AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 1426
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....lso. It cannot make "additional additions" on some other grounds also. The assessment was made on ''one sided approach" and not made on "best judged assessment principle". 2. Further, vide letter dated 04.11.2022, the assessee has filed revised grounds of appeal, including the additional ground, which read as under:- Revised Gr. No. l "1. On the facts and circumstances of the case and in law. Id CI'f(A) has erred in sustaining the addition of Rs. 29,37,587 & Rs. 2,21,050 on the count of estimation of 5% & 25% on adhoc basis, on 'Direct expenses' on "repairs & maintenance' & 'labour charges' of Rs. 5,87,51,733 & Rs. 8.84.200 respectively, since no bills & vouchers produced for verification before the Id AO on 'gross receipts' of Rs. 17.09 crores; while. GP/NP shown in the year, is much higher than the GP/ NP of AY 10-11 which has been accepted by the Id AO; addition of Rs. 29,37,587 & 2,21,050. is not sustainable in the eyes of law even if the books of account is to be rejected & sec 145(3) be applied; is liable to be deleted." Additional Gr. No. l "1. On the facts and circumstances of the case and in law....
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....ssessee has claimed repair and maintenance expenses at Rs. 5,87,51,733/-, which were not substantiated or explained. Further the AO noted that the assessee has failed to discharge its onus. It was also observed by the AO that repair and maintenance expenses may be inevitable and incidental to the nature of business however due to non-submission of bills/vouchers inflating of these expenses cannot be ruled out. Accordingly, the AO disallowed 5 % of the said expenses i.e. Rs. 29,37,587/- and added back to the total income of the assessee. Further, the AO on verification of profit and loss account, found that repair and maintenance expenses were claimed at Rs. 2,16,695/-. No bills and vouchers were produced to support these claims. During the course of assessment proceedings, the AR of the assessee has admitted that no log book for personal use of these expenses is maintained. On account of non-production of any bills and vouchers and the personal use due to nature of these expenses 1/4th of these expenses i.e 54,173/- disallowed by the AO and added to the total income. It was also noted by the AO that labour charges are shown at Rs. 8,84,200/-. As per the AO no bills and vouchers wer....
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....ter 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. 20 lacs Upto Rs. 30 lacs Above Rs. 30 lacs Non-corporate returns Upto Rs. 15 lacs Above Rs. 15 lacs Upto Rs. 20 lacsq 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. 10. Further, the ld. AR relied on the CBDT Instruction No. 6/2011, dated 08.04.2011, wherein the Board has instructed the CCIT/DGIT to adjust the limits by an amount upto Rs. 5 lakhs to ensure that the ....
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....umar Ghosh [2014] 361 ITR 458 (Cal HC); iii) Crystal Phosphates Ltd. [2023] 332 CTR 215 (P&H HC); iv) Sunita Finlease Ltd. [2011] 330 ITR 491 (Chhattisgarh HC); v) Ravi Sherwani, ITA No. 64/RPR/2020, order dated 29.05.2023; vi) Sudhir Kumar Agrawal, ITA No. 158/RPR/2017, order dated 17.10.2022/[2023] 221 TTJ 687 (Raipur-Trib); and vii) Durga Manikanta Traders, ITA No. 59/RPR/2019, order dated 12.12.2022; 13. In view of the above submissions, it was the prayer of the ld. AR that since the notice u/s. 143(2) of the Act itself was invalid, the assessment order u/s. 143(3) of the Act, dated 27.03.2014, is illegal, non-est, bad in law, and deserves to be quashed. 14. On the contrary, ld.Sr.DR vehemently supported the order of the authorities below and produced the clarification sought from the ACIT, Circle-1(1), Raipur, which reads as under :- GOVERNMENT OF INDIA MINISTRY OF FINANCE: DEPARTMENT OF REVENUE, OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX, 1(1) C. R. BUILDING, CIVIL LINES, RAIPUR (C.G.) - 92001 F. No. ACIT-l(l)/RPR/Misc./MA/2022-23 Dated : 15-11-2022 To. The Joint Commissioner ....
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....nt Commissioners/ITOs. It was pointed out by the Board that references have been received from large number of the tax payers 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 DC/AC who is located in different station, which increases their cost of compliance. The Board therefore considered the matter and opined that the existing limit needs to be revised to remove the hardship referred to therein. Further, the Board opined that increase in their monetary limit is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the earlier income limits were introduced. Therefore, for non-corporate returns in mofussil area, the ITOs were assigned cases upto Rs. 15,00,000/- and the Assistant Commissioners and Deputy Commissioners above Rs. 15,00,000/-. Subsequently, by another instruction dated 08.04.2011, the earlier instruction was reconsidered and it was decided that if the application of the limits mentioned in the instruction dated 31.01.2011, leads to substantially uneven distribution of workload between D....
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....m time to time is as sacrosanct and cannot be amended. (9) It is seen that after the issuance of the instruction dated 31.01.2011, a subsequent instruction was given on 08.04.2011. The said instruction modifies the earlier instruction dated 31.01.2011 and vests a discretion to the Chief Commissioner of Income Tax and the Director General of Income Tax to adjust the monetary limits by an amount upto Rs. 5,00,0007-, and the purpose for giving such discretion is to ensure that the workload is equitably distributed amongs the Assessing Officer. Therefore, the monetary limit fixed in the instruction dated 31.01.2011, was not a rigid limit. This is manifest from the subsequent instruction dated 08.04.2011, which has given discretion to the Chief Commissioner and Director General to adjust the limits. The underlining object of the instructions is equitable distribution of work. It is seen that the amended instruction dated 08.04.2011 itself, came to be issued, as Chief Commissioners have expressed the view that the limits fixed in the instruction dated 31.01.2011, if strictly enforced would lead to unequal distribution of workload between Assistant Commissioner and Income Tax Off....
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....s furnished on 01-08-2022, clarification sought on issuance of notice under section 143(2) was furnished on 15-11-2022 and revised clarification was also furnished on 15-11-2022, personal attendance of the AO was directed on 21-11-2022. 7. The assessee filed affidavit on 26-11-2022 under rule 10 to clarify filing of ITR and search proceedings. 8. Brief of A0,s observation:- Order under section 143(3) of the Act was passed and income was assessed at Rs. 56,27,200/- the assessee failed to produce bills and other relevant records of expenses for verification before AO, hence, Rs. 29,37,587/-, 5% of direct expenses of Rs. 5,87,51,173/( Para-5 page3) Rs. 54,173, Y» of Rs. 2,16,695)under head repair and maintenance/-( Para-6 page -3) and Rs. 2,21,050/-,l/4 of Rs. 8,84,200/- under head labor charges( Para -7 Page 4) was disallowed and added to the Income of the assessee. Interest paid of Rs. 70,120/- was paid to Magma finance company is disallowed and added under section 40a(ia) of the Act.( Para-8 page-4) 9. CIT observation: - The CIT appeal confirmed the above addition Para 2.3 Page 4 10. The assessee has challenge the notice under section 143(2....
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....n the jurisdiction of the Income-Tax Officer, Ward-2(2), Bhilai within the stipulated time period of one month Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai ITA No. 158/RPR/2017 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. Apropos, sub-section (3) of Section 124 of the Act, the same places an embargo upon an assess....
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....h in the case Shri Sudhir Kumar Agrawal, Durg Vs. ITO, Ward-2(2), Bhilai ITA No. 158/RPR/2017 of OSL Developers (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 Income-Tax 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 sub- section (3) of Section 124 would not assist the case of the revenue. 18. Admittedly, the assessee has filed its return of income for the assessment year 2011-2012 with a returned income of Rs. 23,44,310/-, which is above Rs. 15 lakhs. As per the CBDT Instruction No. 1/2011, dated 31.01.2011 and Instruction No. 6/2011, dated 08.04.2011 and the Notification of the CCIT, Raipur, dated 30.05.2011, the jurisdiction over the case of the assessee located in mofussil areas i.e at Raipur, Chhattisgar....
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....issued u/s. 119 of the IT Act are binding on the revenue. The relevant observations of the Hon'ble Supreme Court are as under :- 7. This Court has, in a series of decisions, held that circulars issued under Section 119 of the Income Tax Act, 1961 and 37B of Central Excise Act are binding on the Revenue. (See Navnit Lal C Jhaveri vs. K.K. Sen (1965) 56 ITR 198 (SC); Ellerman Lines Ltd. vs. CIT 1972 CTR (SC) 71 (1971) 82 ITR 913 (SC); K.P. Varghese vs. ITO (1981) 24 CTR (SC) 358 : 1981 (4) SCC 17i Union of India vs. Azadi Bachao Andolan (2003) 184 CTR (SC) 450 : 2003 (8) SCALE 287, 308 Collector of Central Excise vs. Usha Martin Industries 1994 (94) ELT : 1997 (7) SCC 47 Ranadey Micronutrients vs. CCE 1996 (8) ELT 19 : 1996 (10) SCC 387; Collector of Centra Excise vs. Jayant Dalai (P) Ltd. 1998 (100) ELT 10 : 1997 (10) SCC 402; Collector of Centra. Excise vs. Kores India Ltd. 1997 (89) ELT 441 : 1997 (10) SCC 338; Paper Products Ltd. vs. Collector of Central Excise 1999 (112) ELT 765 : 1997 (7) SCC 84; Dabur India Ltd. vs. CCE 2003 (157) ELT 129). 8. The somewhat different approach in M/s. Hindustan Aeroneutics V. Commissioner of Income Tax, Karnataka, Bangalore 200....
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..... 319/CTK/2019, vide order dated 10.12.2020, has held that, "it was the duty of the revenue authorities to give effect to the circulars/instructions issued by the CBDT which are binding on them. If the CBDT Instruction No. 1/2011, dated 31.01.2011 & No. 6/2011, dated 08.04.2011 is not accepted by the revenue authorities, as has been occurred in the present case in hand, anyone can frame the assessment/reassessment even having no jurisdiction to enter into the same. The power conferred upon the CBDT to issue instructions and directions by section 119 of the Act is for proper working of the Act, which should be followed by the revenue authorities in true spirit. Accordingly, the Tribunal quashed the reassessment framed by the ITO/AO, who was having no jurisdiction over the assessee. 20. Further, the coordinate bench of the Tribunal in the case of Ravi Sherwani, in ITA No. 64/RPR/2020, vide order dated 29.05.2023, in para 11 has held that, "controversy involved in the present appeal lies in a narrow compass, i.e, sustainability of the assessment framed by the ACIT, Circle 4(1), Raipur vide his order passed u/s 143(3) of the Act, dated 29.03.2016, which in turn was based on a ....
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....r having no jurisdiction over the assessee issued notice u/s. 143(2) of the Act, overlooking the binding Instructions of the CBDT as well as the Notification issued by the CCIT, Raipur, which is not sustainable in the eyes of law. Had the notice u/s. 143(2) of the Act been issued by the jurisdictional AO, i.e. DCIT-1(1), who was having pecuniary jurisdiction over the assessee, there would have been no case for the assessee to raise the issue of wrong assumption of jurisdiction. When the notice issued u/s. 143(2) of the Act is itself invalid owing to the wrong assumption of jurisdiction, the assessment framed thereafter has no legs to stand. Respectfully following the observations of the coordinate bench of the Tribunal in the case reproduced hereinabove, we set aside the order of the ld. CIT(A) and strike down the assessment order dated 27.03.2014. The legal ground raised by the assessee is allowed. 20. Since, we have decided the legal ground for want of valid assumption of jurisdiction by the AO and have struck down the assessment order itself, we, therefore, refrain ourselves from adverting to and to adjudicate the other grounds raised in the present appeal by the assessee wit....