2024 (4) TMI 1129 - AT - Income Tax

Validity of scrutiny Assessment Order - No valid notice issued u/s. 143(2) of the Act in commencing the scrutiny assessment - lack of jurisdiction of the AO who issued the notice u/s 143(2) - HELD THAT - AO has to be vested with jurisdiction over any area as prescribed in clause (a) and (b). In sub-section (3), an assessee is not entitled to call for the jurisdiction of AO after the expiry of one month from the date on which it was served with a notice u/s. 143(2). Further, sub-section (5) states that every Assessing Officer shall have all the powers conferred by or under the Act on an Assessing Officer in respect of the income accruing or arising or received within the area over which he has been vested with jurisdiction by virtue of the directions or orders issued u/s. 120(1) and (2). It is important to note that prima facie assumption of jurisdiction by the AO is to be first passed through the test prescribed in sub-section (1). In the case before us, the assessment has been framed u/s. 143(3) by an AO whose jurisdiction is under challenge who at the threshold itself did not had the jurisdiction over the assessee for issuing notice u/s. 143(2) of the Act. In the present case, both the notice issued u/s. 143(2) and the assessment completed thereafter are by an officer who does not have jurisdiction in terms of CBDT Instruction no. 1/2011, owing to nil income return filed by the assessee. As noted in the case of Kalinga Institute of Industrial Technology 2023 (6) TMI 1076 - SC ORDER that jurisdiction changed after the returns were filed. Also, it noted that the High court had granted liberty to the concerned authority to issue appropriate notice. It further clarified that the AO is free to complete the assessment if the assessment order is not issued. Accordingly, we allow the additional ground raised by the assessee and hold that the assessment order framed in the case of the assessee is without jurisdiction and is a nullity. The impugned assessment order is hereby quashed since the AO i.e. ACIT, Circle-36, Kolkata framed the said assessment did not have jurisdiction over the assessee as mandated by CBDT Instruction No. 1/2011. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO)
2. Bogus Long Term Capital Gain
3. Bogus Commission
4. Disallowance u/s 14A of the Act
5. Validity of the Assessment Order

Summary:

1. Jurisdiction of the Assessing Officer (AO):
The primary issue raised by the assessee was that the AO, ACIT, Circle-36, Kolkata, did not have jurisdiction over the case as per CBDT Instruction No. 1/2011, which mandates that cases with nil income should be handled by the Income Tax Officer (ITO). The Tribunal noted that the notice u/s 143(2) was issued by the ACIT, who did not have the jurisdiction, rendering the assessment order invalid. The Tribunal relied on the decision in the case of Bhagyalaxmi Conclave (P) Ltd. v. DCIT and other precedents, concluding that the assessment framed by an officer without jurisdiction is null and void. Consequently, the assessment order was quashed.

2. Bogus Long Term Capital Gain:
The assessee contended that the Commissioner of Income Tax (Appeals) erred in holding that the sum of Rs. 42,27,500/- represented bogus long-term capital gain and confirming the AO's action of treating it as income u/s 68 of the Act. However, since the assessment order was quashed on jurisdictional grounds, this issue was not adjudicated upon.

3. Bogus Commission:
The assessee challenged the addition of Rs. 1,48,657/- made on account of bogus commission. This issue was also rendered academic due to the quashing of the assessment order on jurisdictional grounds.

4. Disallowance u/s 14A of the Act:
The assessee disputed the disallowance of Rs. 16,26,558/- made by the AO u/s 14A of the Act. Similar to the other issues, this was not adjudicated upon due to the quashing of the assessment order.

5. Validity of the Assessment Order:
The Tribunal concluded that the assessment order was bad in law due to the lack of jurisdiction of the AO who issued the notice u/s 143(2) and framed the assessment. The Tribunal allowed the additional ground raised by the assessee, holding that the assessment order was a nullity.

Conclusion:
The appeal of the assessee was allowed, and the assessment order was quashed due to the jurisdictional issue. The other grounds raised by the assessee were not adjudicated upon as they were rendered academic.