Assessment Order Quashed by ITAT Kolkata: ACIT Found Lacking Pecuniary Jurisdiction Under CBDT Instruction No. 1/2011

Background and Overview

A significant ruling has emerged from the Income Tax Appellate Tribunal, Kolkata, in the matter of Balaka Cold Storage Pvt. Ltd. Vs ACIT, concerning Assessment Year 2017-18. The central issue revolved around whether an Assistant Commissioner of Income Tax possessed the requisite pecuniary jurisdiction to frame an assessment order where the returned income fell below the threshold prescribed under CBDT Instruction No. 1/2011. The Tribunal, after carefully examining the facts and applicable legal framework, concluded that the assessment had been framed by an officer who lacked jurisdiction, rendering the entire proceedings invalid and liable to be quashed.

This decision carries broad implications for assessees whose cases are taken up for scrutiny by officers whose pecuniary jurisdiction does not align with the income levels declared in the return of income.

The Assessee and the Assessment Proceedings

Balaka Cold Storage Pvt. Ltd. is engaged in the business of operating cold storage facilities, along with earning income from other sources. The assessee filed its return of income on 23.10.2017, declaring a total income of ₹16,79,259 for Assessment Year 2017-18.

The case was selected for scrutiny through the Computer Assisted Scrutiny Selection (CASS) mechanism. Notices under Section 143(2) and Section 142(1) of the Income-tax Act, 1961, along with a detailed questionnaire, were served upon the assessee. The assessee duly responded to these notices. Following the scrutiny process, the Assessing Officer — specifically, the ACIT, Circle 23(1), Hooghly — framed the assessment under Section 143(3) of the Income-tax Act, 1961 on 15.10.2019, making various additions to the declared income.

The assessee challenged the assessment order before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The CIT(A) passed an order on 29.11.2023 which was unfavourable to the assessee, leading to the filing of an appeal before the ITAT Kolkata.

Additional Ground of Appeal: Jurisdictional Challenge

Before the Tribunal, the assessee raised an additional ground of appeal during the appellate proceedings — a ground that had not been agitated before the lower authorities. This additional ground challenged the very validity of the assessment on jurisdictional grounds. The ground, as raised before the Tribunal, read as follows:

"FOR THAT in the facts and circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. acted unlawfully in not appreciating that none of the conditions precedent existed for and/or were fulfilled by the Ld. Assistant Commissioner of Income Tax, Circle 23(1), Hooghly for his specious action of framing the assessment order u/s. 143(3) of the Income Tax Act, 1961 on 15-10-2019 in the instant case de hors any valid notice u/s. 143(2) of the Income Tax Act, 1961 issued in contravention of the C.B.D.T. Instruction F. No. 225/157/2017/ITA-II Dated 23-06-2017 as well as the C.B.D.T. Instruction F. No. 1/2011 [F. NO. 187/12/2010-IT(A-1)], DATED 31-01-2011 and the impugned inaction on that account renders the assessment order framed ab initio void, ultra vires and null in law."