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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 23.02.2024 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“ld. CIT(A)”] in Appeal No. CIT (A), Gurgaon- 1/11612/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 23.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that the assessee is an individual and filed his return of income on 05.11.2017 declaring total income at INR 39,58,400/-. The case was selected for scrutiny under CASS and the notice was issued by ITO, Ward-1(3), Gurgaon. Thereafter, various notices were issued and replies were filed by the assessee. After considering the submissions, total income was assessed at INR 3,40,09,154/- by making addition of INR 1,40,51,028 u/s 68 r.w.s.115BBE of the Act and further disallowance of INR 1,59,99,726/- was made being 5% of the expenses claimed.
Against the said order, the assessee preferred an appeal before ld. CIT(A) who vide impugned order dated 23.02.2024, dismissed the appeal of the assessee and confirmed the additions / disallowance made.
Aggrieved by the order of the ld. CIT(A), the assessee has raised following grounds of appeal:-
1.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts in dismissing the appeal and confirming the additions without providing proper opportunity of being heard, especially when additional evidences were admitted but did not wait for receiving of remand report ITNS-51 from the Ld. AO, which is in violation of the principal of natural justice.
2.On the facts and circumstances of the case, The Ld. CIT(A) erred in not properly adjudicating the additional evidences submitted under Rule 46A of the Income Tax Rules, 1962 despite admitting the same, and failed to appreciate that the Ld. AO did not furnish any remand report despite repeated opportunities.
3.On the facts and circumstances of the case, The Ld. CIT(A) erred in confirming the addition of Rs.65,74,394/- relating to opening balances of unsecured loans u/s 68 in a mechanical manner without applying judicial mind and without dealing with the assessee's detailed submissions, contrary to the principles laid down in various judicial precedents.
4.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts in confirming the addition of Rs. 1,40,51,028/ as unexplained cash credit u/s 68 without considering the additional evidence i.e. documents relating to identity and credit worthiness of the lenders as well as genuineness of the transactions provided during appellate proceedings.
5.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts that being the appellant is the proprietor of two firms namely M/s. Paramhans Enterprises and Sheetal catering Services. The amount payable by one firm Rs. 6,54,545/- is Corresponding receivable by another firm of the same proprietor and not in the nature of unsecured loan but a capital addition in the firm.
6.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts in confirming the additions made by the Ld. AO without being considering the fact that the amounts payable to sister concerns those are not third parties and the amount properly received through banking channels and duly reflected in their books of accounts also.
7.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts in confirming the additions made by Ld. AO an addition of Rs. 1,59,99,726 i.e. 5% of total expenses of Rs.31,99,94,521/-without identifying any specific defect, unsupported by law or facts, and merely on estimations and presumptions arbitrarily, illegally without any charging section of the act and without any evidence contrary to the claim of the appellant.
8.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts by not considering the fact that the appellant is doing the business of labour supply and canteen services for labours. The material amount of total expense are paid as the wages and salaries of manpower supply and amount payable for statutory liabilities and their welfare purposes in the ordinary course of business, even there is no such addition in any of the previous year relating to same business.
9.On the facts and circumstances of the case, the learned CIT (A) has erred in law and in facts by not considering the evidences and supporting documents available on record with Ld. AO submitted during the original assessment proceedings that could substantiate the claim of the appellant.
10.The appellant seeks leave to amend or addition to the grounds of appeal, any time before hearing of the appeal."
This appeal was filed delayed by 440 days by the assessee for which an application for condonation of delay alongwith an affidavit of the assessee reaffirming the facts stated in the application are filed. It is stated that the order of LD. CIT(A) was served on e-filing portal and assessee due to his health was confined to bed and thus the appeal could not be filed in time. Assessee also filed medical reports in support of the claim. It is further stated that the delay was neither intentional nor deliberate but purely due to the above unavoidable circumstances. It is thus requested that delay being bonafide, deserves to be condoned and appeal be admitted for adjudication.
Per contra, Ld. Sr. DR opposed to the condonation of delay.
After considering the arguments of both the parties, we find that there is reasonable and sufficient cause with the assessee in filing the appeal delayed by 440 days. It must be remembered that in every case of delay there can be some lapses of the litigant concerned, that alone is not enough to turn down the plea of assessee and to shut the doors against it. When the explanation does not smack of mala fide or it is not put forth as a part of dilatory strategy, the Courts must give utmost consideration to such litigant and its right of hearing of the appeal on merit ought not to be shut. Considering the overall facts and circumstances of the case and in the larger interest of justice, delay in filling the appeal is condoned and appeal of the assessee is admitted for adjudication.
During the course of hearing, the assessee filed an application for admission of additional grounds of appeal under Rule 11 of Income Tax Appellate Tribunal Rules, 1963 dated 18th November 2025 and submits the additional grounds of appeal are purely legal in nature and requires no verification, therefore, the same be admitted for adjudication. Reliance is placed on the judgment of Hon’ble Supreme Court in the case of NTPC Limited Vs. CIT reported in 229 ITR 383 (SC). The additional grounds of appeal taken read as under:
"1.The assessment is invalid and without jurisdiction as the appellant's returned income (RS. 39,58,400/-) for AY 2017-2018 exceeded Rs. 20,00,000/- and, therefore, jurisdiction over the appellant lies with the Assistant/ Deputy Commissioner only and not with the ITO, Ward 1(3), Gurgaon. This is based on CBDT Circular No, 1/2011 [F.No. 187/12/2010 IT(A-I)] dated 31.01.2011. Hence, the assessment order passed by Ld. IT0 Ward 1(3) Gurgaon dated 23-12-2019 is invalid, illegal, and without jurisdiction."
"2.The assessment is invalid and without jurisdiction as the assessment proceedings in the case of appellant are based on statutory notice u/s 143(2) dated 16/08/2018 issued by Ld. ITO Ward 1(3) Gurgaon, which is duly mentioned in assessment order dated 23/12/2019 and even in show cause notice dated 11/11/2019, The notice issued u/s 143(2) dated 16/08/2018 is without jurisdiction, hence invalid, illegal and bad in law. The notice as well as subsequent proceedings including impugned assessment order dated 23/12/2019 based on notice issued by ITO without jurisdiction are void-ab initio and need to be quashed."
"3.The Learned Assessing Officer has erred in law and on facts in making an addition of Rs. 1,40,51,028/- and Rs. 1,59,99,726/- to the Appellant's total income, as the said addition is made without reference to and application of any valid charging section/provision of the Income Tax Act, 1961. An addition cannot be sustained in law merely by disbelieving the explanation of the Appellant without invoking the appropriate deeming or charging section under which the income is sought to be taxed,"
"4.The Learned Assessing Officer has further erred in making the said addition of Rs. 1,40,51,028/- and Rs. 1,59,99,726/- by passing a non-speaking and unreasoned order, which is violative of the principles of natural justice and is, therefore, liable to be set aside/quashed.
On the other hand, Ld. Sr. DR for the Revenue submits that additional grounds of appeal require verification on the part of the AO therefore, the same should not be admitted at this stage.
After considering the submissions and perused the additional ground of appeal taken, we find that the assessee has challenged the validity of the assessment order being passed without jurisdiction. All the facts related to these grounds of appeal are available with us thus requires no verification from the AO. Therefore, by respectfully following the judgement of Hon’ble Supreme Court as relied upon by the assessee, the additional grounds of appeal taken by the assessee are admitted for adjudication.
First we take additional Grounds of appeal Nos.1 & 2 raised by the assessee where the assessee has challenged the validity of assessment order for want of jurisdiction of the AO when the notice u/s 143(2) was issued by AO having no jurisdiction over the assessee.
Before us, Ld.AR for the assessee submits that return of income was filed, declaring total income of INR 38,98,400/- and in terms of CBDT Instruction No.1/2011, the jurisdiction lies with ACIT and not with ITO. However, notice u/s 143(2) of the Act dt. 16.08.2018 was issued by ITO, Ward-1(3), Gurgaon. Thereafter, the impugned assessment order u/s 143(3) of the Act, was also passed by the ITO, ward-1(3), Gurgaon dt. 23.12.2019. It is thus, prayed by Ld.AR that the order being passed on the basis of notice u/s 143(2) issued by the assessing officer having no jurisdiction over the assessee and thus assessment order is bad in law and deserves to be quashed. He placed reliance of the following judgments:
- Ashok Devichand Jain Vs. Union of India 452 ITR 43 (Bombay)
- Sapna Rastogi Vs ITO in ITA No. 617/Del/2024 dt. 28.08.2024
- Shree Deosharwali Oil Industries Vs. ITO in ITA No. 167/Ctk/2024
- Chinmoy Mondal Vs ACIT in ITA No. 1148/Kol/2025.
On the other hand, ld. Sr. DR for the Revenue vehemently supported the orders of the AO and ld. CIT(A). It was the submission that the Assessing officer has concurrent jurisdiction and the ITO was competent to issue notice even though notice is liable to be issued by ACIT, Circle Gurgaon. It was the submission that in any case, it is curable u/s 292BB of the Act.
Heard the contentions of both the parties at length and perused the material available on record. The notice issued u/s 143(2) dt. 16/08/2018 by the ITO, ward-1(3), Gurgaon is reproduced as under:
भारत सरकार/ GOVERNMENT OF INDIA वित्त मंत्रालय/ MINISTRY OF FINANCE आयकर विभाग/ INCOME TAX DEPARTMENT OFFICE OF THE INCOME TAX OFFICER ITO WARD 1(3) GURGAON
सेवा में/ To, BALRAJ SHARMA 604/01 OPP. FIRE STATION ,NEW RAILWAY ROAD DAYA NAND COLONY, GURGAON 122001 ,Haryana India
स्थायी लेखा संख्या/ PAN: AXRPS9683Dनिर्धारण वर्ष/ AY: 2017-18नोटिस संख्या / Notice No.: ITBA/AST/S/143(2)/2018-19/1011537507(1)दिनांक/ Dated: 16/08/2018
आयकर अधिनियम, 1961 की धारा 143(2) के अधीन नोटिस
Notice under section 143(2) of the Income-tax Act, 1961
संवीक्षा (कंप्यूटर आधारित संवीक्षा चयन) Scrutiny (Computer Aided Scrutiny Selection)
महोदय/महोदया/ मेसर्स, Sir/ Madam/ M/s,
आपको सूचित किया जाता है कि निर्धारण वर्ष 2017-18 के पावती संख्या 289442771051117 के अनुसार आपके द्वारा दिनांक 05/11/2017 को दाखिल की गई आयकर विवरणी को संवीक्षा के लिए चुना गया है।
This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack. no. 289442771051117 on 05/11/2017 has been selected for Scrutiny.
2.इस संबंध में, आपको दिनांक 17/09/2018 को 05:00 PM तक साक्ष्य प्रस्तुत करने अथवा साक्ष्य प्रस्तुत कराने का अवसर प्रदान किया जा रहा है जिस पर आप उक्त आयकर विवरणी के समर्थन में निर्भर हैं/रहेंगे।
2.In this regard, an opportunity is being given to you to produce or cause to produce any evidence on which you may like to rely in support of the said return of income by 17/09/2018 at 05:00 PM.
3.उपर्युक्त निर्दिष्ट प्रमाण / सूचना को आपको ऑनलाइन माध्यम से इलेक्ट्रॉनिक रूप में incometaxindiaefiling.gov.in पर अपने ई-फाइलिंग खाता द्वारा प्रस्तुत किया जाना है। बाद की निर्धारण कार्यवाही भी आयकर विभाग की 'ई-कार्यवाही' सुविधा द्वारा की जायेगी। 'ई-कार्यवाही' पर एक संक्षिप्त नोट आपके संदर्भ के लिए संलग्न है।
3.The evidence/information specified above has to be furnished online electronically through your E-filing account in incometaxindiaefiling.gov.in. Subsequent assessment proceedings shall also be conducted electronically through the 'E-Proceeding' facility of Income-tax Department. A brief note on 'E-Proceeding' is enclosed for your kind reference.
4.निर्धारण कार्यवाही के दौरान, यदि आवश्यक होगा तो सूचना / दस्तावेज हेतु विशेष प्रभावी (यों) या अधियाचना (यों) को बाद में जारी किया जाएगा।
4.In course of assessment proceedings, if required, specific questionnaire(s) or requisition(s) for information/document shall be issued subsequently.
5.कृपया ध्यान दें कि यदि आपके पास ई-फाइलिंग खाता है तो आपके लिए पैरा 3 लागू है। आपके द्वारा स्वयं अपना खाता न बना लेने तक निर्धारण कार्यवाही आपके द्वारा वर्णित की गई ई-मेल के माध्यम से या मैन्युअल रूप से (यदि ई-मेल उपलब्ध नहीं है) की जाएगी।
We observe that as per the CBDT Instruction No.1/2011 dated 31.01.2011 u/s 119 of the Act in the present case, the assessee has declared an income of Rs. 38,98,400/- and as per the Instruction, income upto Rs.20,00,000/- is with the ITOs and anything above Rs.20,00,000/-, assessment has to be completed by ACs/DCs. In the given case, we observed that as per the income declared by the assessee, the jurisdiction falls under ACs/DCs however the assessment was completed by ITO, Ward 1(3), Gurgaon. The revenue has not brought on record any order passed u/s 127 for transfer of jurisdiction. Considering the peculiar facts on record, we observe that actual jurisdiction lies with ACs/DCs and it is beyond the jurisdiction of ITOs. Therefore, notice u/s 143(2) to assess the income of the assessee is beyond the jurisdiction of the ITO. Therefore, the jurisdiction notice u/s 143(2) is bad in law and accordingly, even assessment order passed with wrong jurisdiction is bad in law.
The Hon’ble Jurisdictional High Court in the case of PCIT Vs. Vimal Gupta reported in 2017 (10) TMI 1670 (Delhi) held the assessment order as invalid where the notice u/s 148 was issued by the authority having no jurisdiction over the assessee. The relevant observations of the Hon’ble Court are as under:
1.“This is an appeal filed by the Revenue against an order dated 23rd December 2015 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 1211/Del/2010 for the Assessment Year (‘AY’) 2006-07.
2.Although other grounds have been pressed by the Revenue regarding the validity of the impugned order of the ITAT holding the assessment order passed under Section 148 of the Income Tax Act, 1961 (‘Act’) to be invalid, a threshold ground urged is that the ITAT erred in holding in the impugned order that the assessment made by the Additional Commissioner of Income Tax (‘ACIT’) Circle 34 (1) was without jurisdiction. It has been noticed that the matter was transferred to the said ACIT by the Income Tax Officer (‘ITO’) Ward 34 (4), New Delhi without an appropriate order having been issued under Section 127 of the Act. Further that the ACIT did not himself issue the notice under Section 148 of the Act.
3.The ITAT has in para 13 of the impugned order specifically adverted to the above aspect and correctly held that “The ACIT, Circle 34(1), New Delhi has admittedly not recorded that he had reasons to believe that income chargeable to tax of the Assessee has escaped assessment. He continued reassessment proceedings initiated by the ITO, Ward 34(4) of the Act without independently recording reasons for reopening or issuing a fresh notice u/s 148 of the Act.” Further the ITAT noted that “There is no order u/s 127 of the Act transferring the jurisdiction of the case from ITO, Ward 34(4) to ACIT, Ward 34(1). Thus this order of reassessment passed by the ACIT u/s 34(1) of the Act is without jurisdiction and hence is bad in law.”
4.In the present memorandum of appeal no attempt has been made by the Revenue to aver whether in fact there was an order under Section 127 of the Act transferring the case to the ACIT, Circle 34(1). That being the position, the impugned order of the ITAT cannot be faulted. In view of the above conclusion, there is no occasion to examine the other questions urged by the Revenue in this appeal.
5.No substantial question of law arises. The appeal is dismissed.”
Similar view was expressed by the hon’ble Bombay High court in the case of Ashok Devichand Jain Vs. Union of India (supra). Hon'ble Calcutta High Court in the case of Shree Shoppers Ltd in ITAT/39/2023 IA No.GA/1/2023 dated 15.03.2023, wherein, the Hon'ble Calcutta High Court has held as follows:
"The short issue which falls for consideration in the instant case is whether there is valid notice issued under section 143(2) of the Act for commencing the scrutiny assessment. The Tribunal has noted the facts and rendered a finding that on the date when the case was selected for scrutiny, the authority who issued the notice namely, the Income Tax Officer, Ward No.9(4), Kolkata did not have jurisdiction and the jurisdiction was with the Deputy Commissioner of Income Tax. The following findings has been recorded by the Tribunal:
Therefore, the legal ground stands to be admitted and the same relates to invalid notice issued u/s. 143(2) of the Act. It is a settled position of law that for carrying out the assessment proceedings u/s. 143(3) of the Act, the statutory requirement of serving of valid notice u/s. 143(2) of the Act is must and in absence thereof the subsequent proceedings become invalid. In the case of assessee, the facts are that the assessee has declared income of Rs.48,47,180/- in the e-return filed on 26.09.2012. For selecting the case for scrutiny notice u/s. 143(2) of the Act was issued by ITO, Ward- 9(4), Kolkata dated 23.09.2013. The Central Board of Direct Taxes (CBDT vide Instruction No. 1/2011 (supra) revised the monetary limit for issuing notice by ITO/DCs/ACs. Through this instruction it stated that in case of metro cities in case of corporates declare income above Rs. 30 lakh the jurisdiction of such corporate assessee will lie with the DCs/ACs. It is not in dispute that as on the date of selecting the case for scrutiny, the very basis for having jurisdiction over the assessee is the returned income which was more than Rs. 30 lakhs and the same was lying with the DCs/ACs but the notice u/s. 143(2) of the Act has been issued by ITO, Ward-9(4), Kolkata. It is true that subsequently the assessment has been framed by DCIT, Circle-9(2), Kolkata but the point in dispute is that on date of issuing a notice u/s. 143(2) of the Act, whether the ITO, Ward-9(4), Kolkata was having a valid jurisdiction to issue such notice u/s. 143(2) of the Act.
The above factual position recorded by the Tribunal is not in dispute. Therefore, we are of the clear view that the Tribunal rightly allowed the assessee's appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter.
Thus, we find no ground to differ with the findings recorded by the learned Tribunal."
The Co-ordinate Bench of Delhi Tribunal in the case of Sapna Rastogi Vs. ITO reported in 2024 (8) TMI 1517 (ITAT, Delhi) has held the reassessment order as invalid as the notice u/s 148 was issued by the AO having no jurisdiction over the assessee. The relevant observations are as under:
5.“We have given thoughtful consideration to the matter on record and the submissions. The assessee had filed a return of income on 07.07.2013 declaring the total income at Rs. 18,85,550/-. The assessee is an individual and, taking into consideration Instruction No. 01/2011 available at page 245 of the paper book, for non-corporate returns in case of non-metro cities (mofussil areas), the returns above Rs. 15 lakhs have to be assessed by the officers of the rank of Assistant Commissioners/Deputy Commissioners. The report which is filed by the AO dated 26.06.2024 and reproduced above categorically mentions the fact that it is only on 15.05.2024, the PAN of the assessee has been transferred to ACIT, Circle 1(1)(1), Meerut, from ITO, Ward 1(2)(5), Meerut, as per CBDT Instruction No. 05/2011 dated 31.01.2011 vide which jurisdiction of noncorporate returns above Rs. 15 lakhs lies with ACIT/DCIT and upto Rs. 15 lakhs lies with ITO.
5.1Now, admittedly, the notice u/s 148 dated 30.03.2021, copy of which is placed at page 7 of the paper book, is issued by ITO, Ward-1(2)(5), Meerut. Thus, certainly, this Revenue Officer did not have the pecuniary jurisdiction as vested by the Board vide CBDT Instructions No. 01/2011 dated 31.03.2011.
5.2In this context, the coordinate Bench order in the case of J. Mitra & Brothers vs. ACIT, ITA No. 3643/Del/2023 decided on 10.04.2024 has been relied by the ld. AR wherein the coordinate Bench, relying another decision in the case of Kelvin International vs. DCIT, ITA No. 5363/Del/2017, order dated 22.12.2023, has held that the exercise of jurisdiction of Revenue Officer who did not have the jurisdiction given by the CBDT Instructions cannot be sustained and the assessment order is vitiated. The Hon’ble Allahabad High Court in the case of PCIT-II, Lucknow vs. Mohd. Rizwan, Proprietor M/s M.R. Garments, in ITA No. 1000/2015, order dated 30.03.2017 has examined this aspect on the basis of numerous judicial pronouncements and while considering the question, if the notice u/s 148 of the Act, issued by an authority not having jurisdiction, would be valid by referring to section 292BB of the Act, has held that jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction, an assessee cannot confer upon any jurisdictional authority, some which he lack inherently. The Hon’ble Allahabad High Court has decided this issue against the Revenue holding that notice u/s 148 is not a procedural subject, but, a jurisdictional one as it is a condition precedent for initiation of proceedings. This judicial pronouncement squarely covers the issue in favour of the assessee.
5.3The judgments which the ld. DR has relied when taken into consideration, are not applicable to the facts and circumstances as the judgements in the cases of Home Finders Housing Ltd. (supra) and Sagar Developers (supra) are in the context of the non-disposal of the objections and the judgement in the cases of Abhishek Jain (supra) and S.S. Ahluwalia (supra) are primarily concerned with territorial jurisdiction in regard to which there may be instance of concurrent jurisdiction of the two assessing officers. However, the case before us concerns the pecuniary jurisdiction vested by the Board and if that is not complied, the invoking of jurisdiction is vitiated and, consequently, the assessment order is vitiated. The ground No. 1 with sub-grounds in regard to this issue are sustained.
6.In the result, the appeal of the assessee is allowed and the assessment order is quashed.”
Now coming to the issue of Section 292BB, a perusal of the same would clearly shows, that was a case where a valid notice has been issued and the assessee has cooperated in such proceedings. That is a provision to protect the issuance of notice more so service on the AO, it does not protect invalid issuance of notice on account of jurisdiction. Section 292 B is for blocking the invalidation for reasons of any mistake, defect or omission to protect a notice which has been issued without jurisdiction. In the present case, admittedly, the Assessing Officer who has issued the notice u/s 148 of the Act, did not have the pecuniary jurisdiction in view of the instruction issued by CBDT (supra). This being so, respectfully following the principles laid down by hon’ble Bombay High court in the case of Ashok Devichand Jain (supra), of Hon'ble Calcutta High Court in the case of Shree Shoppers (supra) and hon’ble jurisdictional high court in the case of Vimal Gupta (supra) as also the decision of the Co-ordinate Bench of Delhi Tribunal in the case of Sapna Rastogi (supra), it is held that notice issued u/s.148 of the Act is bad in law and consequential assessments are also bad in law. Accordingly, additional Ground of appeal Nos. 1 & 2 raised by the assessee are allowed.
Since we have allowed assessee’s additional legal grounds of appeal thus, the other grounds of appeal including other additional grounds of appeal on merits of the additions /disallowance made, need no adjudication.
In the result, appeal of the assessee is allowed.