2023 (12) TMI 895 - AT - Income Tax

Jurisdiction of income tax authorities to issue notice u/s 143(2) - ACIT or ITO - Legality of AO jurisdiction to issue and frame the assessment - case of the assessee was selected for scrutiny through CASS on the basis of information received from the Investigation wing to verify suspicious transactions relating to long term capital gain in penny stocks - According to assessee since the income tax return filed by the assessee is less than Rs. 30 Lakh therefore the jurisdiction to issue notice u/s 143(2) of the Act to frame the assessment was with the ITO and not with the ACIT - HELD THAT - Since the income tax return filed by the assessee is less than Rs. 30 Lakh therefore the jurisdiction to issue notice u/s 143(2) of the Act to frame the assessment was with the ITO and not with the ACIT. Ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of the Hon ble Jurisdictional High Court in the case of PCIT vs. Shree Shoppers Ltd. 2023 (3) TMI 1432 - CALCUTTA HIGH COURT Thus as per the relevant statutory provisions not only the territorial jurisdiction but also the pecuniary jurisdiction of the Income Tax Officers/Assessing Officer has been fixed by the CBDT and that if the returned income is less than Rs.30 lacs in case of corporate assessee in metro cities the jurisdiction to frame the assessment lies to the Income Tax Officer whereas if the returned income is more than Rs.30 lacs the jurisdiction lies with the concerned ACIT/JCIT. Thus we are of the view that ACIT Circle-43 Kolkata has no jurisdiction to frame the assessment order and to issue notice u/s 143(2) of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer to issue notice and frame the assessment.
2. Validity of the assessment order based on the jurisdictional issue.

Summary:

Issue 1: Jurisdiction of the Assessing Officer to issue notice and frame the assessment.
The assessee challenged the jurisdiction of the Assessing Officer (AO) to issue notice under section 143(2) of the Income Tax Act and frame the assessment. The return of income filed by the assessee was less than Rs. 30 Lakh, which according to the assessee, meant that the jurisdiction to issue notice and frame the assessment lay with the Income Tax Officer (ITO) and not the Assistant Commissioner of Income Tax (ACIT). The assessee relied on the decision of the Hon'ble Jurisdictional High Court in the case of PCIT vs. Shree Shoppers Ltd. and the Coordinate Bench in the case of Alpha National Trading Co. vs. ACIT, which supported the contention that the ACIT did not have jurisdiction in such cases.

Issue 2: Validity of the assessment order based on the jurisdictional issue.
The Tribunal examined the facts and noted that the returned income of the assessee was less than Rs. 30 Lakh, and hence, the jurisdiction to issue notice under section 143(2) and frame the assessment lay with the ITO. The Tribunal referred to various judicial precedents, including the Hon'ble Supreme Court's decision in ACIT vs. M/s Hotel Blue Moon, which emphasized the mandatory nature of issuing a notice under section 143(2) by the competent jurisdictional officer to assume jurisdiction to frame the assessment under section 143(3). The Tribunal concluded that since the ACIT issued the notice and framed the assessment without having the jurisdiction, the assessment order was invalid and liable to be quashed. The Tribunal quashed the assessment order and allowed the appeal filed by the assessee. Other issues raised on merits were not adjudicated in view of the decision on the jurisdictional issue.

Conclusion:
The Tribunal held that the ACIT did not have the jurisdiction to issue the notice under section 143(2) and frame the assessment, rendering the assessment order invalid and quashed. The appeal filed by the assessee was allowed, and other issues on merits were not adjudicated.