2022 (6) TMI 635 - AT - Income Tax

Validity of assessment - notice u/s. 143(2) was issued by the AO having no jurisdiction over assessee - HELD THAT - As the assessee being a non corporate residing at Kolkata having income above Rs. 20 lakhs, the jurisdiction was with DCIT/ACIT and notice for selecting the case of the assessee for scrutiny u/s. 143(2) of the Act was only with ACIT/DCIT. Since in the instant case said Instruction of CBDT has not been followed and the ITO having no jurisdiction over the assessee issued notice u/s. 143(2) of the Act, the same is bad in law and thus, the assessment proceedings becomes void ab initio. We, therefore, quash the impugned assessment proceedings and allow the legal ground No. 1 raised by the assessee.

Summary

Issues:
1. Validity of assessment proceedings due to jurisdictional issue
2. Disallowance of interest expenses

Analysis:
Issue 1: Validity of assessment proceedings due to jurisdictional issue
The appeal concerns the assessment year 2015-16 and challenges the order of the Commissioner of Income-tax (Appeals) dated 12-03-2019, arising from the assessment order under section 143(3) of the Income Tax Act. The primary contention raised by the assessee is the lack of jurisdiction of the Assessing Officer (AO) who issued the notice under section 143(2) of the Act. The assessee argued that as per CBDT Instruction No. 1/2011, the jurisdiction for non-corporate assesses with income above specified limits lies with ACIT/DCIT. Despite being a non-corporate assessee residing in Kolkata with income exceeding Rs. 20 lakhs, the notice was issued by an ITO lacking jurisdiction. The Tribunal referred to a similar case and held that the notice issued by the ITO without proper jurisdiction renders the assessment proceedings void ab initio. Consequently, the assessment was quashed based on this legal ground, rendering other grounds moot.

Issue 2: Disallowance of interest expenses
The other grounds raised by the assessee regarding the disallowance of interest expenses were not adjudicated upon due to the quashing of the assessment proceedings on the jurisdictional issue. The Tribunal deemed it unnecessary to delve into the merits of the disallowance given the primary legal ground leading to the nullification of the assessment. Therefore, the appeal was allowed solely on the basis of the jurisdictional flaw, resulting in the quashing of the assessment proceedings for the assessment year in question.

In conclusion, the Tribunal upheld the appeal of the assessee, quashing the assessment proceedings due to the jurisdictional issue, and did not address the other grounds raised by the assessee as they became academic in light of the primary legal challenge.