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Judgment
PER MANISH AGARWAL, A.M.:
The present appeal is filed by assessee against the order dated 24.12.2025 passed by Ld. Commissioner of Income Tax (A), Delhi-23 [“Ld. CIT(A)”] in Appeal No. CIT (A), Delhi- 23/10066/2022-23 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 29.03.2025 passed u/s 143(3) of the Act pertaining to Assessment Year 2023-24.
Brief facts of the case are that assessee is a company, engaged in the business of foreign currency exchange, dealing in buying and selling of currencies, travelers’ cheque, prepaid cards, remittance and various other forex related services, filed its return of income for A.Y 2023-24 declaring total income of INR 67,11,260/- on 31.10.2023. Thereafter, the case was selected for compulsory scrutiny and notice u/s 143(2) was issued on 30.06.2024. Subsequently, various notices u/s 142(1) were issued alongwith questionnaire from time to time and in response the assessee furnished its reply. In the case of assessee a survey action u/s 133A was conducted on 15.01.2024 at various premises and based on the same assessment u/s 143(3) was completed on 29.03.2025 assessing total income at Rs 6,89,76,974/- by making addition of Rs 4,84,00,000/- u/s 68 of the Act on account of share capital; addition of INR 40,00,000/- u/s 69C of the Act on account of alleged cash commission and addition of INR 98,65,714/- u/s 69C of the Act on account of bogus commission.
In first appeal, as the assessee has failed to file any submissions and thus, Ld. CIT(A) has confirmed the additions made and dismissed the appeal of the assessee.
Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various Grounds of appeal as per appeal memo.
During the course of hearing, the assessee made submission in respect of Ground of appeal No. 6 and 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. Since in this ground of appeal, the assessee has challenged the validity of assessment order passed by the ACIT Circle 18(1), Delhi based on the notice issued u/s 143(2) of the Act by the assessing officer having no jurisdiction over the assessee, therefore, this ground of appeal being legal in nature and goes to the root of the matter, is taken for consideration.
Before us, Ld. AR for the assessee submits that return of income was filed on 31.10.2023 declaring total income of Rs. 67,11,260/-. 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. 30.06.2024 was issued by ITO, Ward-4(1), Gurgaon. Thereafter, in terms of order passed u/ 127 dt. 21.11.2024, the jurisdiction was transferred from ITO Ward 4(1), Gurgaon to the DCIT (Central Circle-3), New Delhi who has finally passed the impugned assessment order u/s 143(3) of the Act, dt. 29.03.2025 at a total income of Rs 6,89,76,974/-. Ld. AR submits that since the assessment order was passed on the basis of notice u/s 143(2) issued by the assessing officer having no jurisdiction over the assessee and thus the assessment order so passed is bad in law and deserves to be quashed. He placed reliance on the judgment of Hon’ble Bombay High Court in the case of Ashok Devichand Jain Vs. Union of India 452 ITR 43 (Bombay).
On the other hand, ld. Sr. DR 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/DCIT. It was the submission that in any case, it is curable u/s 292BB of the Act. It is further submitted that the assessee has declared loss and therefore, in absence of any positive income, the jurisdiction lies with the ITO only. He prayed accordingly.
Heard the contentions of both the parties at length and perused the material available on record. The notice issued u/s 143(2) dt. 30.06.2024 issued by ITO, Ward-4(1), Gurgaon is reproduced as under:
It is observed that as per the CBDT Instruction No.1/2011 dated 31.01.2011, since in the present case, the assessee has declared income of Rs. 67,11,260/- thus, the jurisdiction in the instant case was with the ACIT however, the notice u//s 143(2) was issued by the ITO, Ward 4(1) Gurgaon, and the order u/s 127 of the Act was passed after the issue of notice u/s 143(2) of the Act. Considering the peculiar facts on record, we observed that actual jurisdiction lies with ACIT/DCIT and the notice u/s 143(2) issued by the ITO, ward 4(1), Gurgaon to assess the income of the assessee is beyond the jurisdiction of the ITO. Therefore, the jurisdictional notice issued u/s 143(2) is bad in law and accordingly even assessment order passed on the basis of such invalid notice 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 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.”
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/s148 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, Ground of appeal No. 6 raised by the assessee is allowed.
Since we have already allowed assessee’s Ground of appeal No. 6 thus, 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.