ORCHIDS DIAMOND TOOLS (P) LTD.,GURGAON V. ITO,WARD- 19(2), DELHI

ITA 2416/DEL/2025

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The case involves M/s. Orchids Diamond Tools (P) Limited, the appellant, contesting the jurisdiction of the Income Tax Officer (ITO) who initiated and completed the assessment for the Assessment Year 2012-13. The appellant argued that the proceedings under section 147 and the subsequent assessment under sections 147/143(3) were not in conformity with the law, specifically citing the incorrect application of jurisdiction as per CBDT Instruction No.1/2011. The Tribunal agreed with the appellant, noting that the ITO lacked jurisdiction over the case, which should have been handled by the Assistant Commissioner/Deputy Commissioner due to the income level declared exceeding Rs. 30,00,000.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824807 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2025
• Other Referred Cases: Ashok Devichand Jain vs. UOI, Kevin International vs. DCIT, Suman Devi vs. ITO, Vipul Mittal vs. DCIT, YKM Holdings Pvt. Ltd. vs. ACIT, Monarch & Quershi Builders vs. ACIT, Sapna Rastogi vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDER SINGH
• Assessee Lawyers: ANKIT KUMAR
• Keywords: Set aside; Invalid notice
• Section: 147; 148; 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.2416/DEL/2025 (Assessment Year: 2012-13) M/s. Orchids Diamond Tools (P) Limited, vs. ITO, Ward 19 (2), Plot No.80, Sector 8, Delhi. IMT Manesar, Gurgaon – 122 050 (Haryana). (PAN : AAACO9704C) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ankit Kumar, Advocate Shri Lalit Mohan, CA REVENUE BY : Shri Jitender Singh, CIT DR Date of Hearing : 20.11.2025 Date of Order : 30.12.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-03, Gurgaon [hereinafter referred to as ‘ld. CIT (A)] dated 24.02.2024 for Assessment Year 2012-13. 2. At the outset, ld. AR of the assessee raised legal issue, in respect of issue of assumption of jurisdiction under section 147 of the Income-tax Act, 1961 (for short ‘the Act’) and completion of assessment u/s 147/143(3) of the Act which in the respectful submission of the assessee are not in conformity with Printed from counselvise.com 2 ITA No.2416/DEL/2023 law and, therefore, deserve to be quashed as such, by raising ground nos.1 to 1.4 which read as under :- “1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts In upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/143(3) of the Act without appreciating that the same were without jurisdiction and hence deserved to be quashed as such. 1.1 That tile learned Commissioner of Income Tax (Appeals) has failed to appreciate that initiation of proceedings was mechanical and without any application of mind much less independent application of mind, therefore the notice issued u/s 148 of the Act was an invalid notice and assumption u/s 147 of the Act was without jurisdiction. 1.2 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that Explanation 2 to section 148 of the Act has no application to the facts of the appellant and therefore assumption u/s 147 of the Act was without jurisdiction. 1.3 That in absence of any valid approval obtained under section 151 of the Act, initiation of proceedings U/S 147 of the Act and assessment framed u/s 147 of the Act are invalid and deserve to be quashed as such. 1.4 That the learned Commissioner of Income \"Tax (Appeals) has also failed to appreciate that initiation of proceedings by issuance of notice u/s 148 of the Act by the learned Jurisdictional Assessing Officer is contrary to section 151 A of the Act; and therefore the assumption of jurisdiction was not in accordance with law. 3. Ld. AR submitted that the primary ground herein, is the very initiation of the proceedings and the order of assessment u/s 147/143(3) both in violation of CBDT instructions no.1/2011 dated 31.01.2011. He submitted that the assessee declared returned loss is of Rs.1,84,94,762/- in its return and Printed from counselvise.com 3 ITA No.2416/DEL/2023 according to Instruction No.l/2011 dated 31.01.2011 issued by CBDT, initiation and completion of the proceedings should have been issued by the ACIT/DCIT and not the ITO, but the same has been initiated and completed by ITO Ward 19(2). Delhi, which is in contravention to the instruction issued by CBDT. Even otherwise, he submitted that the earlier order of assessment dated 13.03.2015 u/s 143(3) of the Act has been passed by DCIT, Circle 19(1), New Delhi, which is placed at Pages 108-112 of Paper Book. 4. Ld. AR further submitted that this issue is no longer res integra in view of the judgment of Hon'ble High Court of Bombay in case of Ashok Devichand Jain vs. UOI reported in 452 ITR 43 (Born), copy placed on record. He also relied on various judgments as under :- (i) ITA No. 5363/D/2017 dated 22.12.2023 M/s Kevin International vs. DCIT (pages 10-14 of JPB) (ii) ITA No. 2817/D/2024 dated 25.04.2025 Suman Devi vs. ITO (pages 35-41 of JPB) (iii) ITA No. 28501D12019 dated 15.01.2025 Vipul Mittal vs. DCIT (pages 48 -70 of JPB) 5. Accordingly, he prayed that the initiation of proceedings u/s 147 of the Act and issuance of notice u/s 143(2) of the Act is in contravention to the instruction no.01/2011 issued by CBDT and consequent assessment framed u/s 143(3)/147 of the Act is void ab initio and liable to be quashed as such. 6. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. Printed from counselvise.com 4 ITA No.2416/DEL/2023 7. Considered the rival submissions and material placed on record. We observe that assessment was completed by the Assessing Officer - ITO, Ward 19(2), Delhi vide order dated 26.12.2019. We observe that as per the CBDT Instruction No.1/2011 dated 31.01.2011 u/s 119 of the Act in the present case, the assessee has declared returned loss of Rs.1,84,94,762/- and as per the Instruction, income upto Rs.30,00,000/- is with the ITOs and anything above Rs.30,00,000/-, assessment has to be completed by ACs/DCs. In the given case, we observed that as per the income declared by the assessee, the jurisdiction falls under ACs/DCs. In the given case, the assessment was completed by ITO, Ward 19 (2), Delhi. Considering the peculiar facts on record, we observe that actual jurisdiction lies with ACs/DCs and it is beyond the jurisdiction of ITOs. Therefore, notice u/s 143(2) to assess the income of the assessee is beyond the jurisdiction of the ITO. Therefore, the jurisdiction notice u/s 143(2) is bad in law and accordingly even assessment order passed with wrong jurisdiction is bad in law. In this regard, we rely on the decision of ITAT, Delhi Bench in the case of Vipul Mittal vs. DCIT in ITA No.2850/Del/2019 dated 15.01.2025 wherein it was held as under :- “14. Considered the rival submissions and material placed on record. We observed that assessee has filed its return of income declaring income of Rs.59,68,220/-. As per the CBDT Instruction No.01/2011, the jurisdiction over the assessee’s case lies only with Assistant/Deputy Commissioner of Income-tax as the income declared by the assessee is above Rs.20 lakhs falls under the category of non-corporate returns. It is brought to our notice that notice u/s 143(2) was issued by the ITO, Ward 11 (3) on 28.08.2015, who do not have jurisdiction over the assessee in the case considering the fact that the return of income declared by the assessee is over and above Rs.20 Printed from counselvise.com 5 ITA No.2416/DEL/2023 lakhs. The assessment was completed by the DCIT, Circle 11 (2), New Delhi u/s 143(3) of the Act. However, we observed that the jurisdiction lies only with DCIT, however the statutory notice u/s 143(2) was issued by the ITO instead of the present Assessing Officer i.e. DCIT. In this regard, the Assessing Officer also filed the submissions which are placed on record in which it was submitted that as per the PAN based jurisdiction, the jurisdiction over the case at the time of issue of notice with the ITO, Ward 11(3). Thereafter, the jurisdiction was transferred to Circle 11 (2), Delhi on 21.07.2016 who was ultimately passed the assessment order after allowing the opportunity to the assessee. The Assessing Officer in its submissions as well as ld. DR objected to the submissions of the assessee for the reason that the present jurisdictional issue now instead of raising the same during assessment itself within one month from the date of receipt of the notice u/s 124 (3) of the Act. After considering the factual matrix in this case, we observed that similar issue under consideration is considered by the coordinate Bench in the case of YKM Holdings Pvt. Ltd. vs. ACIT (supra) wherein it was held as under :- “4. We have heard the rival submissions and perused the material available on record. At the outset, we find that the additional grounds raised by the assessee go to the root of the matter challenging the jurisdictional per se. All the facts relevant for its adjudication are placed on record. Hence, in the light of decision of Hon’ble Supreme Court in the case of NTPC Ltd. reported in 229 ITR 383, we are inclined to admit the additional grounds and take up the same for its adjudication. 5. We find that assessee’s returned income for the A.Y. 2015- 16 was Rs. 37,78,510/- hence, the jurisdiction of the assessee should lie with ACIT/DCIT since the returned income had exceeded Rs. 30,00,000/-, in view of the CBDT Instruction No.1/2011 dated 31.01.2011. For the sake of convenience, the said Instruction No.1/2011 [F. No.187/12/2010-IT(A-I)] dated 31.01.2011 is hereby reproduced:- “SECTION 119 OF THE INCOME-TAX ACT, 1961-INCOME- TAX AUTHORITIES- INSTRUCTIONS TO SUBORDINATE AUTHORITIES INSTRUCTION NO. 1/2011 [F. NO. 187/12/2010-IT(A-1)), DATED 31-1-2011 References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing Printed from counselvise.com 6 ITA No.2416/DEL/2023 monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship. An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Income Declared (Mofussil areas) Income Declared (Metro cities) ITOS ACS/DCS ITOS DCS/ACS Corporate returns Upto Rs. 20 lacs Above Rs. 20 lacs Upto Rs. 30 lacs Above Rs. 30 lacs Non-corporate returns Upto Rs. 15 lacs Above Rs. 15 lacs Upto Rs. 20 lacs Above Rs. 20 lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011.” 6. In the instant case, the notice under section 143(2) of the Act stood issued to the assessee on 12.04.2016 by ITO Ward 27(4), Delhi. In July, 2016, the ITO transferred the jurisdiction of the assessee from him to DCIT since the returned income for A.Y. 2015-16 is more than 30,00,000/-. Copy of the said transfer memo is enclosed in page 5 of the paper book. After the transfer of jurisdiction from ITO to DCIT, no fresh notice under section 143(2) of the Act was issued by ACIT, Circle 4(1), Gurgaon. The assessment was ultimately framed under section 143(3) of the Act for A.Y. 2015-16 on 14.12.2017 by ACIT, Circle – 4(1), Gurgaon. It is pertinent to note that assessment for the A.Y. 2014-15 of the assessee was completed under section 143(3) of the Act on 30.11.2016 by DCIT, Circle – 27(2), New Delhi. Hence, it was argued that the notice under section 143(2) of the Act dated 12.04.2016 issued by the ITO selecting the return of assessee for A.Y. 2015-16 for scrutiny is without jurisdiction and Printed from counselvise.com 7 ITA No.2416/DEL/2023 consequently, the assessment framed under section 143(3) of the Act dated 14.12.2017 required to be quashed as void ab initio. When this was confronted to learned DR, he pointed out to the provisions of section 124(3) of the Act wherein it was mentioned that assessee should challenge within one month about the jurisdiction of the AO on receipt of the notice. In the instant case, nowhere up to learned CIT(A), the assessee has challenged the jurisdiction of the learned AO. In our considered opinion, this argument of the learned DR is wrong in as much as section 124(3) of the Act talks only about territorial jurisdiction, whereas the issue involved here is pecuniary jurisdiction. Further, the provisions of section 124(3) of the Act could be taken shelter by the Revenue only when legal valid notice under section 143(2) of the Act has been issued by the Revenue. In the instant case, notice issued under section 143(2) of the Act on 12.04.2016 by ITO is not legal as he did not possess jurisdiction over the assessee for A.Y. 2015-16 in as much as the returned income for A.Y. 2015-16 had exceeded Rs. 30,00,000/-. We find that the issue in dispute is no longer res integra by the decision of Hon’ble Delhi High Court in the case of Ashok Devichand Jain vs. UOI reported in 452 ITR 43 (Bom). In this case, very same issue was addressed in the light of CBDT Instruction No.1/2011[F. No.187/12/2010- IT(A-I)] Dated 31.01.2011. For the sake of convenience, the entire order is reproduced hereunder: “1. Petitioner is impugning a notice dated 30th March, 2019 issued under section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2012-13 and order passed on 18th November, 2019 rejecting Petitioner’s objection to reopening on various grounds. 2. The primary ground that has been raised is that the Income Tax Officer who issued the notice under section 148 of the Act, had no jurisdiction to issue such notice. According to Petitioner as per instruction No. 1/2011 dated 31st January, 2011 issued by the Central Board of Direct Taxes, where income declared/returned by any Non-Corporate assessee is up to Rs. 20 lakhs, then the jurisdiction will be of ITO and where the income declared returned by a Non Corporate assessee is above Rs. 20 lakhs, the jurisdiction will be of DC/AC. 3. Petitioner has filed return of income of about Rs. 64,34,663/- and therefore, the jurisdiction will be that of DC/AC and not ITO. Mr. Jain submitted that since notice Printed from counselvise.com 8 ITA No.2416/DEL/2023 under section 148 of the Act has been issued by ITO, and not by DC/AC that is by a person who did not have any jurisdiction over Petitioner, such notice was bad on the count of having been issued by an officer who had no authority in law to issue such notice. 4. We have considered the affidavit in reply of one Mr. Suresh G. Kamble, ITO who had issued the notice under section 148 of the Act. Said Mr. Kamble, ITO, Ward 12(3)(1), Mumbai admits that such a defective notice has been issued but according to him, PAN of Petitioner was lying with ITO Ward (12)(3)(1), Mumbai and it was not feasible to migrate the PAN having returned of income exceeding Rs. 30 lakhs to the charge of DCIT, Circle 12(3)(1), Mumbai, as the time available with the ITO 12(3)(1) was too short to migrate the PAN after obtaining administrative approval from the higher authorities by 31st March, 2019. 5. The notice under section 148 of the Act is jurisdictional notice and any inherent defect therein is not curable. In the facts of the case, notice having been issued by an officer who had no jurisdiction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law. 6. In the circumstances, we have no hesitation in setting aside the notice dated 30th March, 2019. 7. Consequently the order dated 18th November, 2019 rejecting Petitioner’s objection is also quashed and set aside. 8. Petition disposed.” 7. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we have no hesitation to hold that the assessment framed under section 143(3) of the Act deserves to be quashed in the instant case as the initial scrutiny notice issued under section 143(3) of the Act dated 12.04.2016 by ITO was without jurisdiction as he did not possess jurisdiction over the assessee for the A.Y. 2015-16. Consequently, assessment framed under section 143(3) of the Act is hereby quashed as void ab initio. The additional ground no.2 is hereby allowed.” Printed from counselvise.com 9 ITA No.2416/DEL/2023 15. Similar view was expressed by the ITAT, Mumbai in the case of Monarch & Quershi Builders vs. ACIT (supra) and by the coordinate Bench in the case of Sapna Rastogi vs. ITO (supra). 16. Further the Revenue has not brought on record an order u/s 127 of the Act passed in order to transfer the case to DCIT, Circle 11 (2), New Delhi except making the submissions that assessee should file the objection within one month u/s 124(3) of the Act. Since the issue of notice u/s 143(2) is the basis of initiation of the assessment u/s 143(3) and the jurisdictional officer should have issued the notice and also completed the assessment. The present Assessing Officer has completed the assessment without following the due process of law and we, respectfully following the decisions of the coordinate Bench and ITAT Mumbai, are inclined to hold that the jurisdictional notice u/s 143(2) was not issued by the DCIT before completing the assessment u/s 143(3) of the Act and that there is an unwarranted defect in this case which is not curable. Accordingly, the assessment passed in the given case is quashed and accordingly, the additional grounds raised by the assessee are allowed.” 14. Respectfully following the above decision, we are inclined to set aside the assessment order. Accordingly, Ground Nos.1 to 1.4 raised by the assessee are allowed. 15. Since the grounds on jurisdictional issues are allowed, the issues on merit become academic, therefore, not deliberated upon. 16. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 30th day of December, 2025. Sd/- sd/- (SATBEER SINGH GODARA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30.12.2025 TS Printed from counselvise.com 10 ITA No.2416/DEL/2023 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "