ITAT Kolkata Quashes Assessment Framed by ACIT Without Pecuniary Jurisdiction: Rupasi Bangla Agro Industries Pvt. Ltd. vs ITO
Overview
The Kolkata Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of Rupasi Bangla Agro Industries Pvt. Ltd. Vs ITO (ITAT Kolkata) concerning Assessment Year 2013-14. The core issue revolved around whether an Assessing Officer who lacked the requisite pecuniary jurisdiction under CBDT Instruction No. 1/2011 could validly frame an assessment order. The Tribunal ultimately quashed the assessment, holding it to be a nullity, without proceeding to examine the quantum of the underlying addition.
Background and Facts of the Case
The assessee, a private limited company engaged in manufacturing, had filed its return of income for AY 2013-14 on 28/09/2013, declaring nil income. The case was selected for scrutiny through CASS, and notices under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 were issued accordingly.
During scrutiny, the Assessing Officer observed that the assessee had received share capital and share premium during the relevant year. Not being satisfied with the explanations furnished, the Assessing Officer made an addition of Rs. 13,29,00,000 under Section 68 of the Income Tax Act, 1961 on account of unexplained share capital and premium.
The assessment order was framed by the ACIT, Circle-38, Midnapore, and was dated 26/03/2016. The assessee appealed to the National Faceless Appeal Centre, Delhi (CIT(A)), which upheld the addition vide its order dated 05/07/2023 passed under Section 250 of the Income Tax Act, 1961. Aggrieved by this outcome, the assessee approached the ITAT Kolkata.
Grounds of Appeal
Before the Tribunal, the assessee raised the following grounds challenging the Section 68 addition:
- The CIT(A) erred in confirming the addition of Rs. 13,29,00,000 as unexplained cash credit when the assessee had furnished the PAN details of share applicants, their ROC registration with CIN numbers, bank statements, and source declarations, thereby discharging the requisite onus.
- The CIT(A) erred in treating the addition as justified merely because share applicants did not appear in response to notices under
Section 131, which is not determinative of the ingredients required to establish an unexplained credit underSection 68. - The addition was confirmed on surmises and conjectures without any cogent material brought on record by the Assessing Officer to contradict the documentary evidence furnished by the assessee.
Additional Ground on Jurisdictional Competence
Beyond the merits, the assessee also raised an additional ground asserting that the assessment itself was completed by the ACIT without proper jurisdiction, rendering it void ab initio. Relying on the Supreme Court's decisions in Jute Corporation of India Ltd. Vs. CIT, (1991) 187 ITR 688 (SC) and National Thermal Power Co. Ltd. Vs. CIT, (1998) 229 ITR 383 (SC), the Tribunal admitted this additional ground since it was a pure legal question going to the root of the matter and required no fresh investigation of facts.
The Jurisdictional Issue: CBDT Instruction No. 1/2011
What Does CBDT Instruction No. 1/2011 Prescribe?
CBDT Instruction No. 1/2011 [F.No.187/12/2010-ITA-1], dated 31-1-2011, revised the monetary limits for assigning cases to Income Tax Officers and Deputy/Assistant Commissioners of Income Tax. The instruction was issued in supersession of earlier instructions and became applicable with effect from 1-4-2011.
Under this instruction, the jurisdiction thresholds for corporate returns are as follows:
| Location | Income Declared | Jurisdiction |
|---|---|---|
| Mofussil Areas | Up to Rs. 20 Lakhs | Income Tax Officer |
| Mofussil Areas | Above Rs. 20 Lakhs | ACIT/DCIT |
| Metro Cities | Up to Rs. 30 Lakhs | Income Tax Officer |
| Metro Cities | Above Rs. 30 Lakhs | ACIT/DCIT |
Note: Metro charges for the purpose of the above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune.
Since the assessee was located in a mofussil area (Midnapore) and had declared nil income — which is clearly below the Rs. 20 lakh threshold — the jurisdiction to frame the assessment vested exclusively with the Income Tax Officer, not the ACIT.
No Transfer Order Under Section 127
The Revenue was unable to produce any order under Section 127 of the Income Tax Act, 1961 that would have lawfully transferred jurisdiction over the assessee's case to the ACIT. In the absence of such an order, the ACIT, Circle-38, Midnapore had no authority to frame the assessment.