The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the notice issued under Section 148 of the Income Tax Act, 1961 (the Act), by the Assessing Officer (AO) for failing to follow the procedures prescribed under the Income Tax Act.
The assesse, M/s BPO Finance, and Investments Pvt. Ltd., is a Non-Banking Finance Company(NBFC) with a jurisdiction in New Delhi. The appellant’s income tax jurisdiction was transferred to Kolkata in 2009. A notice under Section 148 of the Income Tax Act was issued against a different Permanent Account Number (PAN) than the appellant’s, leading to a jurisdictional issue. The Assessing Officer rejected the objections, claiming the appellant had two PANs.
The assessor issued an assessment order in 2016, assessing the appellant’s total income. The appellant appealed to the Commissioner of Income Tax (Appeals) and the (CIT(A)), which found the notice was beyond the jurisdiction. The revenue department’s appeal was dismissed, indicating the reassessment proceedings were void ab initio due to a lack of jurisdiction.
The assessee argued that because the assessee’s jurisdiction had been moved to Kolkata under Section 127 of the Act, the Income Tax Officer (ITO) a Kolkata lacked the authority to issue the notice under Section 148 of the Income Tax Act. The assessee additionally claimed that ITO Kolkata lacked the authority to frame an assessment under Section 147 of the Act since it failed to provide any notice as required by Section 148 of Income Tax Act before framing the assessment.
The government contended that because the assessee still possessed a PAN number that was registered in New Delhi, the ITO Kolkata did have the authority to issue the notice by Section 148 of the Act.
In the case of CIT v. Ram Ratan Sahu (1989) 176 ITR 549 (SC), it was decided that if the assessee’s jurisdiction had been transferred to another jurisdiction, the Assessing Officer could not issue a notice under Section 148 of the Act. The court ruled in CIT v. B.K. Mehta (1995) 214 ITR 644 (SC) that the Assessing Officer cannot get beyond the Act’s Section 127 restrictions by issuing a notice under Section 148.
The Bench of Rajesh Kumar (Accountant Member) and Sanjay Garg (Judicial Member) agreed with the assessee that the ITO Kolkata lacked the authority to issue the notice under Section 148 of the Income Tax Act and ruled that the ITO Kolkata had no basis to think that taxable income was evading assessment since the assessee’s jurisdiction had been shifted to Kolkata under Section 127 of the Income Tax Act.
The ITAT further determined that ITO Kolkata failed to issue a notice under Section 148 of the Act before making the assessment, which is required for assuming authority to frame an assessment under Section 147 of the Income Tax Act.
Consiquently, the ITAT dismissed the revenue’s appeal and reversed the reassessment ruling.
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