ADHYATM JAIN PROP. M/S JAMBU KUMAR ADHYATAM JAIN SARAF,LUCKNOW V. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUCKNOW

ITA 788/LKW/2024

AI Insights

The case involves an appeal by Adhyatm Jain against the order of the Commissioner of Income Tax (Appeals), Lucknow, which confirmed an addition of Rs.1,85,66,669 to the assessee's income under section 68 of the Income Tax Act, 1961, for the assessment year 2017-18. The addition was initially made by the Assessing Officer, citing unexplained cash credits. The ITAT, however, found procedural lapses in the issuance of the notice under section 143(2) by an officer lacking jurisdiction, leading to the annulment of the assessment order. The Tribunal did not address other substantive issues raised by the assessee, as the jurisdictional defect was sufficient to dispose of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396724 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: JMK Exports vs ACIT, Pradeep Kumar vs ACIT-I, Smt. Charu Aggarwal vs. DCIT, Sita Ram Rastogi vs. ITO, Anantpur Kalpana vs. ITO, Hirapanna Jewellers vs. ITO, PCIT vs Tripati Proteins (P.)Ltd, ITO vs M/s. Arti Securities & Services Ltd., PCIT vs Mohd. Rizwan Prop. M/s. M. R. Garments Moulviganj Lucknow, CIT vs. Hari Raj Swarup and Sons, PCIT vs Mohd Rizwan, CIT vs Kurban Hussain Ibrahimji Mithiborwala, Raja Textile Ltd vs ITO, P.V. Doshi vs CIT, Dushyant Kumar Jain vs DCIT, Shirshbhai Sajanwale vs ACIT, City Union Bank Ltd vs ACIT, Kiran Singh & Others vs Chaman Paswan & Ors, Sushil Kumar Mehta vs Gobind Ram Bohra, Indian Bank vs Manilal Govindji Khona
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE DID NOT EXPRESS ANY; SUNIL KUMAR RAJWANSHI
• Assessee Lawyers: AKSHAY AGRAWAL
• Keywords: Condonation of delay; Set aside; Invalid notice; Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Bogus
• Section: 143(3); 68; 131; 69; 133(6)

Judgement Text

"आयकर अपीलȣय अͬधकरण ‘बी’ Ûयायपीठ, लखनऊ। IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW Įी क ुल भारत, उपाÚय¢ एवं Įी अनाǑद नाथ ͧमĮा, लेखा सदèय क े समछ BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER आयकर अपील सं/ ITA No.788/LKW/2024 Ǔनधा[रण वष[/ Assessment Year: 2017-18 Adhyatm Jain prop M/s. Jambu Kumar Adhyatam Jain Saraf 322/34, Surangi Tola Chowk, Lucknow-226003. v. DCIT-2, Central Circle-2 Aaykar Bhawan, 5, Ashok Marg, Lucknow-226001. PAN:AAQPJ4623E अपीलाथȸ/(Appellant) Ĥ×यथȸ/(Respondent) अपीलाथȸ ͩक और से/Appellant by: Shri Akshay Agrawal, Adv Ĥ×यथȸ ͩक और से /Respondent by: Shri Sunil Kumar Rajwanshi, Addl. CIT(DR) आदेश / O R D E R PER ANADEE NATH MISSHRA, A.M.: This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Lucknow-3 [hereinafter referred as to the Ld. “CIT(A)”] dated 20.09.2024 for the assessment year 2017-18. The grounds of appeal of the assessee are as under: - “1.The Ld. Commissioner of Income Tax (Appeals) has deleted the addition of Rs.25,03,000/- out of Rs.2,11,53,000/- and confirm the balance addition of Rs.1,85,66,669/- made by the Assessing Officer. 2. The Ld. Commissioner of Income Tax (Appeals) has also confirmed the addition of Rs.1,85,66,669/-. 3. The Ld. Commissioner of Income Tax (Appeals) erred both on facts and in law confirmed the addition on account of addition of Rs.1,85,66,669/- (2,11,53,000 – 25,03,000) u/s 68 of the IT Act. ITA No.788/LKW/2024 Page 2 of 14 4. The order passed by the leaned Assessing Officer bad in jurisdiction. 5. The order passed by the learned CIT(Appeals) is arbitrary capricious, misconceived, erroneous and against the principal of natural justice. 6. The above grounds of appeal will be argued in details at the time of hearing and the appellant crave leave to submit additional grounds of appeal if any and/or amend, vary, modify, alter the grounds of appeal at or before the time of hearing.” 2. The appeal is barred by limitation by 34 days. The assessee has filed an application seeking condonation of delay in filing of this appeal. The application for condonation of delay is supported by an affidavit of the assessee. The Ld. Sr. Departmental Representative for Revenue did not express any objection to the delay being condoned. Being satisfied with the reasons sated in application seeking condonation of delay in filing of this appeal; therefore, we condone the delay in filing of this appeal and admit the appeal for decision on merits. 3. In this case, assessment order dated 27/12/2019 was passed by the Assessing Officer (“AO”, for short), u/s 143(3) of the Income Tax Act, 1961 (“the Act”, for short) whereby the assessee’s total income was assessed at Rs.2,44,98,089/- as against returned income of Rs.34,28,390/-. In the aforesaid assessment order, an addition amounting to Rs.2,10,69,699/- was made u/s 68 of the Act on account of deposits by the assessee in the bank account. The aforesaid addition was confirmed by the Ld. CIT(A) in the impugned appellate order dated 20.09.2024. Aggrieved, the assessee has filed this present appeal in Income Tax Appellate Tribunal (ITAT). During the appellate proceedings in ITAT, the appeal was partly heard on 01.05.2025 and was finally heard on 20.05.2025. On 01.05.2025, the Ld. Counsel for the assessee raised two issues ITA No.788/LKW/2024 Page 3 of 14 including the issue of jurisdiction. Firstly, it was contended by the Ld. Counsel for the assessee that in the facts and circumstances of the present case the addition u/s 68 of the Act was not justified. In this regard, he relied on the order of Income Tax Appellate Tribunal in the Third Member case reported in the case of JMK Exports vs ACIT (2024) 161 taxmann.com 481 (Delhi Trib.) vide order dated 26.03.2024. In this case, it was held “once sales made by assessee were supported by stock register, sale bills, payments through banking channel and sales had not only been disclosed in VAT returns but stood duly verified and accepted by VAT Department, such sales could not be treated as bogus, so as to enable Assessing Officer to invoke provisions of section 68 merely because notices issued under section 133(6) and summons issued under section 131 to some buyers returned un-served or remained unanswered”. It was further held that “when disputed transactions were duly recorded in books of account of assessee, provisions of section 69 would not get attracted”. The Ld. Counsel for the assessee also placed reliance on the order of Co-ordinate Bench of ITAT, Lucknow Bench in the case of Pradeep Kumar vs ACIT-I in ITA. No.198/LKW/2024 vide order dated 04.09.2024, in which it was held as under: - “9. As per section 68 of the Act, the sum found to have been credited in the books of account, for which, the assessee offers no explanation, is deemed to be the income of the assessee, whereas in the instant case, the assessee had duly explained the source of sales, produced the sale bills and had admitted the same as revenue receipt. Once there is no defect in the purchases and sales and the same are matching with the inflow and the outflow of stock and cash, there is no reason to disbelieve the sales. The Assessing Officer had examined the requisite details furnished by the assessee and did not point out any mistake therein. The Assessing Officer had not doubted the Sales made by the Assessee, which sales stand duly disclosed in the monthly VAT Returns too. The VAT assessment of the assessee firm has been completed by VAT Officer, wherein the Sales, Purchases and Stock of the Assessee have been duly accepted. The Assessing Officer had not doubted the availability of Stock of Gold ITA No.788/LKW/2024 Page 4 of 14 ornaments. The entries in the books of account of the assessee were found to be genuine by the Assessing Officer and the Balance in Cash and Sales were found matching with the books of accounts. The source and nature of cash had been duly explained by the assessee. There is no law which prohibits a trader or a manufacturer in making cash sales. The assessee himself offered the amount of cash sales as his income by duly including it in his total sales. The Assessing Officer made the addition merely on pure guess-work, without bringing on record any contrary evidence in support of his view that the amount of Rs.1,50,00,000/- deposited during the month of November, 2016, was generated in old SBNs during the demonetization period and the source of which was not explained by the assessee. 10. At this stage, it is necessary to consider certain judicial precedents on this issue. The ld. counsel for the assessee has placed reliance on the decision of the ITAT Chandigarh Bench in the case of Smt. Charu Aggarwal vs. DCIT [2022] 140 taxmann.com 588, wherein also the assessee was engaged in the business of sale of jewellery, diamond and other related items. The Chandigarh Bench of the Tribunal in that case held that the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of sales. The Bench relying on various decisions of the Hon'ble High Court and Coordinate Benches of ITAT, deleted the addition made by the Assessing Officer. 11. The Lucknow Bench of the Tribunal, on a similar issue, in the case of Sita Ram Rastogi vs. ITO (supra), deleted the addition made under section 68 of the Act. The relevant part of the order dated 8.9.2022 of the Tribunal (paragraph 18) is reproduced as under: “18. In the case at hand, we find that the assessee has established the sales with the bills. The sales were duly accounted for in the books of account. Therefore, the addition of Rs.19,10,000/- made under section 68 of the I. T. Act is not justifiable, as the amount was available with the assessee as opening balance of cash-in-hand as per cash book and cash received from the sales. Since these were Revenue Receipts, the same had also been offered to tax and due taxes had already been paid. The Assessing Officer had randomly made the addition, without pinpointing any abnormality therein. As such, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is not sustainable in the eye of law. Accordingly, I delete the same and allow Ground no.1 taken by the assessee.” 12. In the case of Anantpur Kalpana vs. ITO (supra), on a similar issue, the Bangalore Bench of the Tribunal deleted the addition, observing as under: “9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, ITA No.788/LKW/2024 Page 5 of 14 tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of Associated Transport (P.) Ltd. (supra) on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of Hirapanna Jewellers (supra) on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.” 13. In other cases also, on which reliance has been placed by the assessee, it has been held that the cash receipts represent the sales which the assessee therein had rightly offered for taxation. Since the assessee had already admitted the sales as revenue receipt, there was no case for making the addition under section 68 of the I.T. Act. 14. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the Assessing Officer is erred in making addition towards cash receipts received for sale of jewellery, which was deposited in the bank accounts of the assessee, as unexplained cash credits taxable under section 68 of the Act. As such, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is not sustainable in the eyes of law. Accordingly, we delete the same and allow Grounds no.1 to 5 taken by the assessee.” (3.1) The Ld. Counsel for the assessee further placed reliance on the order of Lucknow Bench of ITAT in the case of Sita Ram Rastogi vs The ITO in ITA. No.23/LKW/2022 vide order dated 08.09.2022, in which it was held as under: - “15. For the sake of ready reference, we reproduce below section 68 of the I.T. Act: \"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:\" 16. As per section 68, the sum found to have been credited in the books of account, for which, the assessee offers no explanation, is deemed to be the income of the assessee, whereas in the instant case, the assessee had duly explained the source of sales, produced the sale bills and had admitted the same as revenue receipt. Once there is no defect in the purchases and sales and the same are matching with the inflow and the outflow of stock and cash, there is no reason to disbelieve the sales. The Assessing Officer had examined the requisite details furnished by the ITA No.788/LKW/2024 Page 6 of 14 assessee and did not point out any mistake therein. The Assessing Officer had not doubted the Sales made by the Assessee, which sales stand duly disclosed in the monthly VAT Returns too. The VAT Returns of the assessee have never been revised/rectified after the demonetization and the VAT assessment of the assessee firm has been completed by VAT Officer, Commercial Tax Department, wherein the Sales, Purchases and Stock of the Assessee have been duly accepted. The Assessing Officer had accepted the Trading Results being Gross Profit and Net Profit and also the Audited Books of Account of the Assessee, which have been audited under section 44AB of the I.T. Act. The Assessing Officer had also not doubted the availability of Stock of Gold and Silver ornaments. The entries in the books of account of the assessee were found to be genuine by the Assessing Officer and the Balance in Cash and Sales were found matching with the books of accounts. The source and nature of cash had been duly explained by the assessee. The Assessing Officer made the addition merely on pure guess-work, without bringing on record any contrary evidence in support of his view that the amount of Rs.19,10,000/- deposited after a gap of five days from the date of previous deposit on 18.11.2016, was generated in old SBNs during the demonetization period and was illegally accepted by the assessee. 17. In ‘ACIT vs. M/s Hirapanna Jewellers’ (supra), on an identical issue, the ITAT, Visakhapatnam Bench, placing reliance on various judgments of the Hon'ble Supreme Court and High Courts, held that the cash receipts represent the sales which the assessee therein had rightly offered for taxation; that there was sufficient stock to affect the sales in the trading account; and that since the assessee had already admitted the sales as revenue receipt, there was no case for making the addition under section 68 of the I.T. Act. 18. In the case at hand, we find that the assessee has established the sales with the bills. The sales were duly accounted for in the books of account. Therefore, the addition of Rs.19,10,000/- made under section 68 of the I. T. Act is not justifiable, as the amount was available with the assessee as opening balance of cash-in-hand as per cash book and cash received from the sales. Since these were Revenue Receipts, the same had also been offered to tax and due taxes had already been paid. The Assessing Officer had randomly made the addition, without pinpointing any abnormality therein. As such, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is not sustainable in the eye of law. Accordingly, I delete the same and allow Ground no.1 taken by the assessee.” (3.1.1) The Ld. Counsel for the assessee placed further reliance on the order of Bangalore Bench of ITAT in the case of Anantpur Kalpana vs ITO (2022) 138 taxmann.com 141 (Bang Trib) in which it was held as under: - “6. I have heard the rival submissions. Learned Counsel for the assessee submitted that both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the ITA No.788/LKW/2024 Page 7 of 14 demonetized notes could not have been accepted as valid tender. He submitted that the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It was also submitted that the assessee was having only one source of income from beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. It was also submitted that the government permitted all to deposit old demonetized notes upto 31.12.2016. Since the amounts deposited were sale proceeds of business and the income from the business have already been taxed, the impugned addition should be deleted. Our attention was also drawn to section 26(2) of the RBI Act, 1934 which provides that government can specify certain notes as not legal tender. It was argued that if there is any violation of the statutory provisions, the consequences will be only under the relevant provisions of RBI Act, 1934 and those violations cannot lead to any addition under section 68 of the Act. The learned Counsel also placed reliance on the following judicial pronouncements rendered on identical facts of the case as that of the assessee. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the said amount as concealed income of the assessee. The revenue moved to Hon'ble Calcutta High Court against the order of the Hon'ble Tribunal and the Hon'ble High Court has confirmed the order of the Tribunal while deleting the penalty; the Hon'ble High Court of Calcutta held as under: \"8. The Tribunal was of the view that the assessee had sufficient cash in hand. In the books of account of the assessee, cash balance was usually more than Rs.81,000/-. There is no reason to treat this amount as income from undisclosed sources. It is not a fit case for treating the amount of Rs.81,000/- as concealed income of the assessee and consequently imposition of penalty was also not justified in this case.\" 7. Further reliance is placed on the decision of the Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in ITA No. 253/Viz/2020 wherein, the Hon'ble Tribunal while considering the issue of implication of Sec. 68 of the Act during demonetization held as under: 9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. ITA No.788/LKW/2024 Page 8 of 14 10. The assessee filed cross objections supporting the order of the Id. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, hence, dismissed. 11. In the result, appeal of the revenue as well as the cross objection of the assessee are dismissed.\" 8. Learned DR reiterated the stand of the Revenue as reflected in the order of the CIT(A). 9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in ITA No. 253/Viz/2020 on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.” (3.1.2) Moreover, Ld. Counsel for the assessee placed reliance also on the order of the Ahmedabad Bench of ITAT in the case of N.K. Industrial Ltd vs DCIT in ITA. No.329/Ahd/2017 vide order dated 16.11.2022, in which it was held as under: - “55. As regard the issue raised in Ground No.6 of this appeal relating to the addition of Rs.10,04,170/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of unexplained cash credit, the learned Counsel for the assessee has submitted that the said amount actually represented realization of sale proceeds as explained on behalf of the assessee before the authorities below. He contended that the same, ITA No.788/LKW/2024 Page 9 of 14 therefore, cannot be treated as unexplained cash credit and Section 68 of the Act has no application. We find merit in this contention of the learned Counsel for the assessee and since the learned DR has not been able to dispute the position that the amount in question represented sale proceeds realized by the assessee-company, we accept the contention of the learned Counsel for the assessee that Section 68 of the Act has no application and the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue by invoking Section 68 of the Act cannot be sustained. Ground No.6 of assessee’s appeal is accordingly allowed.” (3.1.3) Lastly, the Ld. Counsel for the assessee placed reliance on the order of the Hon'ble Gujarat High Court in the case of PCIT vs Tripati Proteins (P.)Ltd(2024) 165 taxmann.com 175 (Guj) in which it was so held “15. Considering the facts of the case, it is not disputed by the appellant- Revenue that the amount of Rs.108.97 crores is credited in sales account offering as income by the respondent- assessee and therefore, addition made by the Assessing Officer under section 68 of the Act was rightly deleted.” (4) The second issue raised by the Ld. Counsel for the assessee at the time of hearing on 01.05.2025 was jurisdictional issue. It was submitted that the notice u/s 143(2) of the Act was issued by an officer who did not hold jurisdiction. Further, he submitted that initiation of assessment proceedings by issue of notice u/s 143(2) of the Act by an officer without jurisdiction in the case made the entire assessment proceedings invalid and as a result, the assessment order is rendered null and void. In this regard, he placed reliance on the order of Co-ordinate Bench of ITAT in the case of ITO vs M/s. Arti Securities & Services Ltd., (vide order dated 06.11.2020 in ITA. No.553/LKW/2018) in which it was held as under: - “12. Keeping in view the above facts and circumstances and legal precedents, we allow the jurisdictional ground taken by the assessee that the notice u/s 143(2) was not issued by an officer having jurisdiction on the assessee and who had passed the assessment order and therefore, we hold that in view of non issue of statutory notice u/s 143(2), the assessment order is bad in law and void ab in initio and hence all further proceedings including the order passed by the learned CIT(A) is bad in law ITA No.788/LKW/2024 Page 10 of 14 and therefore, the appeal filed by Revenue against the order of learned CIT(A) does not stand and is dismissed. (4.1) The Ld. Counsel for the assessee further reliance placed on the order of the Hon'ble Allahabad High Court (Lucknow Bench) in the case of PCIT vs Mohd. Rizwan Prop. M/s. M. R. Garments Moulviganj Lucknow (order dated 30.03.2017 in ITA. No.1000/2015) 2024 (8) TNI 1517 – AT- Income tax/11 ITR – OL – 149 (All) (HC). (4.2) At the time of hearing on 1st May, 2025, the Ld. Departmental Representative for the Revenue submitted that the jurisdiction of the Assessing Officer in the present case needs to be verified. (5) On 28th May, 2025, when the appeal was finally heard, the jurisdiction order vide Notification No.40/2010 dated 26.05.2010 was referred to by representative of both sides and it was accepted by both sides that the jurisdiction in the case was with ACIT Range-6(1) whereas the notice u/s 143(2) of the Act was issued by an officer in another Range i.e. Range-2. It is not in dispute that jurisdiction of the assessee was in Range-6 whereas notice u/s 143(2) of IT Act was issued by an officer in Range-2. 5.1 Thus, it is not in dispute that notice u/s 143(2) of the Act was issued by an officer who did not have jurisdiction over the case. It is through issue of notice u/s 143(2) of the Act that an Assessing Officer assumes jurisdiction to pass assessment order u/s 143(3) of the Act. Therefore, it is of vital importance that the notice u/s 143(2) of the Act is issued by an Assessing Officer holding jurisdiction over the case. A failure in this regard can be ITA No.788/LKW/2024 Page 11 of 14 fatal to the assessment order. In the case of PCIT vs Mohd. Rizwan (supra), the Hon'ble Allahabad High Court, which is the Jurisdictional High Court, held that an order passed by judicial and quasi-judicial authority having no jurisdiction, deserves to be set aside. Moreover, in the case of CIT vs Hari Raj Swarup and Sons (1982) 138 ITR 462 (Alld.), the Hon'ble Jurisdictional High Court has held that even if the assessee submitted to jurisdiction of the Assessing Officer, law is that the assessee cannot confer jurisdictional on an authority who did not have the same. In the case of Abdul Qayume vs CIT (1990) 184 ITR 404 (All.), the Hon'ble Allahabad High Court has held that an admission or an acquiescence cannot a foundation for assessment. In the case of PCIT vs Mohd Rizwan (supra), the Hon'ble Allahabad High Court has held that it is well settled that the jurisdiction can neither be waived nor created even by consent and even by submitting to jurisdiction an assessee cannot confer any jurisdictional authority on an officer which the officer inherently lacked. In the case of CIT vs Kurban Hussain Ibrahimji Mithiborwala (1972) (4) SCC 394, the Hon'ble Supreme Court held that an Income Tax Officer’s jurisdiction depends upon the issuance of valid notice. The Hon'ble Supreme Court further held that the entire proceedings taken by the officer would become void for want of jurisdiction, if the notice issued by him is invalid for any reason. The Hon'ble Supreme Court also hold that an invalid notice cannot be treated as merely an irregularity so as to validitate proceedings of assessment if the assessee had participated. Similar view was taken by a Full Bench of Hon'ble Allahabad High Court in the case of Laxmi Narain Anand Prakash vs Commissioner of Sales ITA No.788/LKW/2024 Page 12 of 14 Tax, Lucknow AIR 1980 ALL 198. In the case of Raja Textile Ltd vs ITO (1973) 87 ITR 539 (SC), the Hon'ble Supreme Court held that it was incomprehensible to think that a quasi-judicial authority like Assessing Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. It is well settled that requirement of valid notice cannot be waived; and the mere fact that assessee acted in pursuance of invalid notice would not render notice valid or validate subsequent proceedings which are vitiated in law for want of valid notice. (5.1.1) The provisions u/s 292BB of the Act also cannot save an invalid notice in the present case before us. The saving provision u/s 292BB of the Act, have application only when notice was not served upon the assessee or when it was not served upon the assessee in time or when the notice was served upon the assessee in an improper manner. The provision u/s 292BB of the Act, cannot cure and invalid notice with regard to a competence/jurisdiction of the authority who has issued notice. In nutshell, while in some situations, the curative provisions u/s 292BB of the Act can save a notice as far as its service is concerned; but it cannot save an invalid notice issued by an authority without jurisdiction to issue the notice. (5.2) It is well settled that jurisdictional issue can be raised at any stage, even if the issue was not raised during the assessment proceedings. This was clearly enunciated in order of Hon'ble Gujarat high Court in the case of P.V. Doshi 113 ITR 22 (Guj) Hon'ble Gujarat high Court passed this order after detailed consideration of a number of decided precedents including ITA No.788/LKW/2024 Page 13 of 14 orders passed by Hon'ble Supreme Court. In this context orders reported at Dushyant Kumar Jain vs DCIT (2016) 381 ITR 428 (Del), Shirshbhai Sajanwale vs ACIT (2017) 396 ITR 167 (Guj), City Union Bank Ltd vs ACIT (2020) 425 ITR 475 (Mad), Kiran Singh & Others vs Chaman Paswan & Ors (1955) 1 SCR 117, Sushil Kumar Mehta vs Gobind Ram Bohra (1990) 1 SCC 193 and Indian Bank vs Manilal Govindji Khona (2015) (3) SCC 712 can be mentioned. Similar view was taken by Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bom). (6) Since the representatives of both sides are in agreement that the notice u/s 143(2) of the Act was issued by an officer who did not have jurisdiction in the case; we respectfully follow the order of Hon'ble Jurisdictional High Court in the case of PCIT vs Mohd. Rizwan (supra); order of the Co-ordinate Bench of ITAT Lucknow Bench in the case of ITO vs M/s. Arti Securities & Services Ltd. (supra); and the other precedents referred to in foregoing paragraph (4.1), (5), (5.1), (5.1.1) and (5.2) of this order. Accordingly, it is held that the assessment proceedings were invalid, and the assessment order passed by Assessing Officer is is null and void. The assessment order, therefore, is annulled and the Assessing Officer is directed to accept returned income of Rs.34,28,390/-. (6.1) Since we have already annulled the assessment order on jurisdictional issue, other issues raised by the assessee in the appeal are merely academic in nature, and therefore, are not being decided. ITA No.788/LKW/2024 Page 14 of 14 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 30/05/2025. Sd/- Sd/- [KUL BHARAT] [ANADEE NATH MISSHRA] उपाÚय¢/VICE PRESIDENT लेखा सदèय/ACCOUNTANT MEMBER Ǒदनांक/DATED: 30/05/2025 Vijay Pal Singh, (Sr. PS) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard File By order // True Copy// Assistant Registrar "