PALANHAR DISTRIBUTORS PRIVATE LIMITED,KOLKATA V. DCIT, CIRCLE 5(1), , KOLKATA

ITA 1077/KOL/2025

AI Insights

The case involves Palanhar Distributors Private Limited, which appealed against the order of the National Faceless Appeal Centre, Delhi, for the Assessment Year 2015-16. The primary contention was that the assessment order was passed by a non-jurisdictional officer, which was in violation of the CBDT instruction No.1/2011. The assessee argued that the notices under sections 143(2) and 142(1) of the Income-tax Act were issued by an incorrect officer, leading to an invalid assessment. The tribunal examined various precedents and found that the procedural irregularity in the issuance of notices was not curable, thus quashing the assessment.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846136 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Kolkata
• Assessment Year: 2015-2016
• Appeal Filed On: 20-05-2025
• Other Referred Cases: Kusum Goyal vs. ITO & ors, PCIT Vs. Rohit Baid, Pr. Commissioner of Income Tax. Vs. M/s Shree Shoppers Ltd., M/s Indovision Commodities Ltd. Vs. ITO, Ward 6(2), Kolkata
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.B. CHAKRABORTHY
• Assessee Lawyers: ABHISHEK BANSAL
• Keywords: Question of law; Procedural lapse
• Section: 143(3); 142(1); 5(2)

Judgement Text

" 5IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.1077/KOL/2025 (Assessment Year: 2015-16) Palanhar Distributors Private Limited 27, Weston Street, 5 th Floor, Bowbazar, Kolkata-700012, West Bengal Vs. DCIT, Circle 5(1) Aaykar Bhawan, P-7, Chowringhee Square, Kolkata- 700069, West Bengal (Appellant) (Respondent) PAN No. AAGCP3677B Assessee by : Shri Abhishek Bansal, AR Revenue by : Shri S.B. Chakraborthy, DR Date of hearing: 13.01.2026 Date of pronouncement: 27.03.2026 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.04.2025 for the AY 2015-16. 2. The assessee has challenged the order of ld. CIT (A) upholding the order of ld. AO which has been invalidly passed by the ld. DCIT, Circle 5(1), Kolkata. 3. The facts in brief are that the assessee filed the return of income on 29.09.2015, declaring total loss of ₹31,53,812/-, which was selected for scrutiny and statutory notices along with questionnaire were duly issued and served upon the assessee. The assessee in compliance Printed from counselvise.com Page | 2 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 furnished all the information and details before the ld. Assessing Officer. The assessment was finally framed vide order dated 28.12.2016, passed u/s 143(3) of the Act by making various additions assessing the income at ₹8,15,43,150/-. 4. The ld. AR vehemently submitted before us that the notice u/s 143(2) and 142(1) of the Income-tax Act, 1961 were issued by ITO Ward 5(2), Kolkata. The ld. AR referred to the notice dated 16.01.2017 issued u/s 142(1) of the Act available at page no.1 and 2 and another notice issued u/s 142(1) dated 31.05.2017 Act available at page no. 3,4 and 5. The ld AR submitted that the assessee complied with the said notices. The ld. AR thereafter referred to notice dated 08.09.2017, issued u/s 142(1) of the Act as available at page no.64, which is issued by DCIT, Ward 5(1), Kolkata. The ld. Counsel submitted that thus the assessment framed DCIT, Ward 5(1), Kolkata is invalid and nullity for two reasons. One that the notice u/s 143(2) was issued by non jurisdictional AO i.e. ITO Ward 5(2) Kolkata which is in violation to CBDT instruction No.1/2011 (F. No. 187/12/2010-IT(A-1), Dated 31.01.2011. Secondly, the case was transferred to DCIT in September, and the DCIT framed the assessment u/s 143(3) of the Act without issuing notice u/s 143(2) of the Act. The ld AR ,therefore, argued that the assessment framed is bad in law and may kindly be quashed.The Ld. A.R in defense of arguments relied on the decisions of the Jurisdictional High Court in the case of Kusum Goyal vs. ITO & ors in GA No. 81 of 2010 WP No. 1229 of 2009 wherein the Hon’ble Court has decided the similar issue in favour of the assessee. The similar issue has been laid down by the Hon'ble High Court in case of PCIT Vs. Rohit Baid in ITAT/44/2025 & IA No.GA/1/2025 dated 06.05.2025. Similar issue has also laid down by the Hon'ble High Printed from counselvise.com Page | 3 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 Court in case of Pr. Commissioner of Income Tax. Vs. M/s Shree Shoppers Ltd. in ITAT/39/2023 & IA No. GA/1/2023 dated 15.03.2023. Similarly, the Co-ordinate Bench of this Tribunal in case of M/s Indovision Commodities Ltd. Vs. ITO, Ward 6(2), Kolkata in ITA No. 500/KOL/2024 vide order dated 06.08.2024, allowed the appeal of the assessee by quashing the assessment. 5. The Ld. D.R on the other hand relied on the order of authorities below. The ld DR contended that the transfer of case was within the jurisdiction of concerned CIT and therefore the assessee had no locus standie to question the jurisdiction. 6. After hearing the rival contentions and perusing the materials on record, we find that the assessee returned a loss of Rs. 31,53,812/- as per the return of income. The case was selected for scrutiny and notice u/s 143(2) dated 20.9.2016 was issued by the ITO Ward- 5(2) Kolkata and so were the notices u/s 142(1) of the Act. In our opinion, there is violation of pecuniary jurisdiction in terms of CBDT instruction No.1/2011 (F. No. 187/12/2010-IT(A-1), Dated 31.01.2011 as the jurisdiction lies with DCIT, Ward 5(1), Kolkata and not with the ITO Ward 5(2), Kolkata. According to the above said instruction, the ITO has pecuniary jurisdiction where the income is upto 20 lacs in the Metro Cities and 15 lacs in Mofussil areas whereas the DC/AC have jurisdiction above 20 lacs in Metro cities and above 15 lacs in the Mofussil areas. After hearing the rival contentions and perusing the materials available on record, we find merit in the argument of the ld. AR that notice u/s 143(2) of the Act, was issued by theITO Ward 5(2), Kolkata, which is in violation of pecuniary jurisdiction of the CBDT instruction No.1/2011 (F. No. 187/12/2010- IT(A-1), Dated 31.01.2011. According to the said instruction, the ITO Printed from counselvise.com Page | 4 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 has pecuniary jurisdiction where the income is upto 20 lacs in the Metro Cities and 15 lacs in Mofussil areas whereas the DC/AC have jurisdiction above 20 lacs in Metro cities and above 15 lacs in the Mofussil areas. The said instructions reads as under:- 7. In the present case, the assessee filed the return of income u/s 139(1) of the Act, disclosing total loss of ₹31,53,812 /-. We note that notice u/s 143(2) and 142(1) of the Act were issued by ITO Ward 5(2), Kolkata which is in violation of the CBDT Instruction No.1/2011 (F. No. 187/12/2010-IT(A-1), Dated 31.01.2011. Therefore, the said notice has been issued by non-jurisdictional AO while the assessment was framed u/s 143(3) of the Act by DCIT Circle 5(1) Kolkata and cannot be sustained. The Hon'ble Jurisdictional High Court in case of PCIT Vs. Rohit Baid in ITAT/44/2025 & IA No.GA/1/2025 dated 06.05.2025., wherein it has held as under:- Printed from counselvise.com Page | 5 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 “We have heard Mr. Prithu Dhudhoria, learned senior standing counsel appearing for the appellant/revenue. Though notice has been served, none appears for the respondent/assessee. On perusal of the impugned order passed by the learned Tribunal, we find that the issue is squarely covered in favour of the assessee by the decision of this Court in the case of Principal Commissioner of Income Tax- 11, Kolkata Vs. M/s. Nopany & Sons in ITAT/58/2017 dated February 4, 2022. The operative portion of the judgment reads as follows : “The short issue which falls for consideration is whether the assessing officer, who had jurisdiction over the assessee at the relevant time had issued notice under Section 143(2) of the Act before taking up the scrutiny assessment under Section 143(3). Before we go into the facts, we take note of the legal position as laid down by the Hon'ble Supreme Court in Asst. CIT vs. Hotel Blue Moon [2010] 321 ITR 362 [SC], wherein the Hon'ble Supreme Court held that omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. Further, we also take note of the decision in the case of Commissioner of Income Tax -vs.- Gitsons Engineering Company, reported in [2015] 370 ITR 87, wherein it was held that the word 'shall' employed in Section 143(2) of the Act, contemplates that the assessing officer should issue notice to the assessee so as to ensure that the assessee has not understated income or has not computed excessive loss or has not under paid the tax in any manner. It was further held that when the assessing officer considers it necessary and expedient to ensure that tax is paid in accordance with law, he should call upon the assessee to produce evidence before him to ensure that the tax is paid in accordance with law. The section makes it clear that service of notice under Section 143(2) of the Act within the time limit prescribed is mandatory and it is not a mere procedural requirement. At this juncture, it would be relevant to take note of the definition of assessing officer as defined in Section 2(7A) of the Act. The said provision defines 'assessing officer' to mean the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income Tax Officer, who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-Section (1) or sub-Section (2) of Section 120 or any other provision of the Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, who is directed under clause (b) of sub-Section (4) of Section 120 to exercise or perform all or any of the powers and functions conferred on, or assigned to, an assessing officer under this Act. In the instant case, the order of assessment was challenged on several grounds and, particularly, on the ground that no notice under Section 143(2) of the Act was issued within the time prescribed by the assessing officer, who had jurisdiction over the assessment file of the assessee at the relevant time. The Commissioner of Income Tax (Appeals)-XXXVII, Kolkata, (CIT(A)) did not agree with the contentions raised by the assessee that there is failure to comply with the mandatory statutory requirement. The CIT(A) opined that the assessing officer, who originally dealt with the e-return filed by the assessee had issued notice under Section 143(2) of the Act. With regard to the merits of the matter, the CIT(A) held it in favour of the assessee. Therefore, the revenue was on appeal before the Tribunal and cross-objection was filed by Printed from counselvise.com Page | 6 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 the assessee questioning that portion of the order of the CIT(A) which held that there is no procedural irregularity committed by the assessing officer. The Tribunal considered the correctness of the finding of the CIT(A) and, on facts, found that both the assessing officers, namely, the assessing officer, who had jurisdiction over the assessee till 06.04.2009 and the assessing officer, who had jurisdiction post the said date had not issued notice under Section 143(2) of the Act within the prescribed period of six months from the end of the financial year in which the return was filed. This factual position could not be controverted by the revenue before us. As pointed out by the Hon'ble Supreme Court in the case of Asst. CIT vs. Hotel Blue Moon (supra), non-issuance of notice under Section 143(2) is not a procedural irregularity and, therefore, it is not curable. Thus, on facts, it having been established that no notice was issued under Section 143(2) of the Act, the order passed by the Tribunal was perfectly legal and valid. The revenue also sought to rely upon Section 292BB of the Act to justify their stand that notice is deemed to be valid and sought to bring the assessee's case under the circumstances mentioned in Section 292BB. This question was considered by the Tribunal and it was pointed out that Section 292BB provides that where an assessee has appeared in any proceedings or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any of the provision of the Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of the Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. This amendment to the Act was introduced with effect from 01.04.2008 and the assessment year under consideration is AY 2007-08. In any event, the Tribunal examined as to whether at all the revenue can rely upon Section 292BB of the Act and noted that the assessee has filed an objection vide letter dated 16.11.2009 objecting to the issuance of notice under Section 142(1) of the Act without valid service of notice under Section 143(2) of the Act. Taking note of the said letter the Tribunal, in our view, rightly held that the proviso to Section 292BB would not stand attracted and the said Section cannot be made applicable to the assessee's case. The Tribunal, thereafter, analysed as to the correctness of the submission of the revenue seeking to sustain their stand by referring to a notice issued by the assessing officer, who at the relevant point had no jurisdiction over the assessee and, on facts, found that there is no valid compliance of Section 143(2) of the Act as the notice issued under Section 143(2) of the Act by the assessing officer/Income Tax Officer, Ward-3(1) had no jurisdiction over the assessee at the relevant time. The Tribunal to support its conclusion placed reliance in the case of CIT & Another Vs. Mukesh Kumar Agarwal [2012] 345 ITR 29 (Allahabad), wherein it was held that the assessing officer did not have jurisdiction to proceed further and make assessment since notice under Section 143(2) of the Act was admittedly not issued. As in the case on hand, the revenue sought to take coverage under Section 292BB of the Act which was rejected on the ground that the very foundation of the jurisdiction of the assessing officer was on the issuance of notice under Section 143(2) of the Act and the same having been complied with, the revenue cannot take shelter under the provisions of Section 292BB of the Act.” Printed from counselvise.com Page | 7 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 The learned Tribunal has taken note of the above decision while allowing the assessee’s appeal. Apart from that, the other decision of this Court is in the case of PCIT Vs. Cosmat Traders (P) Ltd. reported at [2023] 146 taxmann.com 207 (Calcutta). The above decisions were rendered following the decision of the Hon’ble Supreme Court in the case of Asst. CIT Vs. Hotel Blue Moon, reported at [2010] 321 ITR 362 (SC). Thus, the issue is fully covered against the revenue. In the result, the appeal stands dismissed and the substantial question of law is answered against the revenue. The connected application stands closed.” 8. Similar issue has also laid down by the Hon'ble High Court in case of Pr. Commissioner of Income Tax. Vs. M/s Shree Shoppers Ltd. in ITAT/39/2023 & IA No. GA/1/2023 dated 15.03.2023. Similarly, the Co-ordinate Bench of this Tribunal in case of M/s Indovision Commodities Ltd. Vs. ITO, Ward 6(2), Kolkata in ITA No. 500/KOL/2024 vide order dated 06.08.2024, allowed the appeal of the assessee by quashing the assessment. 9. Considering the facts and circumstances of the case and also relying on the above decisions, we hold that the consequent assessment framed by the National Faceless Assessment Centre is invalid and is accordingly quashed. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 27.03.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 27.03.2026 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 8 ITA No. 1077/KOL/2025 Palanhar Distributors Private Limited; A.Y. 2015-16 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "