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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by assessee against the order dated 12.02.2026 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-4/10668/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 25.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
During the course of hearing, vide letter dated 29.06.2026, assessee has taken additional Grounds of appeal which read as under:-
A. “That Ld AO erred in passing of the assessment order u/s 143(3) without prior valid service of statutory notice u/s 143(2) dated 09.08.2018 on the assessee company through either mode by email or post as per Rule 127 without which entire proceedings are invalid and non-starter.
B. On the facts and circumstances of the case and in law, the notice u/s 143(2) issued by ACIT Circle 11(2) is invalid as per pecuniary jurisdiction of the assessee company as stated in CBDT Instruction No.1/2011 which is subsequently transferred to correct jurisdictional AO who passed assessment order i.e ITO Ward 11(4) Delhi.
C. On facts and circumstances of the case and in law, there is no valid notice u/s 143(2) issued in this case by an AO who passed assessment order and accordingly the assessment order passed on the foundation of such notice is liable to be quashed.
D. On facts and circumstances of the case, assessment order passed u/s 143(3) is invalid as being passed in transgression of scope of limited scrutiny case to verify applicability of section 56(2)(viib) for large share premium received by venturing into unexplained cash credits under section 68 of both share capital as well as share premium without taking prior approval of PCIT in converting limited scrutiny case.”
The assessee claimed that the additional Grounds of appeal taken are neither willful and nor deliberately and purely legal issue are raised which do not require any new / fresh investigation. Ld. AR submits that notice issued u/s 143(2) issued by ACIT, Circle-11(2) is invalid as the jurisdiction over the assessee company as per CBDT instruction No.1/2011 was with the ITO and the case was later transferred to correct jurisdictional AO who passed assessment order i.e. ITO, Ward-11(4), Delhi.
On the other hand, ld. Sr. DR for the Revenue vehemently opposed the admission of the additional Grounds of appeal taken at this stage and submits that the additional Ground of appeal taken now should not be admitted.
Heard the contentions of both the parties at length and perused the material available on record. From the perusal of the additional Grounds of appeal, it is observed the additional grounds of appeal are purely legal in nature and requires no verification and thus are admitted for adjudication in terms of the order of hon’ble Apex court int eh case of NTPC Ltd. reported in 229 ITR 383 (SC).
Since the additional Grounds of appeal are legal grounds where the assessee has challenged the very assumptions of jurisdiction by issue of notice u/s 143(2) of the Act by the AO who was not having jurisdiction over the assessee thus they are taken first for adjudication.
Heard the parties and perused the material available on record. It is observed that the notice u/s 143(2) was issued by ACIT, Circle-11(2), Delhi though the jurisdiction over the assessee company was with the ITO as the return of income was filed declaring total income of 24,91,540/- and as per the CBDT instruction No.1/2011 which is subsequently transferred to correct jurisdictional AO who passed assessment order i.e. ITO, Ward-11(4), Delhi.
Brief facts of the case are that the assessee is a company engaged in the business of real estate, e-filed its return of income, declaring total income of INR 24,91,540/- on 16.10.2017. The case of the assessee was taken up for limited scrutiny under CASS and the notice u/s 143(2) was issued on 09.08.2018 and duly served upon the assessee. Thereafter, the impugned order was passed by making addition of INR 4,85,00,000/- and total income was thus, computed at INR 5,09,91,540/- vide assessment order dated 25.12.2019 passed u/s 143(3) of the Act.
Against the said order, assessee filed an appeal before ld. CIT(A) who vide impugned order dated 12.02.2026, dismissed the appeal of the assessee and confirmed the addition of INR 4,85,50,000/- made u/s 68 of the Act.
Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking various grounds of appeal mentioned in the appeal memo.
Before us, the assessee has taken additional Ground of appeal No. 2, challenging the validity of the assessment order based on the assumption of jurisdiction by issue of notice u/s 143(2) of the Act by the AO who was not having jurisdiction over the assessee in terms of CBDT Instruction No. 01/2011 dated 31.01.2011. Ld. AR submits that in the instant case, return of income was e-filed declaring total income at INR 24,91,540/-. Thus, in terms of CBDT Instruction No. 01/2011 dated 31.01.2011, jurisdiction over the assessee lies with the ITO however, the notice u/s 143(2) was issued by ACIT, Circle 11(2) Delhi though the order was passed by the ITO 11(4) without any order passed u/s 127 of the Act. Copy of issue notice u/s 143(2) is placed at page 20 of the Paper Book. Ld. AR submits that the hon’ble Bombay High Court in the case of Ashok Devichand Jain vs Union of India & Others reported in [2022] (3) TMI 1466 dated 08.03.2022 and various orders of the Co-ordinate Benches of Tribunal, held that the assumption of jurisdiction by the AO having no jurisdiction over the assessee is invalid and consequent assessment order passed was quashed. He prayed accordingly
On the other hand, ld. Sr. DR vehemently supported the orders of the lower authorities and submits that the order was passed by the same officers of the same Range and thus cannot be held as invalid order.
Heard the contentions of both the parties at length and perused the material available on record. The notice issued u/s 143(2) dt. 09.08.2018 issued by ACIT, Circle-11(2), Delhi is reproduced as under:-
सेवा में/ To, HURON BUILDERS PRIVATE LIMITED A-19, 2ND FLOOR, STAR CITY, DISTRICT CENTRE MAYUR VIHAR NEW DELHI 110091, Delhi India
स्थायी लेखा संख्या/ PAN: AABCH6627Eनिर्धारण वर्ष/ AY: 2017-18नोटिस संख्या / Notice No.: ITBA/AST/S/143(2)/2018-19/1010970584(1)दिनांक/ Dated: 09/08/2018
आयकर अधिनियम, 1961 की धारा 143(2) के अधीन नोटिस
Notice under section 143(2) of the Income-tax Act, 1961
सीमित संवीक्षा (कंप्यूटर आधारित संवीक्षा चयन)
Limited 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 245999041161017 के अनुसार आपके द्वारा दिनांक 16/10/2017 को दाखिल की गई आयकर विवरणी को सीमित संवीक्षा के लिए चुना गया है और निम्नलिखित कारणों / मुद्दों को जांच हेतु अभिविनिष्ट किया गया है:
This is for your kind information that the return of income filed by you for assessment year 2017-18 vide ack. no. 245999041161017 on 16/10/2017 has been selected for Limited Scrutiny and following issue(s) have been identified for examination:
i.Share premium
2.इस संबंध में, आपको दिनांक 21/08/2018 को 02:20 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 21/08/2018 at 02:20 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।
Note: If digitally signed, the date of digital signature may be taken as date of document. C R BUILDING, ITO, I P ESTATE, NEW DELHI, DELHI, Delhi, 110002
As per the CBDT Instruction No.1/2011 dated 31.01.2011, the jurisdiction in the instant case was with the ITO as the assessee has declared total income of Rs. 24,91,540/- however, notice u/s 143(2) was issued by the ACIT, circle 11(2) Delhi, and no order u/s 127 of the Act was passed before the issue of notice u/s 143(2) of the Act transferring the jurisdiction though the assessment order was passed by the ITO, ward 11(4) Delhi.
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.”
The Hon’ble Bombay High Court in the case of Ashok Devichand Jain Vs. Union of India (supra) under identical circumstances has held the assessment order as without jurisdiction and quashed the same. 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 Coordinate 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.”
Considering the peculiar facts on record, and by respectfully following the judicial pronouncements as relied upon herein above, we are of the considered opinion that when the jurisdiction lies with ITO however, the notice u/s 143(2) was issued by the ACIT, Circle 11(2), Delhi to assess income of the assessee which was beyond his jurisdiction, therefore, the notice so issued u/s 143(2) is bad in law and the consequent assessment order passed on the basis of such invalid notice is hereby quashed. The additional Ground of appeal No. 2 of the assessee is thus allowed.
Since we have already allowed assessee’s additional Ground of appeal No. 2, the other grounds of appeal taken on merits of the additions /disallowance made, need no adjudication.
In the result, appeal of the assessee is allowed.