2023 (7) TMI 1426 - AT - Income Tax

Validity of scrutiny assessment - Assessment framed on the basis of notice issued u/s. 143(2) by the non-jurisdictional officer - validity of jurisdiction of the ld. AO i.e. ITO-1(1), Raipur mentioning the reason that the AO was not having pecuniary jurisdiction over the assessee for issuing notice u/s. 143(2) of the Act in the case of the assessee - HELD THAT - As decided in Durga Manikanta Traders 2023 (1) TMI 1099 - ITAT RAIPUR held that the assessment framed by the AO on the basis of notice issued u/s. 143(2) of the Act by the non-jurisdictional officer is void ab initio. In the present case, the ITO-1(1), Raipur having no jurisdiction over the assessee issued notice u/s. 143(2) of the Act, overlooking the binding Instructions of the CBDT as well as the Notification issued by the CCIT, Raipur, which is not sustainable in the eyes of law. Had the notice u/s. 143(2) of the Act been issued by the jurisdictional AO, i.e. DCIT-1(1), who was having pecuniary jurisdiction over the assessee, there would have been no case for the assessee to raise the issue of wrong assumption of jurisdiction. When the notice issued u/s. 143(2) of the Act is itself invalid owing to the wrong assumption of jurisdiction, the assessment framed thereafter has no legs to stand. Respectfully following the observations of the coordinate bench of the Tribunal in the case reproduced hereinabove, we set aside the order of the ld. CIT(A) and strike down the assessment order dated 27.03.2014. The legal ground raised by the assessee is allowed.

Summary

Issues Involved:

1. Validity of Jurisdiction of the Assessing Officer (AO)
2. Sustaining Additions on Estimation Basis
3. Admissibility of Additional Grounds

Issue-wise Detailed Analysis:

1. Validity of Jurisdiction of the Assessing Officer (AO):

The primary issue raised by the assessee was the validity of the jurisdiction of the AO, specifically the ITO-1(1), Raipur, in issuing the notice under section 143(2) of the Income Tax Act. The assessee contended that the ITO-1(1), Raipur, did not have the pecuniary jurisdiction to issue the notice as per CBDT Instruction No. 1/2011, dated 31.01.2011, and Instruction No. 6/2011, dated 08.04.2011. The instructions specified that cases with income above Rs. 15 lakhs in mofussil areas should be handled by an officer in the rank of ACIT/DCIT. The Tribunal, referencing various judicial precedents, including the Supreme Court's decision in Indian Oil Corporation Ltd. and the coordinate bench's decisions in Sudhir Kumar Agrawal and Ravi Sherwani, concluded that the notice issued by the ITO-1(1), Raipur, was invalid. Consequently, the assessment framed on the basis of such an invalid notice was void ab initio and needed to be struck down.

2. Sustaining Additions on Estimation Basis:

The AO had disallowed certain expenses claimed by the assessee on an estimation basis due to the non-submission of supporting bills and vouchers. Specifically, 5% of the repair and maintenance expenses amounting to Rs. 29,37,587/- and 25% of the labor charges amounting to Rs. 2,21,050/- were disallowed. The CIT(A) upheld these additions on the grounds that the assessee could not substantiate its claims. However, since the Tribunal struck down the assessment order itself due to the invalid jurisdiction of the AO, it refrained from adjudicating this issue further.

3. Admissibility of Additional Grounds:

The assessee raised additional grounds of appeal before the Tribunal, challenging the validity of the jurisdiction of the AO. The Tribunal admitted these additional grounds, citing the Supreme Court's decision in the case of National Thermal Power Co. Ltd., which allows the assessee to raise points of law even if not raised earlier. The Tribunal emphasized that the additional grounds were legal in nature and had a direct bearing on the tax liability of the assessee.

Conclusion:

The Tribunal allowed the appeal of the assessee, primarily on the ground that the notice under section 143(2) was issued by an officer who did not have the jurisdiction as per the binding instructions of the CBDT. Consequently, the assessment order was struck down as void ab initio. The Tribunal did not address the other grounds related to the additions made by the AO, as the assessment order itself was invalidated.