ITA No.12/2022 Page 1 GAHC010094682022 2025:GAU-AS:4962-DB IN THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH) INCOME TAX APPEAL NO.12 OF 2022 1. The Commissioner of Income Tax, Office of the Principal Commissioner of Income Tax, Guwahati, Aayakar Bhawan, Seventh Floor, G.S. Road, Guwahati – 781005. 2. The Income Tax Officer, DCIT, Circle-4, Guwahati, Office of the Principal Commissioner of Income Tax, Guwahati, Aayakar Bhawan, Seventh Floor, G.S. Road, Guwahati – 781005. …..Appellants -Versus- Shankar Lall Goenka, Resident of Kelvin Cinema Compound, S.R.C.B. Road, Fancy Bazar, Guwahati, Assam – 781001. …..Respondent – BEFORE – HON’BLE THE CHIEF JUSTICE MR. VIJAY BISHNOI HON’BLE MR. JUSTICE N. UNNI KRISHNAN NAIR For the Appellant(s) : Mr. S.C. Keyal, Advocate. For the Respondent(s) : None. Date of Hearing : 24.04.2025. Date of judgment : 25.04.2025. ITA No.12/2022 Page 2 JUDGMENT & ORDER (CAV) (Vijay Bishnoi, CJ) Heard Mr. S.C. Keyal, learned counsel for the appellant. Though the notice of the appeal was duly served upon the sole respondent but none has appeared on behalf of the sole respondent. 2. This income tax appeal is filed by the appellants under Section 260A of the Income Tax Act, 1961 (hereinafter to be referred as the “I.T. Act”) against the order dated 28.10.2021 passed by the Income Tax Appellate Tribunal, Gauhati Bench, Guwahati (hereinafter to be referred as “ITAT”), whereby the appeal preferred by the respondent/assessee under Section 250 read with Section 251 of the I.T. Act, has been allowed. 3. This Court, while admitting the present appeal vide order dated 17.02.2025, has framed the following substantial questions of law:- “(a) Whether the Learned Tribunal was justified in not considering the fact that both officers i.e. ITO, Ward -4(3), Guwahati and DCIT, Circle-4, Guwahati within the same Range & at the same station are having concurrent jurisdiction over the assessee? (b) Whether the Learned Tribunal is justified in admitting the new grounds without putting on record reason of assessee of not raising the issue earlier? (c) Whether the Learned Tribunal is justified in not taking note that the intent of Instruction No. 1/2011 is to reduce hardship to the taxpayers in respect of transfer to AC/DC at different station and that the issuance of notice u/s 143(2) and assessment u/s 143(3) of Income Tax by assessing officer at same station of same Range with same supervisory joint commissioner is complete fulfillment of all conditions and assessment procedure as whole?” ITA No.12/2022 Page 3 4. Having carefully scrutinizing the material available on record, we are of the view that none of the above substantial questions of law arise in this appeal. However, another substantial question of law, which has not been formulated earlier, arises in this appeal. Needless to say that as per the proviso to sub-section (4) of Section 260A of the I.T. Act, the High Court can frame a substantial question of law afresh, while satisfying itself that the case involved such question of law. [See – Commissioner of Income Tax -Vs- Engineers India Limited, reported in (2014) 16 SCC 420 and also see – Umerkhan -Vs- Bismillabi @ Babulal Shaikh & Ors., reported in (2011) 9 SCC 684] 5. In view of the fact that the assessee had raised an additional ground before the ITAT, which was not raised either before the Assessing Officer or the Commissioner of Income Tax (Appeals) [hereinafter to be referred as “CIT (Appeals)”] during the adjudication of the appeal preferred by the assessee, questioning the authority of the Assessing Officer, i.e. the Income Tax Officer, of issuing notice to the assessee under Section 143(2) of the I.T. Act and the Deputy Commissioner Income Tax (hereinafter to be referred as “DCIT”) of passing the assessment order under Section 143(2) of the I.T. Act, in our considered opinion, the following substantial question of law is involved in this appeal – “Whether the assessee can challenge the authority of the ITO, who had issued the notice under Section 143(2) of the I.T. Act and the authority of the DCIT for issuing the assessment order under Section 143(3) of the I.T. Act, in view of the limitations prescribed under Sections 292B and 292BB of the I.T. Act?” 6. The brief facts of the case are that the respondent/ assessee had e-filed his return of income in ITR for the assessment ITA No.12/2022 Page 4 year 2015-16 on 30.09.2015 showing total income of Rs.20,03,070/- (Rupees Twenty Lakhs Three Thousand Seventy). The case of the assessee was selected for limited scrutiny under the CASS and the Income Tax Officer issued a notice under Section 143(2) of the I.T. Act on 20.09.2016 to the assessee. Later on, the Income Tax Officer had transferred the case to the DCIT and in turn, the DCIT has issued a notice under Section 142(1) of the I.T. Act to the assessee and has passed the assessment order under Section 143(3) of the I.T. Act on 27.12.2017 and added unsecured loan aggregating to Rs.4,30,00,000/- (Rupees Four Crores 30 Lakhs) in the income and computed the total income of the assessee as Rs.4,52,10,840/- (Rupees Four Crores Fifty Two Lakhs Ten Thousand Eight Hundred Forty). 7. Aggrieved by the assessment order dated 27.12.2017, the assessee preferred an appeal before the CIT (Appeals), which came to be dismissed on 30.07.2019, whereby the CIT (Appeals) upheld the order of the Assessing Officer and has also directed the Assessing Officer to take necessary and requisite action against the assessee as per other laws, i.e. the provisions contained in the Prohibition of Benami Property Transaction Act, 1988 (as amended till 2016) and the Prevention of Money Laundering Act, 2002 after following due procedure as per the Instructions and Rules. 8. Being aggrieved with the order passed by the CIT (Appeals), the respondent/assessee preferred an appeal before the ITAT under Section 253 of the I.T. Act, wherein an additional ground was raised, which was not raised in the appeal preferred before the ITAT. Vide the said additional ground, the assessee had claimed before the ITAT that the Income Tax Officer has no ITA No.12/2022 Page 5 jurisdiction to issue notice under Section 143(2) of the I.T. Act to the assessee because it has no authority to assess the income of an assessee, whose return is more than Rs.20,00,000/- (Rupees Twenty Lakhs) in the moffusil area as per the instruction No.1/2011 dated 31.01.2011 issued by the Central Board of Direct Taxes (CBDT). The assessee has also claimed that though the case was transferred to the DCIT by the Income Tax Officer but since the DCIT has not issued any notice under Section 143(2) of the I.T. Act to the assessee, the action of the DCIT of issuing assessment order while exercising powers under Section 143(3) of the I.T. Act is ex- facie null in law. 9. The ITAT has entertained the said additional ground raised by the assessee, while relying on a decision of the Hon’ble Supreme Court rendered in National Thermal Power Corporation Limited - Vs- Commissioner of Income Tax, reported in (1997) 7 SCC 489 and has allowed the appeal preferred by the assessee, while holding that the Income Tax Officer has no jurisdiction to issue notice under Section 143(2) of the I.T. Act to the assessee due to lack of pecuniary jurisdiction and in the absence of a notice issued by the DCIT under Section 143(2) of the I.T. Act, the assessment order passed by it under Section 143(3) of the I.T. Act is not valid in the eyes of law and, therefore, is null and void. It would be apposite to reproduce hereunder the impugned order passed by the ITAT:- “This is an appeal preferred by the Assessee against the order of Ld. CIT(A)-2, Guwahati dated 30.07.2019 for Assessment year 2015-16. 2. At the outset, the Ld. A.R. of the assessee Shri Somnath Ghosh drew our attention to the additional ground of appeal raised by the assessee which according to him is a legal issue ITA No.12/2022 Page 6 which goes to the root of the jurisdiction of the AO to frame the assessment order. Therefore, the same may be adjudicated first and further contended that since it is a legal issue it can be raised for the first time as per the Hon’ble Supreme Court decision in the case of NTPC Ltd. 229 ITR 383 (SC). 3. The legal issue that has been raised as additional ground reads as under: ‘For that in the facts and circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals)-2, Guwahati acted unlawfully in not appreciating that none of the conditions precedent existed for and/or were fulfilled by the Ld. Income Tax Officer, Ward-4(3), Guwahati for his specious action of issuing notice u/s 143(2) of the Income Tax Act, 1961 on 20.09.2016 in the instant case and the purported assessment order framed u/s 143(3) of the Income Tax Act, 1961 on 27.12.2017 by the Ld. Deputy Commissioner of Income Tax, Circle-4, Guwahati without adhering to the mandatory tenets is therefore ab initio void, ultra vires and ex-facie null in law.’ 4. Brief facts of the case are that the assessee is an individual who filed his return of income for the year under consideration wherein he declared total income to the tune of Rs.20,03,070/-. On the legal issue raised by the assessee, the Ld. AR for the assessee submitted that as per the CBDT Instruction No.1/11 (F. No.187/ 12/2010-IT(AT) dated 31.01.2011 CBDT has fixed new monetary limit in Mufassil areas, according to which income above Rs.15 lacs for ‘non corporate assessee’ and Rs.20 lacs for ‘corporate returns’ has to be assessed by ACIT/DCIT. Thus, according to Ld. Counsel, since assessee’s principal business is in Moffusil area, the AO should have acted upon the instructions given by the CBDT which is binding on the officers of the Department; and since the assessee has declared more than Rs.20 lacs as his returned income, then the scrutiny assessment could have been done by only the ACIT/DCIT and not by the ITO who does not have the pecuniary jurisdiction to do so. However, in this case in hand, even though the assessee’s return of income is more than Rs.20 Lakh, the ITO, Ward-4(3) erroneously assumed jurisdiction and issued the mandatory scrutiny notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) and after realizing the mistake had transferred the case file to the jurisdiction of DCIT, Circle-4 who framed the assessment order u/s 143(3) of the Act, which is bad in law because the DCIT has not issued the notice u/s 143(2) of the Act. For ready reference, Instruction No.1/2011 is reproduced below: ITA No.12/2022 Page 7 “INSTRUCTION NO.1/2011 (F. NO.187/12/2010-IT (A-1), DATED 31-1-2011 References have been received by the Board from a large number of taxpayers, especially from mofussil areas, that the existing monetary limits for assigning cases to ITOs and DCs/ACs is causing hardship to the taxpayers, as it results in transfer of their cases to a DC/AC who is located in a different station, which increases their cost of compliance. The Board had considered the matter and is of the opinion that the existing limits need to be revised to remove the abovementioned hardship. An increase in the monetary limits is also considered desirable in view of the increase in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under: Income Declared (Mofussil areas) Income Declared (Metro cities) ITOs ACs/DCs ITOs ACs/DCs Corporate Returns Upto Rs.20 Lacs Above Rs.20 Lacs Upto Rs.30 Lacs Above Rs.30 Lacs Non-corporate Returns Upto Rs.15 Lacs Above Rs.15 Lacs Upto Rs.20 Crores Above Rs.20 Lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 01-04.2011.’ 5. From a perusal of the above Instruction of the CBDT it is evident that the pecuniary jurisdiction conferred by the CBDT on ITOs is in respect to the ‘non corporate returns’ filed where income declared is only upto Rs.15 lacs; and the ITO doesn’t have the pecuniary jurisdiction to conduct assessment if it is above Rs.15 lakhs. Above Rs.15 lacs income declared by a non-corporate person i.e. like assessee, the pecuniary jurisdiction lies before AC/DC. In this case, admittedly, the assessee an individual (non corporate person) who undisputedly declared income of Rs.20,03,070/- in his return of income cannot be assessed by the ITO as per the CBDT circular (supra). From a perusal of the paper book, it reveals that the statutory notice u/s 143(2) of the Act was issued by the then ITO, Ward-4(3), Guwahati on 20.09.2016 ITA No.12/2022 Page 8 (Refer Page 211 of PB); and the same was served upon the assessee as noted by the AO in the assessment order. Later on the ITO taking note that since the returned income is more than Rs.15 lacs, he transferred the case to DCIT, Circle-4, Guwahati who issued interim notice u/s 142(1) dated 03.03.2017 (Refer Page 209 of PB) and framed the assessment order without issuing notice u/s 143(2) of the Act. From the aforesaid facts the following facts emerged: i) The assessee had filed return of income declaring Rs.20,03,070/-. The ITO issued notice under section 143(2) of the Act on 20.09.2016. ii) The ITO, Ward-4(3), Guwahati taking note that the income returned was above Rs.15 lacs transferred the case to DCIT, Circle-4, Guwahati. iii) On 03.03.2017 notice u/s 142(1) was issued by DCIT, Circle-4, Guwahati but did not issue notice u/s 143(2) of the Act within the prescribed time limit and before passing the assessment order u/s 143(3) of the Act. 6. We note that the CBDT Instruction is dated 31.01.2011; and the assessee has filed the return of income on 30.09.2015 declaring total income of Rs.20,03,070/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of ‘non corporate returns’ the ITO’s increased monetary limit was upto Rs.15 lacs; and if the returned income is above Rs.15 lacs it was the AC/DC. So, since the returned income by the assessee in the present case is an individual is above Rs.15 lakh, then the pecuniary jurisdiction to assess the assessee lies only by AC/DC and not the ITO. So, therefore, only the AC/DC had the jurisdiction to assess the assessee. It is settled law that serving of notice u/s 143(2) of the Act is a sine qua non for an assessment to be made u/s 143(3) of the Act. In this case, notice u/s 143(2) of the Act was issued on 20.09.2016 by ITO, Ward-4(3), Guwahati when he did not had the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the ITO realized that he did not had the pecuniary jurisdiction to issue notice, he duly transferred the file to the DCIT, Circle-4, Guwahati, when the DCIT issued notice u/s 142(1) of the Act and did not issue notice u/s 143(2) of the Act within the time limit prescribed for issuance of notice u/s 143(2) of the Act for the assessment year 2015-16. We note that the DCIT by assuming the jurisdiction after the time prescribed for issuance of notice u/s 143(2) of the Act notice became coarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, in this case, the omission/non-issuance of ITA No.12/2022 Page 9 notice by the DCIT, Circle-4, Guwahati before the limitation period for issuance of statutory notice u/s. 143(2) of the Act has set in, goes to the root of the case because the DCIT gets jurisdiction to frame assessment order u/s 143(3) of the Act only thereafter. Ergo, the assessment order passed by the DCIT, Circle-4 u/s 143(3) of the Act is not valid in the eyes of law and, therefore, is null and void in the eyes of law, and consequently we quash it. Therefore, the legal issue raised by the assessee is allowed. Since we have quashed the assessment and the appeal of assessee is allowed on the legal issue, the other grounds raised by the assessee need not to be adjudicated because it is only academic. Therefore, the additional ground raised by the assessee is allowed. 7. In the result, the appeal of the assessee is allowed.” 10. Having gone through the order passed by the ITAT, it is clear that it had interfered with the order passed by the CIT (Appeals) as well as the assessment order passed by the DCIT on the ground that only the DCIT has the jurisdiction of issuing notice under Section 143(2) of the I.T. Act to the assessee and then only got the jurisdiction to pass the assessment order under Section 143(3) of the I.T. Act, whereas in the present case, the notice under Section 143(2) of the I.T. Act was issued by the Income Tax Officer though he did not have the pecuniary jurisdiction and realizing this mistake, he transferred the file to the DCIT, who, in turn has issued a notice under Section 142(1) of the I.T. Act but did not issue notice under Section 143(2) of the I.T. Act within the time limit prescribed for issuance of the said notice for the concerned assessment year. It is further observed that the DCIT could not have issued notice under Section 143(2) of the I.T. Act because of expiry of the limitation prescribed by the statute. The ITAT has recorded a categorical finding that in the case in hand, omission of notice by the DCIT before the limitation period for issuance of statutory notice under Section 143(2) of the I.T. Act goes to the root of the case and, ITA No.12/2022 Page 10 therefore, the assessment order passed by the DCIT is not valid in the eyes of law and is null and void. The ITAT has allowed the appeal preferred on behalf of the assessee only on the said ground and has observed that the other grounds raised by the assessee need not be adjudicated because it is only academic. 11. We are of the view that the ITAT has altogether ignored the provisions of Section 292B as well as the provisions of Section 292BB of the I.T. Act, which limits the right of an assessee of challenging a notice issued under the provisions of the I.T. Act. For ready reference, the provisions of Section 292B and Section 292BB of the I.T. Act are reproduced hereunder:- “292B. Return of income, etc., not to be invalid on certain grounds. – No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 292BB. Notice deemed to be valid in certain circumstances. – Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was – (a) not served upon him; or (b) not served upon him in time; or (c) Served upon him in an improper manner: ITA No.12/2022 Page 11 Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.” 12. Section 292B provides that notice as well as return of income, assessment, summons, etc., issued under the provisions of the I.T. Act cannot be treated as invalid merely by reason of any mistake, defect or omission in such notice, etc., if the same is in substance and effect in conformity with or according to the intent and purpose of the I.T. Act. The ITAT, in the present case, has interfered with the order passed by the CIT (Appeals) and the assessment order mainly on the ground that there is omission on the part of the DCIT in not issuing notice under Section 143(2) of the I.T. Act to the assessee. The ITAT has not concluded that the notice issued to the assessee by the Income Tax Officer under Section 143(2) of the I.T. Act is not in substance or not in conformity with the intent and purpose of the I.T. Act. In the absence of such finding, the ITAT cannot interfere with the notice or the assessment order issued against the assessee. In the present case, apart from that, the assessee is also debarred from challenging the assessment proceedings for the first time before the ITAT on the ground of issuance of notice under Section 143(2) of the I.T. Act by the Income Tax Officer in the light of the provisions of Section 292BB of the I.T. Act. Section 292BB of the I.T. Act clearly provides that where an assessee has appeared in the proceedings relating to assessment or reassessment before the authority concerned without raising any objection before completion of assessment or reassessment, it is not open for him to raise such objection after passing of the assessment order. In the present case, the notice under Section 143(2) of the I.T. Act was issued by ITA No.12/2022 Page 12 the Income Tax Officer and was duly served upon the assessee, who, in turn, had appeared before the DCIT, to which the proceedings were transferred by the Income Tax Officer, without raising any objection till the assessment order was passed. Even in the appeal preferred by the assessee before the CIT (Appeals), no such ground was ever raised by the assessee. In such circumstances, we are of the candid view that as per law, the respondent/assessee was not within his right to raise the objection regarding issuance of notice by the Income Tax Officer under Section 143(2) of the I.T. Act or questioning the authority of the DCIT in passing the assessment order while exercising powers under Section 143(3) of the I.T. Act before the ITAT. 13. So far as the judgment of the Hon’ble Supreme Court, on which the ITAT has placed reliance, is concerned, we are of the view that there is no quarrel about the proposition laid down by the Hon’ble Supreme Court because it is settled that the appellate authority has all the powers which the original authority may have in deciding the question before it. However, the said authority is subject to restrictions or limitations prescribed by the statutory provisions. The Hon’ble Supreme Court in National Thermal Power Corporation Limited (supra) has relied upon its earlier decision as rendered in Jute Corporation of India Limited -Vs- Commissioner of Income Tax & Anr., reported in 1991 Supp (2) SCC 744, wherein the Hon’ble Supreme Court has held that the appellate authority while hearing an appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it but the said power is subject to the restrictions and the limitations, if any, prescribed by the statutory ITA No.12/2022 Page 13 provisions. Relevant paragraph of the decision of the Hon’ble Supreme Court rendered in Jute Corporation of India Limited (supra) is reproduced hereunder:- “6. The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer.” Emphasis supplied 14. As observed earlier, in the present case, in the light of the provisions of Section 292B as well as Section 292BB of the I.T. Act, the right of the assessee has been restricted to challenge the validity of a notice issued by the Income Tax Officer or the assessment order passed by the DCIT and in such circumstances, the ITAT has illegally passed the impugned order ignoring the said provisions, which restricts the right of the assessee. 15. Hence, the question of law framed by this Court is answered in affirmative and the impugned order passed by the ITAT ITA No.12/2022 Page 14 is set aside. Consequently, the appeal is allowed. The matter is remanded to the ITAT for deciding the appeal preferred by the assessee afresh on other grounds raised by the assessee in the appeal preferred before it. JUDGE CHIEF JUSTICE Comparing Assistant