2023 (7) TMI 1425 - AT - Income Tax

Jurisdiction of the AO in reopening of assessment - validity of jurisdiction assumed by the ACIT Circle-3(1), Raipur - notice u/s 143(2) of the Act issued by a non-jurisdictional officer​​​​​​​ - assessee's returned income as below the pecuniary limit for the DCIT/ACIT as per the CBDT instructions​​​​​​​ - who's jurisdiction to assess the case of the assessee? - HELD THAT - Admittedly, the assessee has filed its return of income for the assessment year 2007-2008 with a returned income which is below Rs. 15 lakhs. As per the CBDT Instruction No. 1/2011, dated 31.01.2011 and Instruction No. 6/2011, dated 08.04.2011, the jurisdiction over the case of the assessee located in mofussil areas i.e at Raipur, Chhattisgarh. Therefore, the jurisdiction to assess the case of the assessee was vested with an officer in the rank of ITO, whereas the case of the assessee was reopened by the DCIT-1(1), Raipur, which was subsequently transferred to ACIT, Circle-3(1), Raipur. Since the jurisdiction assumed by the ACIT Circle-3(1), Raipur, who has framed the assessment of the assessee was not in accordance with the CBDT Instruction No. 01/2011, dated 31.01.2011 and 06/2011, dated 08.04.2011, therefore, the instruction assumed was invalid in terms of non-following the binding instructions issued by the CBDT and, therefore, the order remained on the basis of such reopening was also void ab initio and needs to be struck down. Reopening proceedings were initiated without having vested jurisdiction by the DCIT-1(1), Raipur and also the same was thereafter wrongly been framed by an officer, who was not having jurisdiction over the case of the assessee as per the criteria laid down by the CBDT Instructions. The order framed u/s. 147/143(3) of the Act by the ACIT, Circle-3(1), Raipur, dated 11.02.2015 for the assessment year 20047-2008 in the case of assessee, is liable to be quashed and we do so. Thus, the legal ground of assessee is allowed.

Summary

Issues Involved:
1. Validity of reopening under Section 148 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer (AO) in reopening and making the assessment.
3. Sustaining the addition of Rs. 21,49,054 on account of alleged concealment of income.

Detailed Analysis:

1. Validity of Reopening under Section 148:
The assessee challenged the reopening of the assessment under Section 148, arguing that the notice was issued beyond the permissible four-year period and without any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal noted that the reopening was initiated based on the observation that certain balances were not reflected in the balance sheet, which led the AO to believe that income had escaped assessment. However, the Tribunal found that the reopening was invalid as the AO did not have the jurisdiction to issue the notice under Section 148 due to the pecuniary limits set by CBDT Instruction No. 1/2011 and Instruction No. 6/2011.

2. Jurisdiction of the Assessing Officer:
The Tribunal examined whether the AO had the proper jurisdiction to reopen and assess the case. The assessee's returned income was Rs. 5,22,820, which was below the pecuniary limit for the DCIT/ACIT as per the CBDT instructions. The Tribunal cited various case laws, including "Durga Manikanta Traders," "Sudhir Kumar Agrawal," and "Welcome Coir Industries," which supported the view that assessments made by an officer without proper jurisdiction are invalid. The Tribunal concluded that the DCIT-1(1), Raipur, did not have the jurisdiction to reopen the case, and the subsequent assessment by ACIT-3(1), Raipur, was also invalid. Therefore, the assessment order was quashed.

3. Sustaining the Addition of Rs. 21,49,054:
The Tribunal did not delve into the merits of the addition of Rs. 21,49,054 on account of alleged concealment of income since the assessment itself was found to be invalid due to lack of jurisdiction. The Tribunal noted that the AO had added the amount based on the assessee's failure to provide supporting documents and books of accounts. However, since the assessment was quashed, the Tribunal refrained from adjudicating on this issue.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order under Section 147/143(3) due to the invalid assumption of jurisdiction by the AO. The Tribunal did not address the other grounds related to the additions made by the AO, as the primary issue of jurisdiction rendered the assessment void ab initio. The decision was pronounced on 07/07/2023.