ITO Cannot Issue Section 143(2) Notice Beyond CBDT Prescribed Monetary Limits: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, has quashed an assessment order, as the relevant notice under section 143(2) was issued without proper jurisdiction.

The assessee company, Svadeshi Enterprises, filed its return declaring an income of Rs 2,56,43,720. During the assessment proceedings, the AO disallowed the expense payment to occupants/tenants, claiming that it was a contingent liability. However, the CIT(A) allowed this deduction, noting that the liability to incur the expense was established in the previous year.

Therefore, the revenue filed an appeal before the ITAT Mumbai. The assessee company also filed a cross-objection, calling the assessment passed by the ITO illegal, claiming that its declared income is over Rs 30 lakhs, and as per the CBDT instruction (No. 1/2011 dated 31-01-2011), the jurisdiction of the assessee case lies with ACIT/DCIT instead of the ITO.

These CBDT instructions outline the revised monetary limits for assigning income tax cases to assessing officers.

The ITAT examined the case and agreed with the contentions of the assessee company. Considering the monetary limit involved in this case, the ITAT ruled that the ITO wrongly assumed jurisdiction over the case. Therefore, it was held that the notice under section 143(2) was not issued by the correct authority, i.e., ACIT/DCIT, before completing the assessment under section 143(3) of the Income Tax Act. Therefore, the Tribunal deleted the assessment order and rejected the Revenue’s appeal.