Mr. Manish Gupta vs DCIT

PER MANISH AGARWAL, AM :

The present appeal is filed by assessee against the order dated 31.10.2024 of by Ld. Commissioner of Income Tax, National Faceless Appeal Centre (NFAC) New Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A),Delhi-6/10265/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 26.11.2019 passed u/s 144 of the Act pertaining to Assessment Year 2017-18.

Brief facts of the case are that assessee is an individual and field return of income on 30.07.2017 declaring total income of INR 40,18,380/-. The case of the assessee was selected for scrutiny by issue of notice u/s 143(2) of the Act dt. 14.08.2018 by ITO, Ward-36(4), Delhi. Thereafter, another notice u/s 143(2) was issued by the ACIT, Circle 36(1), Delhi. Finally, the assessment order was passed u/s 144 of the Act on 26.11.2019 by the ACIT, Circle 18(1), Delhi by making addition towards Long Term Capital Gain (“LTCG”) of Rs. 92,50,000/- and further addition of Rs. 6.00 lacs was made u/s 68 of the Act. Accordingly, total income of the assessee was assessed at Rs. 1,38,68,380/-.

In first appeal, as the assessee has failed to file any submissions, Ld. CIT(A) has set aside the assessment order and refer the case back to the file of AO to make a fresh assessment since the assessment order was passed u/s 144 of the Act.

Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various grounds of appeal. Since in Ground of appeal No.1, the assessee has challenged the validity of assessment order passed by the ACIT Circle 18(1), Delhi without assuming valid jurisdiction as the notices u/s 143(2) of the Act were issued by the different Assessing Officers. Since, this ground of appeal is legal in nature and goes to the root of the matter, therefore, the same is taken for consideration even though the both the orders of lower authorities are passed ex-parte.

Before us, Ld.AR submits that first notice for scrutiny u/s 143(2) was issued by ITO, Ward-36(4), Delhi on 14.08.2018 as could be seen form pages 61-64 of appeal set where this notice is placed. Ld. AR further submits that another notice u/s 143(2) of the Act was issued by the ACIT Circle36(1), Delhi which is placed at pages 65 to 68 of appeal set. Ld. AR drew our attention to the assessment order which is passed by the ACIT Circle 18(1), Delhi. Ld. AR stated that under RTI Act, information was sought whether any order u/s 127 of the Act was ever passed for transfer of the case of the assessee. However, in response vide order dt. 16.12.2025, passed u/s 7(1) of RTI Act, it was informed by the Department that no order u/s 127 was passed and stated that being the director of the company no specific order u/s 127 is required. Ld. AR submits that being a director, jurisdiction over the assessee never be with the AO of the company as there is no such law. ld. AR thus, submits that the assessment order passed by ACIT, Circle- 18(1) Delhi without assuming jurisdiction by issue of notice u/s 143(2) is bad in law and therefore, same is liable to be quashed. He prayed accordingly. Ld.AR also placed reliance on the judgement of Hon’ble Supreme Court in the case of ACIT vs SK Industries reported in [2022] 141 Taxmann.Com 568(SC).

On the other hand, Ld. Sr. DR supports the order of lower authorities and submits that assessee has not challenged the jurisdiction within one month from the service of notice u/s 143(2) of the Act and therefore, in terms of provision of section 124(3) of the Act, notice issued by ITO, Ward-36(4), New Delhi and further by the ACIT circle 36(1) Delhi cannot be challenged now after the expiry of one months period. She prayed accordingly.

Heard the contentions of both the parties and perused the material available on record. The sole issue raised in this ground of appeal for our consideration is whether the assessment order passed by the AO without assuming the jurisdiction u/s 143(2) of the Act is valid or liable to be quashed? From the perusal of notices issued u/s 143(2) as filed by the assessee it is seen that first notice was issued by ITO, Ward-36(4), Delhi and second notice u/s 143(2) was issued by the ACIT circle 36(1) Delhi. The said notices are reproduced as under:-

It could be seen that in the present case, jurisdiction over the assessee was transferred between three AOs, First, ITO, Ward-36(4), Delhi who issued notice u/s 143(2) of the Act on 14.08.2018 (it is not clear whether ITO, Ward-36(4), New Delhi was having any jurisdiction over the assessee or not); Second ACIT Circle 36(1), Delhi who issued another notice u/s 143(2) on 20.09.2018, and Third the ACIT, Circle-18(1) Delhi who completed the assessment.

Section 124(3) of the Act referred by Ld. Sr. DR, relates to the case where territorial jurisdiction is challenged however, it not for the cases where the very subject matter of jurisdiction is challenged as has been done in the present case. Thus, the provisions as contained in section 124(3) of the Act are not applicable to the facts of the present case, and as such assessee can challenge the very subject matter of the jurisdiction at any stage. Hon’ble Delhi High Court in the case of Abhishek Jain vs ITO reported in [2018] 94 taxmann.com 355 (Delhi) in para 22 has observed that “…… As far as territorial jurisdiction or pecuniary jurisdiction are concerned, objection should be taken at the earliest possible opportunity and / or before the settlement of issues and not at the subsequent stage. Jurisdiction as to the subject matter is distinct and stand at a different footing.” Therefore, territorial jurisdiction cannot be equated with lack of subject matter of jurisdiction.

Further it is evident from the facts that AO who had completed the assessment i.e. ACIT, Circle-18(1), Delhi assumed the jurisdiction without issue of notice u/s 143(2) of the Act. In the instant case, as observed above, notices were issued u/s 143(2) by the ITO, Ward-36(4), Delhi and later by the ACIT Circle 36(1)Delhi, and the case is finally completed by the ACIT Circle 18(1) Delhi without there any order passed u/s 127 of the Act thus it is a question of subject matter of jurisdiction and thus the ratio laid down by hon’ble Delhi High Court in the case Abhishek Jain (supra) is not applicable rather the observation of Hon’ble High Court in para 22, favors the case of the assessee.

In case where the jurisdiction is transferred from AO who has issued to the notice u/s 143(2) of the Act to the AO who completed the assessment could only be done through an order for transfer of jurisdiction u/s 127(2) of the Act which admittedly has not been done in the instant case. Transfer order is statutorily required to be passed by the prescribed authority u/s127 of the Act, and an A.O cannot on his own transfer an income tax file to another officer. The Co-ordinate Bench in the case of Gaurav Singhal in ITA No.5786/Del/2018 held that “without a valid assumption of jurisdiction u/s 127, the assessment order would be rendered illegal and invalid”.

In view of these facts, we find that assessee’s case is covered by the judgement of Hon’ble Supreme Cout in the case of ACIT Vs. SK Industries (supra) wherein Hon’ble Apex Court held that notice issued u/s 143(2) by the AO who at that relevant point, had no jurisdiction over the assessee, thus, the notice issued u/s 143(2) of the Act had no jurisdiction. Accordingly, in our considered opinion, notice issued u/s 143(2) by ITO, Ward- 36(4), and by the ACIT, Circle 36(1), Delhi and consequent assessment order passed by ACIT Circle 18(1), Delhi without having any valid jurisdiction is hereby, quashed.

Since we have already allowed the legal Ground of Appeal No.1 taken by the assessee, the other grounds of appeal become academic hence, not adjudicated.

In the result, appeal of the assessee is allowed.