2021 (11) TMI 47 - AT - Income Tax

Jurisdiction of the AO to frame the assessment order - scrutiny assessment instruction for non corporate assessee - As argued since the assessee has declared more than ₹ 20 lacs as his returned income, then the scrutiny assessment could have been done by only the ACIT/DCIT and not by the ITO who does not have the pecuniary jurisdiction to do so - scope of CBDT Instruction No. 1/11 (F. No. 187/12/2010-IT(AT) dated 31.01.2011 CBDT has fixed new monetary limit in Mufassil areas - HELD THAT - As per 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 ₹ 15 lacs; and the ITO doesn t have the pecuniary jurisdiction to conduct assessment if it is above ₹ 15 lakhs. Above ₹ 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 ₹ 20,03,070/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the paper book, it reveals that the statutory notice u/s. 143(2) of the Act was issued by the then ITO, Ward- 4(3), Guwahati on 20.09.2016 and the same was served upon the assessee as noted by the AO in the assessment order. Later on the ITO taking note that since the returned income is more than ₹ 15 lacs, he transferred the case to DCIT, Circle- 4, Guwahati who issued interim notice u/s 142(1) dated 03.03.2017 and framed the assessment order without issuing notice u/s 143(2) of the Act. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice, he duly transferred the file to the DCIT, Circle-4, Guwahati, when the DCIT issued notice u/s 142(1) of the Act and did not issue notice u/s 143(2) of the Act within the time limit prescribed for issuance of notice u/s. 143(2) of the Act for the assessment year 2015-16. We note that the DCIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s. 143(2) of the Act notice became coarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, in this case, the omission/non-issuance of notice by the DCIT, Circle-4, Guwahati before the limitation period for issuance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case because the DCIT gets jurisdiction to frame assessment order u/s 143(3) of the Act only thereafter. Ergo, the assessment order passed by the DCIT, Circle-4 u/s. 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law, and consequently we quash it. Therefore, the legal issue raised by 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.

Summary

Issues involved:
- Jurisdiction of the Assessing Officer to frame the assessment order based on the CBDT Instruction.
- Validity of the assessment order issued under section 143(3) of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Jurisdiction of the Assessing Officer
The appellant raised a legal issue challenging the jurisdiction of the Assessing Officer (AO) to frame the assessment order. The appellant contended that the AO did not have the authority to issue the notice under section 143(2) of the Income Tax Act, 1961, as the returned income exceeded the monetary limit specified by the CBDT Instruction. The CBDT Instruction dated 31.01.2011 set new monetary limits for assessment based on the location and type of assessee. It was argued that since the appellant's income exceeded the specified limit for non-corporate assessee, the assessment should have been conducted by ACIT/DCIT, not the ITO. The ITO, realizing the error, transferred the case to DCIT, who issued an interim notice under section 142(1) but failed to issue the mandatory notice under section 143(2) before passing the assessment order under section 143(3). The Tribunal held that the AO lacked jurisdiction to issue the notice initially and the subsequent actions by DCIT were also invalid due to the failure to issue the required notice within the prescribed time limit. Consequently, the assessment order by DCIT was deemed null and void.

Issue 2: Validity of the Assessment Order
The Tribunal found that the failure to adhere to the statutory requirement of issuing notice under section 143(2) before passing the assessment order under section 143(3) rendered the assessment order invalid. The Tribunal emphasized that serving a notice under section 143(2) is a fundamental requirement for conducting a valid assessment under section 143(3) of the Act. As the DCIT assumed jurisdiction after the prescribed time limit for issuing the notice had lapsed, the assessment order was deemed to be without jurisdiction and null in the eyes of the law. Consequently, the Tribunal quashed the assessment order and allowed the appeal of the assessee on the legal issue raised regarding the jurisdiction of the Assessing Officer.

In conclusion, the Tribunal allowed the appeal of the assessee based on the jurisdictional issue, rendering the assessment order null and void. The other grounds raised by the assessee were deemed academic in light of the decision on the legal issue. The Tribunal's decision highlighted the importance of adhering to statutory requirements and jurisdictional limits in conducting assessments under the Income Tax Act, 1961.

This detailed analysis provides an in-depth understanding of the legal judgment, focusing on the issues raised, arguments presented, and the Tribunal's decision regarding the jurisdiction of the Assessing Officer and the validity of the assessment order.