ITAT Quashes Reassessment for Lack of Jurisdiction; Deletes Rs 2 Crore Addition u/s 68

The assessee, Annapurna Packaging Industries Pvt. Ltd., filed its return for AY 2013-14 declaring a loss of Rs. 98.32 lakh. The case was reopened under Section 147 based on information that the assessee allegedly received accommodation entries of Rs. 2 crore through layered transactions.

The Assessing Officer issued notices and completed the reassessment by treating the loan received from a group company as an unexplained cash credit under Section 68. The CIT(A) upheld the reassessment as well as the addition.

The assessee challenged the proceedings before the ITAT on the ground that the reassessment was initiated by an officer lacking pecuniary jurisdiction as per CBDT Instruction No. 1/2011.

Issues Raised: Whether reassessment is valid when initiated by an Assessing Officer lacking pecuniary jurisdiction, and whether a loan received from a group company can be treated as unexplained cash credit despite supporting evidences

ITAT Held: The Tribunal held that the entire reassessment was invalid due to a lack of jurisdiction. It was observed that, as per CBDT Instruction No. 1/2011, cases involving income beyond Rs. 20 lakh fall under the jurisdiction of ACIT/DCIT, whereas in the present case, notices were issued by the ITO despite the returned loss exceeding the prescribed monetary limit.

The Tribunal emphasised that jurisdictional defects are not procedural irregularities but go to the root of the matter. Since notices under Sections 148, 143(2), and 142(1) were issued by a non-jurisdictional officer, the entire reassessment proceedings were held to be void ab initio and quashed.

The Tribunal also deleted the addition of Rs. 2 crore made under Section 68. It noted that the assessee had furnished complete details of the lender, including PAN, audited financial statements, bank statements, and confirmations. The lender was a group company with substantial income and regular tax compliance. The AO had made the addition without conducting any independent inquiry or investigation.

Thus, the Tribunal held that the addition was unsustainable and directed its deletion.

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