2024 (1) TMI 1380 - AT - Income Tax

Lack of territorial jurisdiction with the AO - challenge to the territorial jurisdiction of the AO, Ward 19(2)(4), Mumbai, who passed the assessment order - as submitted that the CIT (A) ought to have held that the notice issued by the AO u/s 143(2) of the Act and the consequent assessment order passed u/s 143(3) of the Act are without jurisdiction as per the provisions of Section 120 r.w.s. 124 - HELD THAT - A conjoint reading of Sections 120 and 124(1) of the Act, with the directions or orders issued by the Board, would indicate that the territorial jurisdiction of the AO is determined on the basis of place where the assessee resides and/or carries on his business or profession. As per notification the jurisdiction of ITO Ward 19(2)(4), Mumbai as notified u/s 120 of the Act extends to Ward D of the Municipal Corporation of Greater Mumbai, excepting the areas set out in the said notification. We, therefore, find that the AO of Ward 19(2)(4), Mumbai lacked territorial jurisdiction to pass the impugned assessment order. As noticed earlier, it is not in dispute that such an objection was raised within the stipulated time and was not dealt with by the AO. A perusal of order of CIT (A) would also go to show that CIT (A) has not dealt with this aspect, inasmuch as ground nos. 1 and 2 were separate and distinct grounds, than those on merits and thus, the disposal of the grounds on merits cannot amount to disposal of grounds nos. 1 and 2 as held by the CIT(A). It is trite that an order which is passed without jurisdiction (which is an issue which goes to the root of the matter) is non est in the eyes of law. Considering the fact that at the time of assessment, the appellant-assessee was residing and carrying on her profession at Bangalore, the assumption of jurisdiction by the AO at Mumbai was invalid. The change of address in the records and/or migration of PAN are not strictly relevant in the matter where the jurisdiction is governed by the statutory provisions as contained in Section 120 read with Section 124 of the Act and the notification issued by the Board.

Summary

Issues Involved:

1. Territorial jurisdiction of the Assessing Officer (AO).
2. Validity of the assessment order passed by the AO without jurisdiction.

Issue-wise Detailed Analysis:

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

The primary issue in this appeal is the challenge to the territorial jurisdiction of the AO, Ward 19(2)(4), Mumbai, who passed the assessment order for the assessment year 2017-18. The appellant contended that the AO lacked jurisdiction as the assessee was a resident and carried on her profession in Bengaluru, Karnataka, not Mumbai. The appellant relied on Sections 120 and 124 of the Income Tax Act, 1961, which govern the jurisdiction of income tax authorities based on the place of residence or business of the assessee. The appellant argued that the AO in Mumbai had no authority to issue a notice under Section 143(2) and pass an assessment order under Section 143(3) since the assessee's principal place of residence and profession was Bengaluru.

The appellant's counsel emphasized that the PAN migration to Bengaluru was completed on 26.02.2021, and the AO had been informed of the change of address prior to the assessment order. The counsel also highlighted that the field in the return of income mentioning the AO as Ward 19(2)(4), Mumbai, was auto-filled by the system based on the PAN, and not a voluntary act by the assessee. The Tribunal, after considering the submissions and the statutory provisions, concluded that the AO in Mumbai lacked territorial jurisdiction as the assessee was residing and carrying on her profession in Bengaluru at the time of assessment.

2. Validity of the Assessment Order Passed by the AO Without Jurisdiction:

The Tribunal examined whether the assessment order passed by the AO in Mumbai was valid, given the lack of jurisdiction. It was noted that the appellant had raised an objection to the AO's jurisdiction within the stipulated time under Section 124(3) of the Act. The Tribunal referred to Section 124(1) of the Act, which specifies that an AO has jurisdiction over an area based on the place where the assessee carries on business or resides. The Tribunal found that the jurisdiction of ITO Ward 19(2)(4), Mumbai, did not extend to Bengaluru, where the assessee was residing and practicing law.

The Tribunal cited relevant case law, including decisions by the Madras High Court and the Pune Bench of the Tribunal, which supported the view that an assessment order passed without proper jurisdiction is invalid. The Tribunal emphasized that jurisdictional issues go to the root of the matter, and an order passed without jurisdiction is non est in the eyes of law. Consequently, the Tribunal held that the assessment order was invalid due to the lack of territorial jurisdiction by the AO in Mumbai.

In conclusion, the appeal was allowed on the grounds of lack of jurisdiction, and the assessment order was set aside. The Tribunal did not address the merits of the assessment, as the jurisdictional issue was sufficient to dispose of the appeal. The order was pronounced in open court on 15/01/2024.