JAYANTA KHAUND,GUWAHATI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, GUWAHATI

ITA 35/GTY/2021

AI Insights

The case involves two appeals by Jayanta Khaund against the additions made to his income and the penalties levied under sections 68 and 271(1)(c) of the Income Tax Act, respectively. The primary issue was the verification of sundry creditors and the jurisdiction of the Assessing Officer. The Assessing Officer initially added a substantial amount to the assessee's income due to non-verification of creditors' transactions. The CIT(A) further enhanced this addition, leading to the appeals. The ITAT examined the jurisdictional challenge and the merits of the additions, ultimately remanding the matter back to the Assessing Officer for a detailed examination of the creditors' genuineness and the appropriate assessment year for the additions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33313 (ITAT-GUWAHATI)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-09-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 26-03-2021
• Other Referred Cases: PCIT vs. Nopany and Sons, S. K. Industries vs. ACIT, PCIT vs. Cosmat Traders (P) Ltd., DCIT vs. Kalinga Institute of Industrial Technology, Shivaaditiya Jems And Jewellery (P) Ltd. vs. ITO, Suresh vs. ACIT, Amarjit Singh Tut. Vs. UOI, Abhishek Jain vs. ITO, Chandrika Investments vs. ITO, CIT vs. British India Corpn. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Bogus
• Section: 148; 142(1); 143(2); 64; 271(1)(c); 11; 132; 153A; 68; 133(6); 153C; 246; 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “GUWAHATI BENCH, GUWAHATI VIRTUAL HEARING AT KOLKATA Before Shri Manomohan Das, Judicial Member and Shri Sanjay Awasthi, Accountant Member I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund…………………………………….....................……….……Appellant 300B, Trebeni Complex, G.P. Road, Adabari, Guwahati- 781012. [PAN: AKKPK7824L] vs. ACIT, Circle-1, Guwahati.............…..….…..….........……........……...…..…..Respondent Appearances by: Shri S. P. Bhati, FCA, appeared on behalf of the appellant. Shri Sanjay Jha, JCIT, appeared on behalf of the Respondent. Date of concluding the hearing : September 18, 2024 Date of pronouncing the order : November 26, 2024 ORDER Per Sanjay Awasthi, Accountant Member: 1. This is a batch of two appeals, one involving the quantum and the other challenging the levy of penalty u/s 271(1)(c) of the Income Tax Act (hereinafter referred to as the ‘Act’) on the amount of addition. Since the issues are interconnected, therefore, these two appeals are being taken up for adjudication simultaneously. 1.1 I.T.A. No.35/GTY/2021 - The unique set of facts pertaining to the quantum appeal may be briefly mentioned. The assessee filed his return of income on 30.10.2015 for assessment year 2015-16 showing an income of Rs.59,47,780/-. The case was picked up for limited scrutiny. The initial notice u/s 143(2) of the Act was issued by ITO, Ward-3(2), Guwahati and thereafter, on account of change of pecuniary jurisdiction, the assessment was completed by ACIT, Circle-1, Guwahati. Needless to say, that the successor Assessing Officer issued a notice u/s 142(1) of the Act, prior to completing the assessment. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 2 1.2 During the course of assessment proceedings, the Assessing Officer has recorded that the assessee is a civil contractor and the reason for picking up the case for scrutiny was a substantial increase in sundry creditors. The Assessing Officer issued notices for collecting information about the said creditors and managed to obtain some basic details like addresses, PAN etc. However, notices u/s 133(6) of the Act issued by the Assessing Officer did not result in any compliance from the said creditors. Also, the Assessing Officer failed to obtain any details regarding payments made to them or even bills or vouchers in evidence of the transactions claimed. Even though, as is recorded, they were old creditors but it was felt that since even for this year some transactions had been made, there would be no problem with verification. Thereafter, the Assessing Officer proceeded to add u/s 68 of the Act Rs.1,88,60,982/-, representing transactions during the period from 01.04.2014 to 31.03.2015, mainly on account of non-satisfactory verification of the said transactions. 1.3 This matter was carried to the ld. CIT(A), where, the assessee filed some new documentation in support of his claim that the said creditors were genuine. Thereafter, a remand report was submitted by the Assessing Officer in which it was mentioned that one Mr. Toko Tei, proprietor of Tagam Enterprise, was available for verification and questioning. However, the remaining three creditors could not be available for verification. Interestingly, this creditor (Tagam Enterprises) claimed the status of a tribal person and hence denied the liability of filing any return of income or maintaining any books of account etc. In fact, it was claimed that this creditor had only maintained receivables’ details in a diary only. This lack of records and the fact that there appeared to be no payment made by the assessee inspite of huge amounts outstanding, led to an adverse view being recommended by the Ld. AO in the remand report. The ld. CIT(A) proceeded ahead to not only I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 3 confirm the addition made by the Assessing Officer but also issued a notice for enhancement of income at her own level. 1.4 Through the said notice, it was proposed to add back the entire credit balance of Rs.8,69,22,282/- shown as outstanding against the four parties as on 31.03.2015. This enhancement was eventually done by Rs.6,80,71,300/- (Rs.8,69,22,282/- being the total of creditors less Rs.1,88,50,982/- being the amount already added by the Assessing Officer). The main reasoning for doing this, as deserves to be repeated again, was on account of non-verification of three out of four creditors and even in the case of the creditor who presented himself for verification, doubting his claim on account of absence of any books of accounts, vouchers, etc. considering the huge amount of Rs.5,52,82,001/- shown as credit against his M/s Tagam Enterprise. The ld. CIT(A) treated the entire credit as having been extinguished and used the provisions of section 41(1) r.w.s. 251(2) of the Act to make the addition/enhancement. 1.5 Thereafter, a penalty was also levied u/s 271(1)(c) of the Act on the enhanced amount by the ld. CIT(A). 2. Aggrieved with these actions, the assessee has approached the ITAT through the following grounds of appeal [ regarding ITA 35]: “1. For that the learned CIT (Appeals) is not justified in sustaining the addition made by A.O. u/s 68 of I.T. Act of Rs.1,88,60,982/-. 2. For that the learned CIT (Appeals) is not justified in enhancing the assessment by Rs.6,80,71,300/- by making addition u/s 41(1) of I.T. Act, 1961. 3. For that the assessment order is bad in law as no notice u/s 143(2) has been issued by jurisdictional Assessing Officer. 4. For that the assessment order is bad in law as transfer of assessment by one A.O. to another A.O. is without any order by Commissioner of Income Tax as provided u/s 127 of I.T. Act, 1961. 5. For that the learned CIT (Appeals) after holding in 3rd Para on Page 44 of order that no books of accounts has been maintained making addition on same books of accounts. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 4 6. For that the learned CIT (Appeals) is not justified in giving blanket direction for reassessment for the A.Y. 2013-14 to A.Y. 2018-19. 7. For that the learned A.O. is not justified in applying tax rate as prescribed u/s 115 BBE of I.T. Act, 1961. 8. The Appellant craves the leave to take Additional Grounds at the time of hearing of Appeal.” 2.1 Right at the outset, it may be mentioned that Ground Nos.6,7 & 8 are not proposed to be specifically adjudicated as they would be consequential to the decision rendered for Ground Nos.1 to 5 (supra). However, since the Ground Nos.3 and 4 challenge the assumption of jurisdiction, it would be appropriate to deal with this issue first before proceeding any further in this matter. 3. On the issue of assumption of jurisdiction, both the ld. AR & DR have filed written submissions in support of their respective stand points. These will be extensively referred to in adjudicating this issue. 3.1 The facts regarding this contention are that the initial notice u/s 143(2) of the Act was issued by ITO, Ward-3(2), Guwahati on 19.09.2016. Later, this case was transferred to ACIT, Circle-1, Guwahati since the income was above Rs.20 lacs. Further, notices were issued by the said ACIT, Circle and the assessment was also completed by him. It is the contention of the assessee that not only was the income in the present year but also in the immediately preceding year more than Rs.20 lacs and thus the initial notice u/s 143(2) of the Act should have been issued by the ACIT and not the ITO, Ward-3(2), Guwahati. The issuance of such notice by the allegedly wrong Assessing Officer (being ITO) has brought in a fatality in the present proceedings, rendering the Assessing Officer’s order illegal and void. It has been emphasized that the subsequent passing of the assessment order by the admittedly ‘correct’ Assessing Officer does not cure the defect. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 5 3.2 At this stage, it would be appropriate to summarize the arguments of both the ld. AR & DR. (A) Ld. AR – (i) The initial notice u/s 143(2) of the Act should have been issued by the Assessing Officer having jurisdiction, being the ACIT and not the ITO. (ii) The position of law as enshrined in sections 120 and 124 of the Act regarding jurisdiction and the definition of “Assessing Officer” as in section 2(7A) of the Act has been emphasized to mean that section 2(7A) not only defines an Assessing Officer but also implies that it means an Assessing Officer having jurisdiction. (iii) Reliance has been placed on the following cases: (a) PCIT vs. Nopany and Sons 286 Taxman 388 (Cal), order dated 04.02.2022 (b) S. K. Industries vs. ACIT (WPC; No.4014/2016 & CM NO.16938/2016 (Del), order dated 31.05.2017 (c) PCIT vs. Cosmat Traders (P) Ltd. (ITAT/78/2022, IA No.GA/2/2022, order dated 15.11.2022) (iv) The ld. AR has taken pains to distinguish the present matter from the case of DCIT vs. Kalinga Institute of Industrial Technology reported in 454 ITR 582 (SC), mainly on the ground that it denotes allowing of an SLP and is not a decision of regular Civil appeal. It needs to be mentioned that this order is dated 01.05.2023. (B) Ld. DR – (i) At no stage, either before the Assessing Officer or the ld. CIT(A), has the assessee ever raised the issue of jurisdiction and since the assessee participated in the proceedings, he has forfeited his right to challenge the jurisdiction at this stage. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 6 (ii) Reliance has been placed on the case of Kailash Kedia 147 taxmann.com 126 (Ori) and the case of Anshul Jain reported in 143 taxmann.com 37 (P&H) 4. We have carefully considered the submissions from both sides and also perused the facts, as evident from the records. It is felt that the issue of whether assessment proceedings can be vitiated due to non- adherence to the pecuniary jurisdiction assigned to various levels of Income Tax Officers, deserves a fresh look with the judgment in the case of DCIT vs. Kalinga Institute of Industrial Technology reported in 454 ITR 582 (SC) order dated 01.05.2023. Since all the the case laws relied upon by the ld. AR, i.e. PCIT vs. Nopany and Sons (supra), S. K. Industries vs. ACIT (supra) & PCIT vs. Cosmat Traders (P) Ltd. (supra) have been pronounced earlier than 01.05.2023 [being the date of judgment of Kalinga DCIT vs. Kalinga Institute of Industrial Technology (supra)], it would be in the fitness of things to analyze the issue of jurisdiction of an Assessing Officer with a view to determining when its inappropriate application would render proceedings as null and void. 4.1 To begin with, we need to advert to the facts of the Kaling Case (supra). In that case, the assessee filed a writ petition for challenging the notice u/s 143(2) of the Act, issued by the ACIT, Corporate Circle-1(2), Bhubaneshwar, as being without jurisdiction. The High Court allowed the said writ petition and set aside the notice issued u/s 143(2) on the ground that the jurisdictional officer had not adjudicated upon returns as jurisdiction has been changed after returns had been filed. The Hon’ble Apex Court’s order may be reproduced in full on this issue: “1. The impugned order set asides the assessment for A.Y. 2014-2015 the ground that the jurisdictional officer had not adjudicated upon the returns. The jurisdiction had been changed after the returns were filed. However, the records also reveals that the assessee had participated pursuant to the notice issued under section 142(1) and had not questioned the jurisdiction of the assessing officer. Section 124(3)(a) of the Income-tax Act precludes the assessee from questioning the jurisdiction of the assessing I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 7 officer, if he does not do so within 30 days of receipt of notice under section 142(1). 2. In the present case, the facts did not warrant the order made by the High Court. At the same time, this Court notices that the High Court had granted liberty to the concerned authority to issue appropriate notice. 3. It is clarified, therefore, that the assessing officer is free to complete the assessment (in case the assessment order has not been issued) within the next 60 days. In such event, the question of limitation shall not be raised by the assessee. 4. The special leave petition is allowed in the above terms. ------------” 4.2 We are conscious of the fact that the matter under consideration pertains to pecuniary jurisdiction and we need to see if there is any generic distinction between pecuniary and other varieties of jurisdiction, more importantly territorial. Here some relevant portions of section 120 of the Act (titled “Jurisdiction of income-tax authorities”) and also section 124 (titled “Jurisdiction of Assessing Officers”) need to be highlighted: Section 120 [Jurisdiction of income-tax authorities. 120. (1) Income-tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. [Explanation. —For the removal of doubts, it is hereby declared that any income- tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1).] (2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely :— (a) territorial area; I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 8 (b) persons or classes of persons; (c) incomes or classes of income; (emphasis added) and (d) cases or classes of cases. (4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,— (a) authorise any [Principal Director General or] Director General or [Principal Director or] Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the [Principal Director General or] Director General or [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by [an Additional Commissioner or] [an Additional Director or] a [Joint] Commissioner [or a [Joint] Director], and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such [Additional Commissioner or] [Additional Director or] [Joint] Commissioner [or [Joint] Director] by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the [Joint] Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 9 the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.] Section 124 [Jurisdiction of Assessing Officers. 124. (1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction— (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the [Principal Director General or] Director General or the [Principal Chief Commissioner or] Chief Commissioner or the [Principal Commissioner or] Commissioner; or where the question is one relating to areas within the jurisdiction of different [Principal Directors General or] Directors General or [Principal Chief Commissioners or] Chief Commissioners or [Principal Commissioners or] Commissioners, by the [Principal Directors General or] Directors General or [Principal Chief Commissioners or] Chief Commissioners or [Principal Commissioners or] Commissioners concerned or, if they are not in agreement, by the Board or by such [Principal Director General or] Director General or [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner as the Board may, by notification in the Official Gazette, specify. (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer— (a) where he has made a return [under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 142 or [sub-section (2) of section 115WE or] sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under [sub-section (2) I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 10 of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; [(c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub- section (2) of section 153C or after the completion of the assessment, whichever is earlier.] (4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made. ------------------ 4.3 A plain reading of section 120(3) of the Act reveals that jurisdiction pertains to territorial area, persons, classes of persons, incomes or classes of income and cases or classes of cases. Thus, it is clear that this section includes pecuniary jurisdiction. As a logical corollary, it would be a clear interpretation that the mechanism for settlement of any grievance, pertaining to the challenging of jurisdiction, would be available in this Chapter XIII and its Part ‘B’ (“Jurisdiction”). At this stage, it needs to be recapitulated that the assessee has, admittedly, never raised this issue, either before the ld. Assessing Officer or the ld. CIT(A). In fact, this point is canvassed for the first time before the ITAT only. For arriving at a definite conclusion regarding the maintainability of this issue before us, we may refer to some authorities, other than the Kalinga Institute case (supra), on this subject. 4.4 (a) In the case of Shivaaditiya Jems And Jewellery (P) Ltd. vs. ITO reported in 450 ITR 483 (All), it has been observed as under: I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 11 “10. Thus, sub-section (1) of section 120 of the Act, 1961 confers powers on the Board to issue directions to the Income-tax authorities for exercise of powers and performance of the functions by all or any of those authorities. Sub-section (2) of section 120 permits directions of the Board made under sub-section (1) for authorising any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income tax authorities who are subordinate to it. Sub-section (3) of section 120 provides for the Board or other income tax authority authorised by it to have regard to one or more of the mentioned four criteria in issuing directions or orders referred to in sub-sections (1) and (2) of section 120. The criteria are: (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. Sub-section (5) of section 120 enables issuance of directions and orders referred to in sub-section (1) and (2) requiring two or more Assessing Officers (whether or not of the same class) to exercise and perform concurrently the powers and functions referred to in the four criteria mentioned in sub-section (3). Section 124 of the Act deals with jurisdiction vested in any Assessing Officer under sub-section (1) or sub-section (2) of Section 120 of the Act with regard to territorial area. Where any question arises as to whether an Assessing Officer has jurisdiction to assess any person, (qua the territorial area), the question is required to be determined administratively by the authority in the manner mentioned in sub-section (2) of section 124. Sub-section (3) of section 124 limits and negativates the right of any person to call in question the jurisdiction of an Assessing Officer where any of the three conditions mentioned in clause (a),(b) and (c) of sub- section (3) respectively exist. Clause (a) of sub-section (3) of section 124 refers to situations, inter alia, where a person has made a return under sub-section (1) of section 139, who has been served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143. Given the provision of clause (a) of sub-section (3) of section 124, no person is entitled to call in question the jurisdiction of an Assessing Officer after I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 12 expiry of one month from the date on which he is served with such notice, whichever date is earlier. Sub-section (4) of section 124 mandates the Assessing Officer to refer the matter for determination under sub-section (2) before the assessment is made, if he is not satisfied with the correctness of the claim of the assessee calling in question the jurisdiction of an Assessing Officer, subject to the provisions of sub-section (3). Sub-section (5) of Section 124 which begins with a non-obstante clause, is as under:- \"(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120.\" 11. It is undisputed that ITO Ward-2(1), Moradabad who issued the impugned notice dated 31-3-2021 under section 148 of the Act, 1961 for the Assessment Year 2017-18 and passed the impugned order dated 10- 9-2021/13-9-2021 under section 148A(d) rejecting the objections, is the Assessing Officer within the meaning of Section 2 (7A) of the Act, 1961. 12. The contention of the learned counsel for the petitioner is that since on account of the mandated monetary limit, the impugned order was passed by the ACIT-2, Moradabad, therefore, only ACIT-2, Moradabad could have issued notice under section 148 of the Act and not the ITO Ward-2(1). We do not find any substance in the submission. 13. Section 120(1) of the Act, 1961 confers powers upon the Income-tax Authorities to exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assign to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.” *** “16. It is reiterated that sub-section (1) of section 124 of the Act, 1961 provides that where by virtue of any direction or order issued under sub- section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 13 in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. 17. Thus, under sub-section (1) of section 124 of the Act, 1961 the Assessing Officer who has been vested with jurisdiction over any area, shall have jurisdiction within the limits of such area. Sub-section (5) of Section 124 of the Act, 1961 starts with a non-obstante clause and provides that every Assessing Officer shall have all the powers conferred by or under the Act,1961 on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120. Thus, the Assessing Officer vested with jurisdiction by virtue of direction of sub-section (1) and (2) of section 120 shall have all powers conferred by or under the Act, 1961 on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction. 18. It has been admitted before us that respondent no. 1 i.e the ITO-2(1), Moradabad has the territorial jurisdiction over the petitioner, but only objection to the jurisdiction has been raised merely on the ground that on account of pecuniary limit, the proceedings ought to have been initiated by ACIT-2, Moradabad. 19. Once the territorial jurisdiction of respondent no. 1 is admitted by the petitioner, there existed no occasion for the Assessing Officer to refer the matter for determination under sub-section (2) of section 124 before the assessment was made. 20. The facts and legal position as discussed above leave no manner of doubt that the respondent no. 1 is the Assessing Officer having territorial jurisdiction over the petitioner. Merely because some pecuniary limit has been fixed for purpose of distribution of work between officers, it would not mean that there shall be inherent lack of jurisdiction of respondent no. 1. Therefore, it cannot be said that respondent no. 1 lacked inherent jurisdiction while issuing the impugned notice under section 148 of the Act, 1961.” (b) In the case of Suresh vs. ACIT reported in 385 ITR 1 (Bom), it has been observed as under: “8. In our view the order passed by the Deputy Commissioner of Income- tax is a speaking and well reasoned order. As soon as respondent No. 3 noted from the copy of income-tax return, the return for income filed for the I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 14 year 2010-11 are more than one crore and the assessment was made by the Joint Commissioner, he transferred the file to the Deputy Commissioner of Income-tax as per the procedure laid down in section 127 of the said Act as the same was falling within the pecuniary jurisdiction of respondent No. 2. We therefore found no illegality or irregularity on the part of respondent No. 3 in issuing notice under section 148 of the said Act as well as order dated September 16, 2015 passed by respondent No. 2. Since the Joint Commissioner of the Income-tax has dealt the case of the petitioner for the assessment year 2010-11 pursuant to transfer order passed by the Commissioner of Income-tax to be operative for the period from February 9, 2012 to March 31, 2013, there is no force in the submission of learned counsel for the petitioner that officer not below the rank of the Joint Commissioner of Income-tax can only make reassessment. The Deputy Commissioner of Income-tax, who is now dealing with the case is duly competent and possess the pecuniary and territorial jurisdiction to deal with the case of the petitioner for reassessment. For this reason alone, we are not inclined to accept the contention of learned counsel that the Joint Commissioner of Income-tax alone competent to make reassessment for the year 2010-11. 9. The impugned notice under section 148 of the said Act was issued to the petitioner on March 25, 2015. By the notice issued the petitioner was called upon to submit the return of the assessment year 2010-11 in the prescribed proforma. It is mentioned in the notice that the notice has been issued after due satisfaction of the Assessing Officer that there is reason to believe that in the income chargeable for the assessment year 2010-11, the petitioner has escaped certain amount from assessment within the meaning of third proviso to Explanation 2(c)(i) to section 147 of the said Act. In the notice it is also mentioned that necessary approval has been granted by the Additional Commissioner of Income-tax for issuing such notice. The petitioner has responded to the said notice dated March 25, 2015 on April 22, 2014. However, no objection as to jurisdiction is raised. The objection as to the jurisdiction has been raised for the first time by representation dated September 7, 2015. Thus, it is amply clear that within the period of 30 days of issuance of notice under section 148 of said Act, no objection as to the jurisdiction was raised by the petitioner. By the notice dated June 26, 2015 issued by respondent No. 3 under section 142(1), respondent No. 3 called upon the petitioner to submit his return on July 11, 2015. The objection as to the jurisdiction was first time raised on September 7, 2015. As provided under sub-section (3) of section 124 of the said Act, no person is entitled to call in question the jurisdiction of an Assessing Officer after the expiry of the time allowed by the notice issued under section 148. Section 124 of the Income-tax Act reads as under : ……. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 15 “11. As discussed in the foregoing paras, respondent No. 3 had issued the notice under section 148 of the said Act after seeking necessary approval under section 151 of the said Act. The proceeding is already transferred by respondent No. 3 to the Deputy Commissioner of Income- tax, who is vested with the jurisdiction to deal with the matters having valuation more than 10.00 lakhs. The objections raised by the petitioner also decided by the Deputy Commissioner of Income-tax, who holds the territorial and pecuniary jurisdiction to make the reassessment of the case of the petitioner. The case is still under consideration of the Deputy Commissioner of Income-tax. The Joint Commissioner, who has assessed income for the assessment year 2010-11 and dealt the case, as the file was transferred to him from the file of the Deputy Commissioner of Income-tax by the order of the Commissioner of Income-tax in exercise of power under section 127 of the Income-tax Act. In view of this, we find no merit in the submissions advanced that the impugned notice issued by respondent No. 3 is illegal, bad in law and without jurisdiction. So also, we find no infirmity in the order dated September 16, 2015 passed by the Deputy Commissioner of Income-tax.” (c) Furthermore, in the case of Amarjit Singh Tut. Vs. UOI reported in 347 ITR 585 (P&H), it has been held as under: “14. A distinction has to be made between a situation when there is inherent lack of jurisdiction and a situation where jurisdiction is irregularly assumed and plea of want of jurisdiction can be waived by a party. In the later situation, question arises whether party who could waive the plea of jurisdiction, raised such a plea and whether such a party had been prejudiced on account of erroneous assumption of jurisdiction. 15. Reference may be made to judgment of the Hon'ble Supreme Court in Kiran Singh v. Chaman Paswan AIR 1954 SC 340, para 7, wherein it was observed:- \"7. …….With reference to objections relating to territorial jurisdiction, Section 21 of the Civil Procedure Code enacts that no objection to the place of suing should be allowed by an appellate or revisional court, unless there was a consequent failure of justice. It is the same principle that has been adopted in Section 11 of the Suits Valuation Act with reference to pecuniary jurisdiction. The policy underlying Sections 21 and 99, C. P. C. and Section 11 of the Suits Valuation Act is the same namely, that when a case had been tried by a Court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless it had resulted in failure of justice and the policy of the legislature has been to treat objections to jurisdiction both territorial and pecuniary as technical I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 16 and not open to consideration by an appellate court, unless there has been a prejudice on the merits. The contention of the appellants, therefore, that the decree and judgment of the District Court, Monghyr, should be treated as a nullity cannot be sustained under Section 11 of the Suits Valuation Act.\" 16. Same view has been taken by the Hon'ble Supreme Court in Greenworld Corpn. Referring to an earlier judgment in Mantoo Sarkar v. Oriental Insurance Co. Ltd. [2009] 2 SCC 244, in para 63, (emphasis added) it was observed:- \"63. In Mantoo Sarkar v. Oriental Insurance Co. Ltd. [2008 (16) SCC 197], this Court held: \"17. The Tribunal is a court subordinate to the High Court. An appeal against the Tribunal lies before the High Court. The High Court, while exercising its appellate power, would follow the provisions contained in the Code of Civil Procedure or akin thereto. In view of sub-section (1) of Section 21 of the Code of Civil Procedure, it was, therefore, obligatory on the part of the appellate court to pose unto itself the right question, viz., whether the first respondent has been able to show sufferance of any prejudice. If it has not suffered any prejudice or otherwise no failure of justice had occurred, the High Court should not have entertained the appeal on that ground alone. 18. We, however, while taking that factor into consideration must place on record that we are not oblivious of the fact that a decision rendered without jurisdiction would be coram non juris. Objection in regard to jurisdiction may be taken at any stage. (See Chief Engineer, Hydel Project v. Ravinder Nath, [(2008) 2 SCC 350]) wherein inter alia the decision of this Court in Kiran Singh v. Chaman Paswan, [AIR 1954 SC 340] was followed, stating: \"26. The Court also relied upon the decision in Kiran Singh v. Chaman Paswan [AIR 1954 SC 340] and quoted (in Harshad Chiman Lal case ([(2005) 7 SCC 791], SCC pp. 804- 805, para 33) therefrom: Kiran Singh case (supra), AIR p.342, para 6. 6. ...It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, ...strikes at the very I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 17 authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties.\" Though in the aforementioned decision these observations were made since the defendants before raising the objection to the territorial jurisdiction had admitted that the court had the jurisdiction, the force of this decision cannot be ignored and it has to be held that such a decree would continue to be a nullity.\" 20. A distinction, however, must be made between a jurisdiction with regard to subject matter of the suit and that of territorial and pecuniary jurisdiction. Whereas in the case falling within the former category the judgment would be a nullity, in the latter it would not be (emphasis added)...\" 17. Accordingly, question has to be answered against the assessee and impugned notice cannot be held to be vitiated for want of jurisdiction. (d) Also in the case of Abhishek Jain vs. ITO reported in 405 ITR 1 (Del), the Hon’ble Delhi High Court has observed as under: “Section 120 which relates to jurisdiction of the Income-tax Authorities stipulates that Income-tax Authorities shall exercise any of the powers and perform all or any of the functions conferred or assigned to such authority by or under this Act as per the directions of the Board i.e., Central Board of Direct Taxes. As per Explanation to sub-section (1), the power can also be exercised, if directed by the Board, by authorities higher in rank. Under sub- section (2), the Board can issue orders in writing for exercise of power and performance of functions by the Income-tax Authorities and while doing so in terms of sub-section (3), the Board can take into consideration and have regard to the four-fold criteria namely, territorial area; persons or classes of persons; incomes or classes of income; and cases or classes of cases. Thus, the act does not authoritatively confer exclusive jurisdiction to specific Income Tax Authority. It is left to the Board to issue directions for exercise of power and functions taking into consideration territorial area, class/types of persons, income and case, and Board have been given wide power and latitude. The said section by necessary implication postulates and acknowledges that multiple or more than one Assessing officer could exercise jurisdiction over particular assessee. Concurrent jurisdictions are therefore not an anathema I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 18 but an accepted position under the Act. The term 'jurisdiction' in section 120 has been used loosely and not in strict sense to confer jurisdiction exclusively to a specified and single Assessing Officer, to the exclusion of others with concurrent jurisdiction. It would refer to 'place of assessment', a term used in the Income-tax Act, 1922. Sub- section (5) to section 120 again affirms and accepts that there can be concurrent jurisdiction of two or more assessing officers who would exercise jurisdiction over a particular assessee in terms of the four- fold criteria stated in sub-section (3) to section 120. Second part of sub-section (5) states that where powers and functions are exercised concurrently by Assessing Officers of different classes, then the higher authority can direct the lower authority in rank amongst them to exercise the powers and functions. [Para 16]” (e) A similar finding is given in the case of Chandrika Investments vs. ITO reported in [2023] 155 taxmann.com 63 (Karnataka), wherein, the Hon’ble High Court has observed as under: “The assessee raised its objection with regard to pecuniary jurisdiction of the Assessing Officer for the first time before the Commissioner (Appeals). [Para 11] The Delhi High Court in the case of Abhishek Jain v. ITO [2018] 94 taxmann.com 355/405 ITR 1 has held that as far as territorial and pecuniary jurisdiction are concerned, objection should be taken at the earliest possible opportunity and/or before the settlement of issues and not at the subsequent stage. Jurisdiction as to the subject matter is distinct and stands on a different footing. [Para 12] ---------- Admittedly the assessee has not raised any objection with regard to pecuniary jurisdiction before the Assessing Officer. In view of the law laid down in the case of Abhishek Jain (supra) that any objection with regard to territorial and pecuniary jurisdiction should be taken at the earliest possible opportunity before the settlement of issues and not at a subsequent stage and the interpretation of section 254 by the Karnataka High Court in the case of Fidelity Business Services (P.) Ltd. (supra), there was no error in the order passed by the Tribunal. [Para 14] In the result, the appeal filed by the assessee deserves to be dismissed. [Para 16]” (f) Finally, in the case of CIT vs. British India Corpn. Ltd. reported in 337 ITR 64 (Allahabad), reliance has been placed on an extract from the I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 19 case of Mantoo Sarkar v. Oriental Insurance Co. Ltd. [2009] 2 SCC 244, wherein, the Hon’ble High Court has observed as under: “21. We cannot lose sight of the fact that in the Act it has been specifically provided that the question of jurisdiction of the assessing authority can be gone into either by the Commissioner or by the Board, as the case may be. An appeal to an appellate authority under the Act lies on the grounds as enumerated in section 246 of the Act. None of its clauses shows that an appeal on the question of jurisdiction of the assessing authority is maintainable. *** 25. In Mantoo Sarkar v. Oriental Insurance Co. Ltd. [2009] 2 SCC 244, the apex court in relation to the question of jurisdiction of the Tribunal under the Motor Vehicles Act has made the following observations, vide paragraph 20, which is reproduced below (page 249) : \"A distinction, however, must be made between a jurisdiction with regard to the subject-matter of the suit and that of territorial and pecuniary jurisdiction. Whereas in the case falling within the former category the judgment would be a nullity, in the latter it would not be. It is not a case where the Tribunal had no jurisdiction in relation to the subject-matter of claim. As a matter of fact the civil court had no jurisdiction to entertain the suit. If the Tribunal had the jurisdiction to entertain a claim petition under the Motor Vehicles Act, in our opinion, the court should not have, in the absence of any finding of sufferance of any prejudice on the part of the first respondent, entertained the appeal.\" 26. In this case, the apex court has reiterated its well known earlier judgment in the case of Kiran Singh v. Chaman Paswan, AIR 1954 SC 340, wherein a distinction has been drawn between a jurisdiction with regard to the subject-matter of the suit and that of territorial and pecuniary jurisdiction. It has been held that a decree or judgment passed by a court having no territorial or pecuniary jurisdiction is not a nullity but at the most it is an irregularity and such a judgment and decree cannot be set aside by higher court while exercising appellate or revisional jurisdiction unless a prejudice which has been caused to the appellant is established. Prejudice can be a ground for relief only when it is due to the action of another party and not when it results from one's own act. Courts cannot recognise that as prejudice which flows from the action of the very party who complains about it. (Kiran Singh v. Chaman Paswan, AIR 1954 SC 340). I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 20 27. The case on hand stands still on a weak footing inasmuch as the Income-tax Officer, CC-I had the jurisdiction when the assessment proceedings commenced and a draft assessment order was submitted to the Inspecting Assistant Commissioner. Subsequent change in the jurisdiction if any unless brought to the notice of the authority concerned, will not in any manner vitiate the assessment order in the absence of any objection with regard to lack of jurisdiction by the assessee. It is a case where both the Assessing Officer and the assessee proceeded as if there is no transfer order transferring jurisdiction. 28. There is one more flaw in the order of the Tribunal. The Tribunal at the most should have remitted the matter back to the Inspecting Assistant Commissioner for completing the assessment. It was not justified in annulling the assessment order.” 4.5. A combined reading of the case laws cited above and the plain language of the sections determining jurisdiction (both territorial and pecuniary) reveals that the mechanism for challenging the jurisdiction of an Assessing Officer is contained in Part B of Chapter XIII of the Act and it is clearly within the administrative domain. Since, in this case, the assessee never challenged the jurisdiction of the Assessing Officer, therefore, there was no occasion to administratively consider that issue. 4.6. Furthermore, the facts do not indicate that either of the two AOs: ITO and ACIT, did not have territorial jurisdiction, the absence of which might have brought in a legal fatality. It is just that a division of work was affected on account of division on the basis of returned income limits of an assessee, in other words the third limb of the categories of jurisdiction contained in section 120(3) of the Act, indicating pecuniary jurisdiction. Catena of judgments relied upon in the earlier part of the discussion, especially in the case of Kalinga Institute of Industrial Technology (supra) and Mantoo Sarkar (supra), it is held that the pecuniary jurisdiction challenged at this stage is unjustified and is at best, a curable defect, if at all it can be called a defect, considering the facts of the case. Ground No.3 and 4 of the assessee’s appeal are accordingly dismissed. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 21 5. Before parting with this issue, it needs to be mentioned that the cases relied upon by the ld. DR bear no similarity to the facts of the present case. The cases relied upon by the ld. AR are seen, as has already been recorded at the start of this discussion, that they predate the case of Kalinga Institute of Industrial Technology (supra) and would thus not be of much help in deciding the issue at hand. 6. Regarding the merit of the quantum addition, as has already been recorded in the facts of this case, the Assessing Officer made the initial addition of Rs.1,88,60,982/- on the ground that the creditors could not be adequately verified. At first appeal stage, the ld. CIT(A) treated the entire quantum of sundry creditors as on 31.03.2015 as a discharged liability and used the provisions of section 41(1) of the Act to enhance the income by a further Rs.6,80,71,300/-. Here also the genuineness was doubted of the entire set of four creditors, even though, the proprietor of M/s Tagam Enterprise presented himself for verification at Remand Report stage. It is felt that there is an inherent error in this action, in as much as the credits added contain entries belonging to earlier years and in case it can be shown that the impugned sums represent bogus entries, then also they have to be added back in the appropriate year. Therefore, we deem it fit to remand the matter back to the file of the Assessing Officer to determine the genuineness, or otherwise, of the sundry creditors and in case of any adverse findings then additions, if any, need to be made in any appropriate previous year, if the law permits reopening, considering the limitations involved as per the relevant statute. The assessee would do well to present all the facts before the Assessing Officer to enable him to assess his income correctly. We direct accordingly. 7. I.T.A. No.35/GTY/2021 is accordingly partly allowed. I.T.A. Nos.35&36/GTY/2021 Assessment Years: 2015-16 Jayanta Khaund 22 8. I.T.A. No.36/GTY/2021 – Since the matter in quantum has been remanded back to the file of the Assessing Officer, the impugned penalty would also not survive for any adjudication. Accordingly, this appeal is allowed for statistical purposes. 9. In the result, I.T.A. No.35/GTY/2021 is partly allowed, whereas, I.T.A. No.35/GTY/2021 is allowed for statistical purposes. Kolkata, the 26th November, 2024. Sd/- Sd/- [Manomohan Das] [Sanjay Awasthi] Judicial Member Accountant Member Dated: 26.11.2024. RS Copy of the order forwarded to: 1. Chunakhali Samabay Krishi Unnayan Samity Ltd 2. ITO, Ward-42(1), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "