Notice Issued By Officer Without Jurisdiction Cannot Sustain Assessment: ITAT Quashes Assessment

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 26 February quashed an assessment against taxpayer Jagruti Kirti Shah, holding that the notice under Section 143(2) of the Income Tax Act was issued by an officer lacking jurisdiction as per the Central Board of Direct Taxes (CBDT) Instruction No. 1 of 2011.

Instruction 1 prescribes the officer-level jurisdiction for issuing scrutiny notices based on the assessee's income and category.

The Bench, comprising Judicial Member Rahul Chaudhary and Accountant Member Bijayananda Pruseth, allowed the taxpayer's additional ground and set aside the assessment order dated 24 December 2018 passed under Section 143(3) of the Income Tax Act. It held:

“The Revenue has failed to bring on record any material to distinguish above judgment/decision either on facts or in law. Therefore, respectfully following the same, we quash notice, dated 04/07/2017, issued by the Income Tax Officer under Section 143(2) of the Act.”

Shah had filed a return declaring income of Rs. 40.33 lakh. According to CBDT Instruction No. 1/2011 dated 31 January 2011, in metro cities such as Mumbai, cases of non-corporate assessees declaring income above Rs. 20 lakh fall within the jurisdiction of Deputy Commissioners or Assistant Commissioners, and not Income Tax Officers.

In the present case, the notice under Section 143(2), a mandatory jurisdictional notice for scrutiny assessment, was issued on 4 July 2017 by the Income Tax Officer, Ward 18(1)(5), Mumbai.

The Tribunal noted that the Revenue failed to bring on record any material distinguishing the judgments/decisions cited by the assessee, either on facts or in law. It was also noted that it is an admitted position that the assessee had filed a return declaring Rs. 40,33,450, exceeding the Rs. 20 lakh threshold fixed by CBDT Instruction No. 1 of 2011.

The Income Tax Appellate Bench therefore quashed the notice issued under Section 143(2) and, consequently, the assessment order under Section 143(3).

As a result, the assessee's appeal was partly allowed, and the Revenue's cross-appeal, which challenged the relief granted on merits, was dismissed as infructuous.