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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax, Delhi-4 [hereinafter referred to as ‘ld. PCIT] dated 10.03.2025 arising out of assessment order dated 15.03.2023 passed under section 147 of the Income Tax Act, 1961, for the Assessment Year 2018-19. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and circumstances of case and in law, the Id. PCIT - 4, New Delhi erred in initiating proceedings under section 263 of Income Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the Ld. CIT under section 263 of Act is bad in law, without jurisdiction and barred by limitation.
2.On the facts and circumstances of case and in law, the ld. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 147 r.w.s 143(3) of Act was erroneous and prejudicial to the interest of the revenue.
3.On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed
4.On the facts and circumstances of the case and in law, the Id. PCIT erred in stating that the assessment passed by the assessing officer was without making inquiries or verification which should have been made.
5.On the facts and circumstances of the case and in law, the various allegations/remarks made/adverse inference drawn by the ld. PCIT are erroneous.
6.On the facts and circumstances of case and in law, the Ld. PCIT erred in mentioning that issue of alleged bogus purchase of Rs. 4,22,74,671/-should be added u/s 69C r.w.s 115BBE instead of section 37 as assessed by the AO.
7.On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as the original assessment order itself is bad in law and without jurisdiction.
The principal contest raised by the appellant assessee through the above grounds of appeal is regarding the validity of order under section 263 of the Act dated 10.03.2025 passed by PCIT-4, Delhi. Brief factual matrix of the case as discerned from records is that Return declaring Income of Rs.40,70,350/- was filed by the assessee on 15.10.2018. The case was selected for scrutiny on account of some credible information with the ld. AO received from Investigation Wing, that the assessee had taken accommodation entries in the form of bogus purchases. The ld. AO proceeded to add an amount of Rs.4,22,74,671/- on account of bogus purchase u/s 37 of the Act vide his order u/s 147 r.w.s. 144B, dated 15.03.2023. Subsequently, ld. PCIT-4, Delhi, held the view that the ld. AO should have made addition u/s 69C of the Act and exposed the income to the higher rate of taxation. Consequently, order u/s 263 dated 10.03.2025 was passed setting aside the assessment order dated 15.03.2023 (supra) and issuing directions to ld. AO to treat the amount of Rs.4,22,74,671/- on account of bogus purchase u/s 69C of the Act r.w.s. 115BBE of the Act.
Heard the rival parties and perused the material available on record. Before us, the principal argument taken by the ld. Counsel for the assessee on legal grounds is that the ld. PCIT has incorrectly assumed the revisionary jurisdiction under section 263 of the Act. The ld. Counsel has placed on record before us its Return of Income filed dated 15.10.2018 and 22.04.2022 both declaring income of Rs.40,70,349/-. It has been argued that in terms of CBDT Instruction No.01 of 2011, the jurisdiction over its case was rested with an Assistant/Deputy Commissioner of Income Tax and consequently that the notice u/s148 dated 26.03.2012 issued by the learned ITO, Ward-14(3) having DIN No.ITBA/AST/S/148_1/2021-22/1041638106(1) was without jurisdiction and hence void ab initio. The ld. Counsel has argued that the consequent assessment order would also become infructuous. It is the case of the assessee that it is trite law that when notice u/s 148 is without jurisdiction, the provisions of section 263 cannot be invoked in respect of such assessment order which in itself is bad in law. The ld. Counsel further argued that the challenge to the validity of an assessment order can be made even in the proceeding challenging the order u/s 263. The ld. Counsel argued that in terms of CBDT Instruction No.01 of 2011, ITO Ward-14(3) did not have any jurisdiction to issue the impugned notice u/s 148 of the Act. In support of its contentions, the ld. Counsel placed reliance upon a catena of cases.
On the impugned subject, we have noted the decision of this Tribunal in the case of Sahi Exports Pvt. Ltd. in ITA No.2170/Del/2017, dated 24.03.2021 holding that assumption of jurisdiction under section 263 in respect of non-est order is invalid. Thus, it was held as under:-
“….11. As per the facts mentioned hereinabove, additions made u/s 143(3) of the Act were repeated in the assessment order framed/s 153A r.w.s 153C of the Act. This means that no additions had any link with any incriminating material found at the time of search as assessed income u/s 143(3) of the Act is the assessed income u/s 153C of the Act.
12.The Hon'ble High Court of Delhi in the case of Kabul Chawla in 380 ITR 573 has held that "if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act."
13.The Hon'ble Supreme Court in the case of Singhad Technical Educational Society 397 ITR 344 has also held that in the absence of any incriminating material, no jurisdiction can be assumed by the Assessing Officer u/s 153C of the Act.
14.In light of the above binding decisions, assessment framed u/s 153C of the Act in A.Ys 2008-09 and2010-11 are without jurisdiction and, therefore, bad in law and deserve to be quashed as null and void.
15.The Supreme Court in the case of Kiran Singh & Others vs Chaman Paswan & ors [1955] 1 SCR 117 has held as under:
" It is a fundamental principle well established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. "
16.In light of the aforesaid ratio laid down by the Hon'ble Supreme Court, we are of the considered opinion that the assumption of jurisdiction u/s 263 of the Act in respect of an assessment which is non-est is also bad in law as a non-est order cannot be erroneous and prejudicial to the interest of the Revenue. An order framed u/s 263 of the Act for both the A.Ys 2008-09 and 2010-11 are accordingly quashed on the principle of Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation, i.e. the order u/s 153C has been removed, the super structure i.e. the order u/s 263 must fall.
Again, in the case of Sapna Rastogi in ITA No. 617/Del/2024 dated 28/08/2024, this Tribunal held that jurisdiction can neither be waived nor created even by consent. Notice u/s 148 is not a procedural subject but a jurisdictional one being a condition precedent for initiation of proceedings. Thus, it was held that :
“….4. It was also contended that each year is separate and distinct year and only because the earlier year’s assessment was conducted in the jurisdiction of another AO, the present assessment is not invalid. The ld. DR has also drawn our attention to a letter dated 26.06.2024 by which the AO, ACIT, Circle 1(1)(1), Meerut has submitted a report and we consider it relevant to reproduce the report here itself and hereinbelow:-
2.The assessee has filed her return of income on 07.07.2013 at total income of Rs. 18,85,550/-. The assessee's name was identified as potential case with the case type High Risk CRIUVRU Information under "Priority 1" on Verification Module' of insight portal stating that assessee has given no treatment to the alleged profit earned on the sale of shares of TTK Prestige Ltd, amounting to Rs. 3,51,90,000/. Accordingly, the provisions of section 147 of I.T. Act were invoked after obtaining the approval u/s 151 of the I.T. Act. 1961 and notice u/s 148 dated 30.03.2021 was issued by ITO Ward 1(2)(5), Meerut. On the basis of above, the FAO, completed assessment u/s 147 read with section 144B of the I.T. Act, 1961 on 30.03.2022 at total income of Rs. 3,77,41,558/-after making addition of Rs. 3,58,56,008 as unaccounted money. Subsequently, the PAN of the assessee has been transferred to ACIT Circle-1(1)(1), Meerut on 15.05.2024 from ITO, Ward-1(2)(5), Meerut, as per CBDT Instruction No. 1/2011, dated 31.01.2011, vide which jurisdiction of non-corporate returns above Rs. 15 Lacs lies with ACIT/DCIT and upto Rs. 15 Lacs lies with ITO.
3.The Hon'ble ITAT has directed to send report regarding the correctness of jurisdiction of the Officer, issuing notice u/s 148 by ITO Ward 1(2)(5), Meerut. No internal orders were made for transfer of PAN within the PCIT charge. The assessee did not raise any objection regarding the jurisdiction of Circle/Ward during the assessment proceedings.
4.The assessee raised an objection against the re-opening of assessment u/s 147 for A. Y. 2013-14. According to the ITBA systems, letter dated 30.12.2021 is an Order disposing of the objection raised against the re-opening of assessment u/s 147 for A.Y. 2013-14, which is draft letter approved by the Range-Assessment Unit. Submitted for kind perusal and necessary action."
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. 8,85,550/-. 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 subgrounds in regard to this issue are sustained.
6.In the result, the appeal of the assessee is allowed and the assessment order is quashed.”
We have noted from the facts of the case discussed hereinabove that he Return of Income filed by the assessee exceeded to Rs.20 lakhs and hence the rightful jurisdiction in terms of CBDT Instruction No.01 of 2011 vested with an Officer of the rank of ACIT/DCIT. In this context of the matter, the issue of notice u/s 148 dated 26.03.2022 by the ld. ITO, Ward-14(3), Delhi, was an act not supported by the provisions of law. As discussed above, an assessee is entitled to raise challenge to the validity of the reassessment proceedings during contest made to a revisionary order u/s 263. Consequently, as the order u/s 147/144B dated 15.03.2023 was void ab initio in view of resting upon an invalid notice dated 26.03.2022, the ld. PCIT-4, Delhi, was ousted of his revisionary jurisdiction under section 263 qua assessment order u/s 147/144B dated 15.03.2023. Accordingly, we are of the considered view that the ld. PCIT-4 did not had any authority to exercise his revisionary authority. The order u/s 263 dated 10.03.2025 is therefore set-aside and quashed. The appeal of the assessee is therefore allowed.
In the result, the appeal of the assessee is allowed.