of income for the assessment year 2014-15 on 30.11.2014, declaring an income of Rs.6,57,380/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 4. Assessment, was thereafter framed by the A.O vide his order passed u/s.143(3) of the Act, dated 29.12.2016, determining the income of the assessee at Rs.3,01,02,300/- i.e. after making an addition of Rs.2,94,44,914/- towards bogus debts to the returned income. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. As the assessee has challenged the validity of the assumption of jurisdiction by the A.O for framing of the assessment u/s. 143(3) of the Act, dated 29.12.2016....
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....s inherent pecuniary jurisdiction as per the CBDT Instruction No.1 of 2011, dated 31.01.2011, therefore, no obligation was cast upon it to raise any objection within the stipulated time period as contemplated in Section 124(3) of the Act. In order to buttress his claim that an obligation to call in question the jurisdiction of the A.O as per the mandate of Section 124(3) of the Act was only confined to a case where the territorial jurisdiction is challenged, and not otherwise, the Ld. AR had relied on the judgments of the Hon'ble High Court of Bombay in the case of Peter Vaz Vs. CIT (2021) 128 taxmann.com 180 (Bombay) and that of the Hon'ble High Court of Gujarat in the case of CIT Vs. Ramesh D Patel (2014) 362 ITR 492 (Guj.) Also, support was drawn by the Ld. AR from the recent order of the ITAT, Raipur in the case of Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai in ITA No.158/RPR/2017, dated 17.10.2022. It was submitted by the Ld. AR that the CBDT Instruction No.1 of 2011, dated 31.01.2011 was binding on the department and there could be no escape from the same. In support of his aforesaid contention reliance was placed by the Ld. AR on the judgment of the Hon'ble Su....
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.... the Income Tax Department, therefore, the aforesaid CBDT Instruction No.1 of 2011, dated 31.01.2011 vesting exclusive pecuniary jurisdiction over the case of the assessee for the year under consideration with the ITO, Ward-1(1), Bhilai was binding on the department and could not have been departed from. On the basis of his aforesaid contention, it was submitted by the Ld. AR that the as the ITO, Ward-1(1), Bhilai had framed the impugned assessment u/s. 143(3), dated 29.12.2016 de-hors issuance of any valid notice u/s. 143(2) of the Act, therefore, the assessment so framed by him could not be sustained and was liable to be struck down. 12. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. The Ld. DR had drawn support from the judgment of the Hon'ble Supreme Court in the case of the Pr. CIT Vs. I-Ven Interactive Limited (2019) 418 ITR 662(SC). However, on being called upon to explain that as to how the aforesaid judgment of the Hon'ble Apex Court which was in context of the validity of the jurisdiction that was assumed by an A.O on the basis of the address provided by an assessee in the PAN database, and was not in the c....
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....s DCs/ACs Corporate Returns Upto Rs.20 lacs Above Rs.30 Lacs Upto Rs.30 lacs Above Rs.30 Lacs Non-corporate Returns Upto Rs.15 lacs Above Rs.15 Lacs Upto Rs.20 lacs Above Rs.20 lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011." (emphasis supplied by us) As stated by the Ld. AR, and, rightly so, the CBDT vide its aforesaid Instruction No.1/2011, dated 31.01.2011 had, inter alia, revised the earlier existing monetary limit for assigning the cases to ITOs/ACs/DCs w.e.f. 01.04.2011. On the basis of the aforesaid CBDT Instruction No.1/2011 (supra) w.e.f 01.04.2011, the case of a non-corporate assessee located in a mofussil area having declared an income above Rs.15 lacs in his return of income is to be assigned to the ACs/DCs. As the case of the present assessee for the A.Y.2012-13 was selected for scrutiny assessment vide notice issued u/s. 143(2), dated 24.09.2015, therefore, the aforesaid CBDT Instruction No.1/2011, dated 31.01.2011 that was applicab....
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.... Court by referring to the CBDT Instruction No.1 of 2011, dated 31.01.2011, had observed, that as the pecuniary jurisdiction over the case of the assessee before them who had returned an income of Rs.64.34 lacs was vested with the DCs/ACs, therefore, the notice issued u/s.148 of the Act by the ITO who during the year under consideration had no pecuniary jurisdiction over the assessee's case was bad in the eyes of law. Considering the aforesaid lapse in the assumption of jurisdiction the Hon'ble High Court had quashed the notice that was issued by the ITO u/s.148 of the Act. Also, a similar view had been taken by the Hon'ble High Court of Gujarat in the case of Pankajbhai Jaysukhlal Shah Vs. ACIT, Circle-2 (2019) 110 taxmann.com 51 (Guj.). In the said case, though the A.O who had jurisdiction over the case of the assessee had recorded the 'reasons to believe' but notice u/s.148 of the Act was issued by another officer, therefore, the notice so issued u/s.148 of the Act was quashed by the Hon'ble High Court. At this stage, we may herein observe, that the aforesaid order of the Hon'ble High Court had thereafter, been upheld by the Hon'ble Supreme Court in the case of ACIT, Circle-1 Vs....
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....ted 31.01.2011, therefore, the same cannot be justified. 14. We shall now deal with the objection raised by the Ld. DR that as the assessee had not called in question the jurisdiction of the Income-Tax Officer, Ward-2(2), Bhilai within the stipulated time period of one month from the date on which he was served with the notice(s) u/ss.143(2) and 142(1), dated 03.03.2015, therefore, it was not permissible for him to challenge the same for the first time in the course of the proceeding before the tribunal. Having given a thoughtful consideration to the aforesaid claim of the ld. DR we are unable to persuade ourselves to subscribe to the same. On a careful perusal of Section 124 of the Act, it transpires that the same deals with the issue of "territorial jurisdiction" of an Assessing Officer. Ostensibly, sub-section (1) of Section 124 contemplates vesting with the A.O jurisdiction over a specified area by virtue of any direction or order issued under sub-section (1) and sub-section (2) of Section 120 of the Act. On the other hand sub-section (2) of Section 124 contemplates the manner in which any controversy as regards the territorial jurisdiction of an A.O is to be resolved. Apropo....
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....pers (p) Ltd. Vs. ITO, (2021) 211 TTJ (Kol) 621 and that of ITAT, Gauhati Bench in the case of Balaji Enterprise Vs. ACIT (2021) 187 ITD 111 (Gau.). Accordingly, on the basis of our aforesaid observations, we are of the considered view that as the assessee's objection to the validity of the jurisdiction assumed by the IncomeTax Officer, Ward-2(2), Bhilai is by no means an objection to his territorial jurisdiction, but in fact an objection to the assumption of jurisdiction by him in contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, therefore, the provisions of subsection (3) of Section 124 would not assist the case of the revenue. 15. We shall now deal with the contention of the Ld. DR that as both the officers in question i.e. Dy. CIT, Circle-1, Bhilaiand the Income Tax Officer, Ward-2(2), Bhilai as per sub-section (5) of Section 120 were vested with concurrent jurisdiction over the assessee, therefore, initiation of the assessment proceedings by the Dy. CIT, Circle-1, Bhilai vide notice issued u/s.143(2) dated 24.09.2013, which thereafter had culminated into an assessment framed by the Income-Tax Officer, Ward-2(2), Bhilai vide his order passed u/s.143(3), dated....
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....) is to be transferred to another A.O (having concurrent jurisdiction over the case of the assessee), even then the authority specified under sub-section (1) of Section 127 is obligated to record his reasons for doing so. Considering the aforesaid position of law, we are of the considered view that now when in the present case the assessment proceedings were initiated by the Dy. CIT, Circle-1, Bhilai vide notice u/s.143(2), dated 24.09.2013, which thereafter were taken up and culminated by the Income-Tax Officer, Ward-2(2), Bhilai vide his order passed u/s.143(3) dated 30.03.2015, then, as per the mandate of sub-section (1) of Section 127 of the Act, the specified authority i.e. Commissioner or above was obligated to have recorded his reasons for transferring the case from the aforesaid Dy. CIT, Circle-1, Bhilai to the Income-Tax Officer, Ward-2(2), Bhilai. However, nothing has been brought to our notice which would justify the transfer of jurisdiction over the assessee's case from the Dy. CIT, Circle-1, Bhilai to Income-Tax Officer, Ward-2(2), Bhilai. 16. Be that as it may, we are of the considered view that as in the case of the assessee the assessment order u/s.143(3), dated 3....
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....ers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship. An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Income Declared (Mofussil areas) Income Declared (Metro cities) ITOs ACs/DCs ITOs DCs/ACs Corporate Returns Upto Rs.20 lacs Above Rs.30 Lacs Upto Rs.30 lacs Above Rs.30 Lacs Non-corporate Returns Upto Rs.15 lacs Above Rs.15 Lacs Upto Rs.20 lacs Above Rs.20 lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instruction....
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....olkata Bench on this issue. 5.3. Kolkata "B" Bench of the Tribunal in the case of Hillman Hosiery Mills Pvt. Ltd.(supra) held as follows: "10. In this case, the ITO Ward-3(3), Kolkata, issued notice u/s 143(2) of the Act on 04/09/2014. In reply, on 22/09/2014, the assessee wrote to the ITO, Ward-3(3), Kolkata, stating that he has no jurisdiction over the assessee. Thereafter on 31/07/2015, the DCIT, Circle-11(1), Kolkata, had issued notice u/s 142(1) of the Act to the assessee. The DCIT, Circle-11(1), Kolkata, completed assessment u/s 143(3) of the Act on 14/03/2016. The issue is whether an assessment order passed by DCIT, Circle-11(1), Kolkata, is valid as admittedly, he did not issue a notice u/s 143(2) of the Act, to the assessee. This issue is no more res-integra. This Bench of the Tribunal in the case of Soma Roy vs. ACIT in ITA No. 462/Kol/2019; Assessment Year 2015-16, order dt. 8th January, 2020, under identical circumstances, held as under:- "5. After hearing rival contentions, I admit this additional ground as it is a legal ground, raising a jurisdictional issue and does not require any investigation into the facts. The ld. Counsel for the assessee submitted that as....
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....as follows:- "5. From a perusal of the above Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the 'non corporate returns' filed where income declared is only upto Rs.15 lacs ; and the ITO doesn't have the jurisdiction to conduct assessment if it is above Rs 15 lakhs. Above Rs. 15 lacs income declared by a non- corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of Rs.50,28,040/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the assessment order, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward-1, Haldia on 06.09.2013 and the same was served on the assessee on 19.09.2013 as noted by the AO. The AO noted that since the returned income is more than Rs. 15 lacs the case was transferred from the ITO, Ward-1, Haldia to ACIT, Circle-27 and the same was received by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of ....
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.... the assessee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed. 7. In the result, appeal of assessee is allowed." Apart from that, we find that a similar view had been taken by the ITAT, Cuttack Bench, Cuttack in the case of Kshirod Kumar Pattanaik Vs. ITO, Angul Ward, Angul, ITA No.380/CTK/2019 dated 10.12.2020. 17. Consequent to our aforesaid deliberations, we are of the considered view that as in the present case before us the assessment had been framed by the Income Tax Officer, Ward-2(2), Bhilai u/s. 143(3), dated 30.03.2015 in clear contravention of the CBDT Instruction No.1/2011, dated 31.01.2011, which divested him of his jurisdiction over the case of the assessee for the year under consideration i.e. AY 2012-13, therefore, the same cannot be sustained and is liable to be struck down in terms of our aforesaid observations. We, thus, in terms of our aforesaid observations quash the order passed by the Income-Tax Officer, Ward-2(2), Bhilai for want of ....