Lack of Jurisdiction Disqualifies Entire Tax Proceedings against NRI: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, recently held that a lack of proper jurisdictional authority and improper notice service invalidates the entire tax proceedings.

The assessee, Raman Pillai Sivasankara Pillai, a Non-Resident Indian (NRI) employed in Afghanistan during the period between 2000 and 2013 had deposited ₹28.50 lakh in his Syndicate Bank account, Chandigarh. The Income Tax Department questioned the transaction, leading the Assessing Officer (AO), Chandigarh, to issue a notice under Section 148 of the Income Tax Act, 1961.

In response, the assessee clarified that the deposit was the sale proceeds from rural agricultural land in Kollam, Kerala, which does not qualify as a capital asset under the Income Tax Act of 1961.  Despite this explanation, the assessing officer (AO) issued a notice under Section 148, reopening the assessment.

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The case was transferred to the Deputy Commissioner of Income Tax (DCIT), International Taxation, Chandigarh, since the assessee was a NRI, and the DCIT had jurisdiction over the case. DCIT added the full deposit as unexplained income u/s 68, but no new notice under Section 148 was given to the assessee regarding the case transfer.

Aggrieved by the reassessment order, the assessee challenged it before the Commissioner of Income Tax (Appeal), CIT(A), New Delhi, who upheld the assessment. The assessee then moved to the ITAT.

Dr. Ranjit Kaur, counsel for the revenue, argued that the reassessment was valid as the case was transferred to the appropriate AO and the assessee participated in the proceedings. The counsel stressed that the unexplained cash deposits justified the addition under Section 68.

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Sudhir Sehgal, counsel for the assessee, countered that the reassessment was invalid as the AO, Chandigarh, lacked the authority to issue a Section 148 notice to an NRI. The transfer to DCIT, International Taxation, didn’t rectify this, as no fresh notice was issued.

Quoting the Punjab High Court's decision in CIT vs. Harish Chandra (1981) and the ITAT Amritsar's decision in Mandeep vs. ACIT (2024), he asserted that reassessment without sufficient jurisdiction and notice service is null and unlawful.

The counsel claimed the ₹28.50 lakh deposit was from the sale of rural agricultural land, exempt under Section 2(14), and presented a Tehsildar’s certificate confirming it was beyond 12 km from municipal limits, making the addition unjustified.

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The bench, comprising Rajpal Yadav (Vice President) and Krinwant Sahay (Accounting Member), ruled that jurisdictional issues aren’t rectified by case transfer. As the AO lacked jurisdiction over an NRI, the Section 148 notice was void ab initio. Quoting DCIT vs. Shri Manjeet Singh (2022), the Tribunal held that an invalid reassessment notice without proper jurisdiction nullifies the entire proceedings.

The ITAT noted the absence of evidence proving proper service of the Section 148 notice, weakening the revenue’s position. It accepted the Tehsildar’s certificate as sufficient proof that the land qualified for exemption. Consequently, the reassessment was deemed null and void due to jurisdictional error.

To Read the full text of the Order CLICK HERE

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