Income Tax Appellate Tribunal, Delhi Bench: In an appeal filed by the assessee challenging the validity of assessment by assessing officer (AO), the Bench comprising Sudhir Kumar, Judicial Member and Manish Agarwal, Accountant Member, held that the notice issued under Section 143(2), Income Tax Act, 1961 (1961 Act) was both time-barred and issued without jurisdiction. Consequently, the assessment order passed under Section 143(3) was quashed.
Background
The assessee, an individual engaged in the business of Kirana items and a partner in a firm, e-filed his return of income on 31 October 2019 declaring total income of Rs 17,91,980. A search and seizure operation were conducted under Section 132 of the 1961 Act on 4 December 2018 in the case of a locker company where the assessee maintained a locker. During the course of search, cash amounting to Rs 1.2 crore was found in the said locker.
Subsequently, the case of the assessee was centralized pursuant to an order passed under Section 127 of the 1961 Act and notice under Section 143(2) of the 1961 Act was issued. Further notices under Section 142(1) of the 1961 Act along with detailed questionnaires were issued from time to time, which were duly complied with by the assessee.
The assessee claimed that the cash found in the locker represented his income earned from commission and regular business Activities, kept outside the books, and was stored in the locker for safe custody. However, the AO rejected the explanation and treated the amount as unexplained money under Section 69-A of the 1961 Act read with Section 115BBE of 1961 Act assessing the total income at Rs 1,37,91,980.
Against the said order, assessee filed an appeal, the CIT(A) dismissed the appeal and held it time barred. Aggrieved by the same, assessee filed the present appeal.
Analysis, Law, and Decision
The Tribunal noted that the assessment order was passed on 12 April 2021 and the appeal was filed on 21 January 2022, both falling within the COVID-19 period. Relying on the Supreme Court’s order in In Re: Cognizance for Extension of Limitation, (2020) 19 SCC 10 whereby limitation was extended from 15 March 2020 to 28 February 2022, the Tribunal held that the delay stood condoned. Accordingly, it rejected the finding of the CIT(A) treating the appeal as time-barred and held the appeal to be valid.
The Tribunal then considered the admissibility of additional grounds raised by the assessee challenging the jurisdiction of the assessment. It observed that the additional grounds were purely legal in nature and did not require any fresh verification of 1961 Acts. Therefore, the same were admitted for adjudication. Further on the issue of jurisdiction under Section 127 of the 1961 Act, the assessee contended that the transfer of jurisdiction was invalid due to an error in identifying the correct assessing authority. The Tribunal noted that although there appeared to be actual error in transferring jurisdiction, such an order was not appealable before it. Since the assessee had not challenged the transfer earlier before appropriate forums, the Tribunal declined to adjudicate the issue and dismissed this ground.
The Tribunal examined the validity of notice issued under Section 143(2) of the 1961 Act. It observed that the return was filed on 31 October 2019 and the statutory time limit for issuance of notice expired on 30 September 2020. However, the notice was issued on 22 October 2020, making it clearly barred by limitation.
Further, the Tribunal found that the notice was issued by an AO who did not have jurisdiction at the time of issuance, as the jurisdiction was transferred subsequently under Section 127 on 24 December 2020. Thus, the notice suffered from a dual defect being both time-barred and issued without jurisdiction.
The Tribunal held that such a notice vitiates the entire assessment proceedings. Consequently, the assessment order passed under Section 143(3) of the 1961 Act dated 12 April 2021 was declared invalid and quashed. Accordingly, the appeal of the assessee was allowed.
Since the assessment itself was quashed on jurisdictional grounds, the Tribunal held that the remaining grounds on merits had become academic and required no adjudication.
[Naveen Goel v. CIT, ITA No. 1449-Del-2023, decided on 1-4-2026]
Advocates who appeared in this case:
For the Appellant: Pawan Ved, Advocate; Mohit Gupta, Mirza Muhiuddin Baig, Charter Accountants
For the Respondent: Pooja Swaroop, CIT-DR
