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2023 (1) TMI 958 - AT - Income TaxValidity of assessment - jurisdiction of the Income Tax Officer/AO to issue the notice - HELD THAT - The issue relating to the pecuniary jurisdiction also came into consideration before the Coordinate Bench of the Tribunal and Others titled as Bhagya Laxmi Conclave Pvt. Ltd. 2021 (2) TMI 181 - ITAT KOLKATA wherein the Tribunal further relying upon various other decisions of the Coordinate Benches of the Tribunal has decided the issue in favour of the assessee and held that the assessment framed by Assessing Officer who was not having pecuniary jurisdiction to frame such assessment was bad in law. Assessment framed u/s. 143(3) of the Act by the DCIT being without jurisdiction is bad in law and the same is accordingly set aside. Assessee appeal allowed.
Issues Involved:
1. Jurisdiction of the Deputy Commissioner of Income Tax (DCIT) to frame the assessment order. 2. Declaration by the assessee as a name lender. 3. Deletion and redirection of the addition of Rs. 1,50,000,00/-. 4. Sustaining and enhancing the addition of Rs. 4,70,71,484/- under section 40A(3). 5. Assessment based on incomplete and incorrect books and rejection of grounds under sections 68 and 40A(3). Detailed Analysis: 1. Jurisdiction of the DCIT: The primary issue contested by the assessee was the jurisdiction of the DCIT to frame the assessment order dated 31.03.2016 under section 143(3) of the Income Tax Act. The appellant argued that as per CBDT notifications, the jurisdiction over cases with total income below Rs. 35 lacs should lie with the Income Tax Officer (ITO) and not with the DCIT. The appellant's income was below this threshold, thus challenging the DCIT's jurisdiction. The Tribunal referred to Section 2(7A) and Section 120 of the Income Tax Act, which define the jurisdiction of assessing officers. It was noted that the jurisdiction of Income Tax Authorities can be fixed based on territorial area, persons or classes of persons, and income or classes of income. The Tribunal concluded that the pecuniary jurisdiction in this case lied with the ITO, not the DCIT, thereby making the assessment framed by the DCIT without jurisdiction and bad in law. 2. Declaration by the Assessee as a Name Lender: The assessee declared before the Assessing Officer (AO) that he was only a name lender and the real business was conducted by other individuals. The authorities were criticized for not probing the matter seriously and placing the entire onus on the assessee, ignoring his poor financial and social status. This issue, however, was not elaborated upon in the judgment as the primary focus was on the jurisdictional matter. 3. Deletion and Redirection of the Addition of Rs. 1,50,000,00/-: The CIT(A) deleted the addition of Rs. 1,50,000,00/- as it did not pertain to the relevant assessment year. However, the CIT(A) held that the source of this amount could not be explained by the assessee and directed the AO under section 150(1) to bring this amount to tax in the assessment year 2012-13. This direction was not further analyzed in the judgment due to the primary jurisdictional issue. 4. Sustaining and Enhancing the Addition under Section 40A(3): The CIT(A) sustained the addition of Rs. 4,70,71,484/- made by the AO by way of disallowance under section 40A(3) and further enhanced it by Rs. 16,47,597/-. This issue was also not further elaborated upon in the judgment, as the jurisdictional issue took precedence. 5. Assessment Based on Incomplete and Incorrect Books: The assessee argued that the assessment should have been made by estimating the income after invoking section 145(3) due to incomplete and incorrect books, rather than making inflated additions under sections 68 and 40A(3). The rejection of this ground by the CIT(A) was deemed arbitrary and unjustified by the assessee. However, this issue was not further analyzed due to the primary focus on jurisdiction. Conclusion: The Tribunal held that the assessment framed by the DCIT was without jurisdiction and thus bad in law. The appeal of the assessee was allowed on this ground, rendering the other issues secondary and not addressed in detail. The decision emphasized the importance of adhering to jurisdictional mandates as prescribed by CBDT notifications and statutory provisions.
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