2021 (2) TMI 181 - AT - Income Tax

Validity of assessment - No Notice u/s 143(2) issued - Jurisdiction ITO or DCIT - HELD THAT - In the remand report, the AO clearly stated that notice u/s 143(2) of the Act was issued by DCIT, Circle-1, Kolkata. The ld. D/R could not controvert the contention of the assessee that no notice u/s 143(2) of the Act was issued by the DCIT-13(1), Kolkata, who completed the assessment. The income of each of all these four assessee companies which are in appeal before us is below ₹2 lakhs. Thus, as per the CBDT Instruction No. 1/2011, the jurisdiction of these assessees, based on monetary limits lies with the ITO and not with the DCIT. This fact could not be controverted by the ld. D/R. CBDT instructions are binding on all the Income Tax Authorities. See HILLMAN HOSIERY MILLS PVT. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11 (1) 2021 (2) TMI 26 - ITAT KOLKATA The orders are bad in law for the reason that the assessing authority passed the order u/s 143(3) of the Act i.e. DCIT-13(1), Kolkata has not issued a notice u/s 143(2) of the Act and also for the reason that the jurisdiction of these cases lies with the ITO and not the DCIT. Appeals of the assessees are allowed.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) issuing notice under Section 143(2) of the Income Tax Act, 1961.
2. Validity of assessment orders passed without issuing notice under Section 143(2) by the jurisdictional AO.
3. Applicability of CBDT Instruction No. 1/2011 regarding monetary limits for jurisdiction.
4. Consequences of administrative directions and their violation.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) issuing notice under Section 143(2) of the Income Tax Act, 1961:
The assessees contended that the initial notices under Section 143(2) were issued by DCIT, Circle-1, Kolkata, who did not have jurisdiction over them as their companies were located in Howrah. The jurisdiction was subsequently transferred to DCIT-13(1), Kolkata, who did not issue fresh notices under Section 143(2). The Tribunal found that the notices issued by DCIT, Circle-1, Kolkata, were without jurisdiction, and DCIT-13(1), Kolkata, who completed the assessments, did not issue the required notices under Section 143(2). This was a significant procedural lapse.

2. Validity of assessment orders passed without issuing notice under Section 143(2) by the jurisdictional AO:
The Tribunal emphasized that the issuance of notice under Section 143(2) by the jurisdictional AO is a statutory requirement. The absence of such notice from the jurisdictional AO (DCIT-13(1), Kolkata) rendered the assessment orders invalid. This principle was supported by various case laws, including the decision in Hillman Hosiery Mills Pvt. Ltd. vs. DCIT, which held that an assessment order passed without issuing a notice under Section 143(2) by the jurisdictional AO is invalid.

3. Applicability of CBDT Instruction No. 1/2011 regarding monetary limits for jurisdiction:
The assessees argued that their income fell below ?2 lakhs, and as per CBDT Instruction No. 1/2011, the jurisdiction should lie with the ITO and not the DCIT. The Tribunal noted that the CBDT instructions are binding on all Income Tax Authorities. The DCIT did not have jurisdiction over the assessees based on the monetary limits, and this fact was not controverted by the Departmental Representative. The Tribunal followed the principles laid down in previous decisions, confirming that the jurisdictional limits must be adhered to.

4. Consequences of administrative directions and their violation:
The CIT(A) had previously held that monetary limits are not sacrosanct and that discretion vests with the Pr. CIT or DIT to adjust the monetary limit by up to ?5 lakhs. However, the Tribunal disagreed, stating that violation of administrative directions cannot be a ground to nullify the assessment, but in this case, the absence of a valid notice under Section 143(2) by the jurisdictional AO was a sufficient ground to quash the assessments. The Tribunal cited the Supreme Court's decision in CIT vs. Laxman Das Khandelwal, which clarified that Section 292BB does not cure the complete absence of a notice.

Conclusion:
The Tribunal quashed the assessment orders passed by DCIT-13(1), Kolkata, as they were invalid due to the non-issuance of notices under Section 143(2) by the jurisdictional AO. The appeals filed by the assessees were allowed, emphasizing the importance of adhering to jurisdictional requirements and statutory procedures in tax assessments.

← Previous Next →