Notice by Non-Jurisdictional AO Invalid: ITAT Renders Addition u/s 69A Void Ab Initio [Read Order]

The Income Tax Appellate Tribunal (ITAT), Jaipur, has ruled that a notice issued by a non-jurisdictional Assessing Officer is invalid, rendering the addition under Section 69A of the Income Tax Act, 1961, void ab initio. The Tribunal quashed the order in full and allowed the appeal.

The appellant, Gaytri Devi Sharma, a small-time trader of spices operating under the proprietorship of M/s Mahesh Trading Company in Chomu, Jaipur, was subjected to an assessment for Assessment Year 2017-18. The Assessing Officer (AO) had made an addition of ₹5,25,000, treating cash and cheque deposits as unexplained money under Section 69A. The Commissioner of Income Tax (Appeals), Kanpur [CIT(A)], upheld the additions, prompting Sharma to approach the Tribunal.

Appearing on behalf of the appellant, C.L. Yadav, Chartered Accountant, argued that the initiation of proceedings was invalid as the notice under Section 142(1) dated 15.02.2018 was issued by the Income Tax Officer, Ward-7(1), Jaipur, who had no jurisdiction over the assessee’s case.

It was further submitted that the scrutiny selection was contrary to CBDT Instruction No. 3 of 2017 as the assessee’s cash deposits in specified bank notes were below ₹2.5 lakh, the exemption threshold. It was also contended that the deposits represented business receipts from spice trading, duly supported by sales records, bank transactions, and Udyog Aadhaar documents.

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Appearing on behalf of the Revenue, Gautam Singh Choudhary, JCIT, supporting the order, argued that the assessee had failed to provide conclusive evidence of the source of deposits. He maintained that both cash and cheque deposits remained unexplained and were rightly added under Section 69A.

The Bench comprising Accountant Member Rathod Kamlesh Jayantbhai and Judicial Member Narinder Kumar, accepted the additional ground that the jurisdictional notice was defective. The bench held that since the notice under Section 142(1) was issued by ITO Ward-7(1), Jaipur, whereas the territorial jurisdiction lay with ITO Ward-7(3), Jaipur, the initiation of proceedings itself was invalid.

The Tribunal specifically relied upon the jurisdiction chart and bank confirmation documents produced during the hearing, which established that the correct jurisdiction vested with Ward-7(3). This evidence directly impacted the validity of the assessment under Section 69A, leading to the complete annulment of the additions.

Consequently, the assessment framed based on such notice was declared void ab initio. The bench quashed the assessment order, rendering all other grounds academic.

Therefore, the appeal of the assessee was allowed.

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