TaxTMI 
TaxTMI 
2024 (7) TMI 1641
X X X X Extracts X X X X
X X X X Extracts X X X X
....on entries from Shri Mukesh Banka to the tune of Rs. 92,50,000/- during the current financial year and accordingly, the case of the assessee was reopened u/s. 147 of the Act by issuing notice u/s. 148 dated 30.06.2021 by ITO, Ward- 2(1), Kolkata. The notice u/s 148A(b) was issued on 26.05.2022. Both the notices were issued by ITO Ward-2(1) Kolkata. The assessment was framed vide order dated 26.05.2023 passed u/s 147 r.w.s. 144B of the Act by making addition of 35.50 Lacs. 4. The ld AR vehemently argued that the assessment framed is invalid and bad in law on four counts. First, Ld. AR stated that the income of the assessee was Rs. 39,72,460/- and therefore the assessment has to be framed by the AC/DC in terms of CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011. The Board has issued instruction in exercise of power u/s 119 of the Act that in case of non-corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the eyes of law. In defense of his arguments, the Ld. AR relied on the decision of Hon'ble Apex court in the case of M/s. Arati Marketing Pvt. Ltd. Vs. Union of India & Ors. in WPO No. 2747 of 202 dated 12.02.2024 wherein the Hon'ble Apex Court has held that the provisions of old regime of section 148 of the Act including (TOLA) are read into or applied to the new regime applicable from 01.04.2021, it would also necessarily mean that provisions repealed by the Parliament without any saving and exception clause is applied by the revenue even after it has come to an end which is clearly not permissible in law. The Ld. AR stated that the said decision was rendered by the Hon'ble Apex Court in the context of old regime u/s. 148 having been repealed/abrogated and replaced by new set of provisions by finance Act, 2021 which came into force on 01.04.2021. The Ld. AR submitted that the new section 148A was inserted w.e.f. 01.04.2021. The Ld. AR argued that the Hon'ble Apex Court has held that no notice u/s. 148 of the Act (unamended provision) can be issued after 01.04.2021 within the said section as it is not on the statute book following abrogation/repealing of the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;ble Jharkhand High Court in the case of Ratan Bej Vs. PCIT in WP(T) No. 3589 of 2023 dated 24.01.2024 wherein the Hon'ble Court has decided the same in favour of the assessee. 4.3. Arguing on the fourth limb, the Ld. AR submitted that as per the reasons recorded by the Ld. AO, it was noted that assessee has received and is beneficiary of accommodation entry amounting to Rs. 92,50,000/- received from the concerns belonging to or operated by Shri Mukesh Banka during the year and accordingly, the Ld. AO came to the conclusion that income has escapement to that extent. The Ld. AR stated that the assessee has filed objection to the notice issued u/s. 148A(b) dated 26.05.2022 vide his written submission dated 15.06.2022 in which the assessee stated that as per the books of account of the assessee there was no transaction of Rs. 27 lakh on 26.04.2013 as noted in the said notice with Funidea Vinimay Pvt Ltd. There was only one transaction of Rs. 25,50,000/- on 26.04.2013 from the said party which was the short term loan and which was repaid on 24.03.2015. Similarly, in respect of second party i.e. Manikala Dealmark Pvt. Ltd., the assessee stated that as per the notice issued by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntions of the assessee, the ld DR relied on the orders of authority below. 6. After hearing the rival submissions and perusing the material available on record, we find that undisputedly the returned income of the assessee was Rs. 39,72,460/- and the jurisdiction to issue notice and to frame the assessment vested with the ACIT/DCIT whereas the notice u/s. 148 of the Act dated 30.06.2021 has been issued by ITO, Ward-2(1), Kolkata. We note that the notice u/s 148A(d)of the Act dated 28.07.22 was replied by the assessee vide letter dated 11.08.2022, a copy of which is available at pages 18 to 25 of the paper book. In the said letter the assessee objected to the issuance of notice by ITO, Ward- 2(1), Kolkata to be without jurisdiction which would render all the proceeding as invalid and void. The said communication by the assessee to the AO went unheeded and no action was taken on the objection raised by the assessee and the AO proceeded with the assessment and framed the same accordingly. Now, issue before us is whether the assessment framed by the AO lacked jurisdiction. We have also perused the decisions relied on by the assessee as noted hereinabove which are discussed as under:....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such notice u/s. 143(2) of the Act." The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee's appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter. Thus, we find no ground to differ with the findings recorded by the learned Tribunal. In the result, the appeal filed by the revenue (ITAT/39/2023) is dismissed and the substantial questions of law are answered against the revenue. Consequently, the connected application for stay (IA No.GA/2/1/2023) also stands closed ." (ii) Similarly, ratio has been laid down by Hon'ble Coordinate Bench in the case of Smita Biswas (supra), wherein the operative portion of the order is as under: "9. After hearing the rival contentions and perusing the material on record, I find that though the notice u/s 143(2) was issued by ITO, Ward-1(4), Jalpaiguri who is the jurisdictional AO however the assessment in this case was framed by ACIT, Circle-1(1), Jalpaiguri . We note that there is no valid order of transfer of jurisdiction from....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... application being G.A.No. 81 of 2010 is also allowed. The case of the assessee is also covered by the decision of Co-ordinate Bench decision in the case of Amiya Gopal Dutta (supra). For the sake of ready reference, the operative part is extracted below: "5. At the outset, the Ld. Counsel for the assessee submitted that the assessment passed u/s 144 of the Act dated 17.12.2018 is void,ultra vires and nullity in the eyes of law as the same was passed by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri whereas as per the CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011 the Board has issued instruction in exercise of power u/s 119 of the Act that in case of non- corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruction of CBDT by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri which is not a metro city and therefore the same may kindly be quashed. In defense of h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome 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 lacs Above Rs. 20 lacs Metro charges for the purpose of above instructions shall be Ahmadabad, 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. In terms of the above instruction in the case of non-corporate assessee in non-metro cities, the ITR filed upto Rs. 15 lacs has to be assessed by ITO and therefore in the instant case the assessment is framed in violation of above instruction by the Board. The case of the assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata benches in the case of Hirak Sarkar (supra). The operative part is reproduced as under: 5. I have considered th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is stage, it will be appropriate to refer to the provisions of section 127 of the Act as under: Power to transfer cases (1) The [Principal Director General or] Director General or [Principal Chief Commissioner or] Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. 8. A perusal of the above statutory provisions would reveal that jurisdiction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from ITO, Ward-23(3), Hooghly to ACIT, Circle-23(1), Hooghly. Even, there is no document on the file that the ACIT, Circle-23(1), Hooghly had ever recorded any reaso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 per Board Instruction No. 1/2011 [F. No. 187/12/2010-IT(A-I)], dt. 31/01/2011, the jurisdiction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non-corporate assessee and the income returned is above Rs.15,00,000/- and whereas, the statutory notice u/s 143(2) of the Act, was issued on 29/09/2016, by the Income Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the jurisdiction over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the statutory period prescribed under the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the Act on the same day. From the aforesaid facts the following facts emerged: i) The assessee had filed return of income declaring Rs. 50,28,040/-. The ITO issued notice under section 143(2) of the Act on 06.09.2013. ii) The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014. iii) On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia. 6. We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rutiny assessment vested in Income-tax Officer and notice under section 143(2) must be issued by Income-tax Officer, Ward-I, Haldia and none other - But, notice was issued by Asstt. Commissioner, Circle Haldia much after CBDT's instruction and knowing fully well that he had no jurisdiction over assessee - Whether, therefore, notice issued by Asstt. Commissioner was invalid and consequently assessment framed by Income-tax Officers becomes void since issue of notice under section 143(2) was not done by Income-tax Officers as specified in CBDT instruction No. 1/2011." 9.2. The Hon'ble High Court of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range - I, reported in [2005] 278 ITR 218 (Cal.) has held as follows :- "Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of - Assessment years 1983-84 to 1987-88 - Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for first time before Tribunal - Held, yes Whether jurisdiction of Assessing Authority is not dependent on date of accrual of cause of action but on date whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of notice itself." 10. Respectfully following the propositions of law laid down in all these case-law and applying the same to the facts of the case, we hold that the assessment order is bad in law for the reason that the Assessing Officer having jurisdiction over the assessee, has not issued a notice u/s 143(2) of the Act as required by the statute. Notice issue by the officer having no jurisdiction of the assessee is null and void. When a notice is issued by an officer having no jurisdiction, Section 292BB of the Act, does not comes into play. Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee." 6. Respectfully following the propositions of law laid down in these orders stated above, we hold that the orders are bad in law for the reason that the assessing auth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l ITO and it should have been issued by the officer of the rank of ACIT/DCIT. Besides, the decision of Hon'ble Apex Court in the case of DCIT (Exemption) & Anr. Vs. Kalinga Institute of Industrial Technology, Special Leave to Appeal (C) No(s). 29304/2019 and WP(C) No. 898/2017 as relied on by the Ld. DR to defend his arguments is not applicable as the assessee has objected to the issuance of notice within 30 days from the issuance of the notice u/s 148 of the Act itself. Therefore, in our opinion, the assessment so framed is invalid for the want of jurisdiction. Accordingly, we quash the assessment made by the AO. 6.2. The second argument of the AR for the assessee was with regard to the issue of assessment being barred by limitation as no notice u/s. 148 could be issued post 31.03.2021. We have perused the provisions of the Act carefully and found that the old regime of reassessment has undergone a sea change and section 148 of the Act has been repealed and abrogated and replaced by new sections of 148 and 148A w.e.f. 01.04.2021 by the Finance Act 2021. For the sake of better understanding of the provisions of the Act and Taxation and Other Laws (Relaxation and Amendment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilable. On May 11, 2022 Instruction No. 01/2022 issued by the Central Board of Direct Taxes. The said circular proceeded on the basis that proceedings under Sections 147/148 of the Act for, inter alia, the assessment years 2013-14 and 2014-15 did not get time barred on March 31, 2021. The Finance Act, 2021 completely reformed the system of reassessment by bringing in a completely new procedure of reassessment with effect from April 1, 2021. In terms of Sections 40, 41, 43 and 44 of the Finance Act, 2021, which came into force on April 1, 2021, as per Section 2(a) thereof, the old Sections 147, 148, 149 and 151 stood repealed/abrogated and replaced by a new set of provisions. Further, by Section 42, a new Section 148A was inserted also with effect from April 1, 2021. By Section 43 of Finance Act 2021, old Section 149 of the Act was substituted with effect from April 1, 2021 without any savings clause. The new Section 149 laid down new time limits for issue of notice under the new Section 148 of the Act. As such, the first proviso to the new Section 149(1) of the Act stipulated that no notice under the new Section 148 of the Act shall be i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 31.06.2021. In our opinion the notice issued u/s 148 of the Act on after 1.4.2021 is clearly barred by limitation. If this is accepted this would result in dichotomy of two system in operation for the same period which are in conflict interse. The case of the assessee is also squarely covered by the decision of the Apex court in the case of M/s. Arati Marketing Pvt. Ltd. Vs. Union of India & Ors. in WPO No. 2747 of 202 dated 12.02.2024 wherein the Hon'ble Apex Court has held that the provisions of old regime of section 148 of the Act including (TOLA) are not applicable post 31.3.2021. The operative part of the decision of the Hon'ble Apex Court is as extracted below: Considering the facts and circumstances of the case, submission of the parties, relevant provisions of law including unamended old Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 as stood on March 31, 2021, prior to enactment of the Finance Act, 2021, and present substituted Sections 147, 148, 149, 151 and newly inserted Section 148A of the Income Tax Act, 1961 as enacted by Finance Act, 2021, without having any savings clause for the old provisions relating to reassessment proceedings, Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1961, by converting the same into notices under Section 148A of the Act, newly inserted by Finance Act, 2021 on the basis of the aforesaid two notifications by the CBDT in exercise of power under TOLA, is highly arbitrary and not sustainable in law. ii. The provisions of TOLA applied only to the pre-amended law as applicable till 31.03.2021 - Section 3 of TOLA clearly provided for extension of time limit for undertaking any action required to be undertaken from 20.03.2020 to 31.03.2021 only. iii. Therefore, the question of application of provisions of TOLA by the revenue in the case of notices on or after 1st April, 2021, issued under old Section 148 or newly inserted Section 148A of the Income Tax Act, 1961, relating to assessment years 2013-14 and 2014-15 after coming into effect the Finance Act, 2021 from 1st April, 2021 amending and subsisting the old provisions under Section 147 to 151 of the Income Tax Act, 1961, without any saving clause does not arise and such exercise by the authority under TOLA under the aforesaid two notifications by the CBDT in conflict of the relevant provisions under Finance Act, 2021 is wholly unwarranted and bad in law. iii. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law as well as amended law) will operate simultaneously and it would result in a direct conflict between two altogether differing statutory scheme/provisions relating to reassessment, which could by no stretch of imagination be the intention of the Parliament, and which is not permissible in law. ix. If validity of notices issued on or from 01.04.2021 to 30.06.2021 is tested on the basis of pre- amended provisions including TOLA and notifications issued thereunder, both issued in the context of pre-amended law, the same shall result in following ambiguity/anomaly: a. During the period from 01.04.2021 to 30.06.2021 both pre-amended as well as amended scheme of reassessment shall continue to operate - this shall result in direct conflict of two provisions/statutory schemes; b. Apex Court in Ashish Agarwal (supra) categorically held that all defences, including defense of limitation, as available under the amended provisions, including the amended Section 149, shall be available - application of old law shall, however, defeat the said right specifically recognized by the Apex Court as available to the assessee; c. Even if the defense available to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the third argument of the assessee, we have perused the material available on record, we observe that apparently the addition in this case has been made of Rs. 35.50 lakh and thus, AO has no jurisdiction to issue notice u/s. 148 of the Act in terms of provision of section 149(1)(b) as the AO was not having any books of account/document/evidence, which revealed that income escaping assessment amount to or is likely to amount to Rs. 50 lakh or more. The case of the assessee finds support from the decision of Hon'ble Jharkhand High Court in the case of Ratan Bej Vs. PCIT in W.P.(T) No.3589 of 2023 dated 24.01.2024, wherein the Hon'ble High court has held as under: "9. At this stage, it would be pertinent to indicate that Section 148 and 148A which have been introduced by way of the Finance Act, 2021, has been codified following the judgment rendered by the Apex Court in the matter of GKN Driveshafts (India) Limited (supra). The provisions mandate that, before making any assessment under Section 147, the Assessing Officer must serve a notice to the Assessee requiring him to file his return of income within specified time and before such notice, the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee received Rs. 5.00 lakh on 01.05.2013 whereas as per the books of account the short term loan received by the assessee on 05.02.2013 which was repaid on 24.03.2015. In respect of third party i.e. Moonview Conclave Pvt. Ltd., the notice of the AO stated that assessee has received Rs. 10.00 lakh on 06.02.2013 which was appearing in the books of account of the assessee and was repaid on 20.03.2015. In respect of fourth party, Gyneshwar Agencies Pvt Ltd as per the notice of the AO, transaction was Rs. 25.00 lakh whereas as per the books of account of the assessee there was no such transaction with the said entity and as a matter of fact, the assessee had transaction with Gyaneshwar Vyapar Pvt. Ltd. on 26.04.2013 of Rs. 25.00 lakh which represented short term loan which was subsequently repaid on 24.03.2015. Thus the notice issued by the Ld. AO u/s. 148A(b) of the Act has been comprehensively replied as stated above controverting the allegations of the AO as incorrect and baseless. However, the AO has not applied his mind to the reply given by the assessee and not controverted the arguments of the assessee. Thus apparently the assessment framed by the AO without application of mind an....