2023 (1) TMI 1429 - AT - Income Tax

Validity of an assessment order passed u/s. 143(3) by an AO having no jurisdiction - assessee contended that the notice issued by ITO Ward-1(3) Raipur was invalid as the jurisdiction at the time was vested with ITO Ward-2(3) Raipur HELD THAT - AR had on the basis of supporting documentary evidences apparently substantiated his claim that the territorial jurisdiction over the case of the assessee at the relevant point of time was vested with the ITO Ward-2(3) Raipur therefore there is substance in his claim that in the absence of any notice u/s. 143(2) having been issued by the said A.O within the stipulated time period i.e. latest by 30.09.2013 the assessment order thereafter passed by the ITO Ward-3(1) Raipur u/s. 143(3) of the Act dated 30.03.2015 cannot be sustained and is liable to be vacated on the said count itself. As the assessee in order to drive home his aforesaid claim had placed on record certain fresh documents viz. municipal receipts copy of sale deed and affidavit of the partner of the assessee firm neither of which were there before the lower authorities therefore considering the fact that contradictory claims as regard vesting of jurisdiction over the assessee s case at the relevant point of time i.e. on 19.08.2013 have been raised before me both by the assessee and the revenue which would require a foolproof verification in the backdrop of the aforesaid documents thus the matter in all fairness requires to be revisited by the A.O. Thus in terms of our aforesaid observations for the aforesaid limited aspect i.e. for verifying as to whether or not the territorial jurisdiction over the case of the assessee firm as on 19.08.2013 was vested with the ITO Ward-1(3) Raipur i.e. the A.O who had issued notice u/s. 143(2) of the Act dated 19.08.2013 thus restore the matter to the file of the A.O. In case it is found that the territorial jurisdiction over the case of the assessee on the date of issuance of notice u/s. 143(2) on 19.08.2013 was not vested with the ITO Ward-1(3) Raipur then the assessment so framed u/s.143(3) of the Act dated 30.03.2015 would stand vacated. As observe that the A.O in the course of the set-aside proceedings shall before arriving at a final conclusion as regards the territorial jurisdiction over the case of the assessee at the relevant point of time i.e. on the date of issuance of notice u/s. 143(2) dated 19.08.2013 keep in view the observations recorded by me hereinabove. Accordingly the matter is restored to the file of the A.O for the aforesaid limited purpose. Thus the additional ground of appeal raised by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of jurisdiction assumed by the Assessing Officer (A.O) due to the issuance of notice under Section 143(2) of the Income-tax Act, 1961.
2. Disallowance of expenses related to raw materials, wages, garden, and gifts.
3. Addition related to the deduction under Section 80IB(10).

Issue-wise Detailed Analysis:

1. Validity of Jurisdiction:
The primary issue revolves around the validity of the jurisdiction assumed by the A.O due to the issuance of notice under Section 143(2) by an officer who allegedly did not have jurisdiction over the assessee at the relevant time. The assessee contended that the notice issued by ITO, Ward-1(3), Raipur, was invalid as the jurisdiction at the time was vested with ITO, Ward-2(3), Raipur. The Tribunal acknowledged the importance of a valid notice under Section 143(2) for a lawful assessment under Section 143(3). The Tribunal highlighted that an assessment order passed without a valid notice is considered bad in law, supported by precedents such as ACIT & Anr. Vs. Hotel Blue Moon and CIT v. Laxman Das Khandelwal. The Tribunal noted that the issue of jurisdiction was deliberated in the case of Dr. Hari Singh Chandel Vs. Income Tax Officer, where it was established that an assessment order based on a notice from an officer without jurisdiction is null and void. The Tribunal decided to remand the matter to the A.O for verification of jurisdictional facts, emphasizing that if the jurisdiction was not with ITO, Ward-1(3) at the time of notice issuance, the assessment would be vacated.

2. Disallowance of Expenses:
The assessee challenged the disallowance of expenses related to raw materials, wages, garden, and gifts. The CIT(Appeals) had sustained the disallowance of Rs. 1,75,000/- out of raw material expenses, Rs. 30,000/- out of wages and garden expenses, and reduced the disallowance of gift expenses from Rs. 1,10,000/- to Rs. 50,000/-. However, the Tribunal noted that the assessee's representative did not press these grounds during the appeal hearing, leading to their dismissal as not pressed.

3. Addition Related to Deduction under Section 80IB(10):
The assessee also contested the addition of Rs. 21,97,992/- related to the disallowance of the deduction under Section 80IB(10). However, the Tribunal observed that no contentions were advanced by the assessee's representative on this ground during the appeal hearing. Consequently, the Tribunal refrained from adjudicating this issue, leaving the CIT(Appeals)'s decision on this matter unaltered.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, focusing primarily on the jurisdictional issue. The matter was remanded to the A.O for verification of jurisdictional facts, with the Tribunal emphasizing that the assessment would be vacated if it was found that the jurisdiction was not with ITO, Ward-1(3) at the time of the notice issuance. The other grounds related to disallowance of expenses and the deduction under Section 80IB(10) were not pressed or addressed, leading to their dismissal or non-adjudication.