The Patna Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the assessment orders passed against a Kolkata-based real estate developer after holding that the Assessing Officer (AO) at Patna lacked territorial jurisdiction to issue notices and complete the assessments. 

The bench of  Yogesh Kumar U.S. (Judicial Member) and Laxmi Prasad Sahu (Accountant Member) ruled that jurisdiction under the Income Tax Act must strictly conform to the jurisdiction assigned by the Central Board of Direct Taxes (CBDT), and an assessment framed by an officer without lawful jurisdiction cannot be sustained. 

The assessee, an Association of Persons (AOP) engaged in the business of construction and property development, had its registered office and principal place of business in Kolkata. It had consistently filed its income tax returns mentioning its Kolkata address and had also obtained trade licence and service tax registration in Kolkata. 

Despite this, scrutiny notices under Section 143(2) of the Income Tax Act were issued by the Income Tax Officer (ITO), Ward-6(2), Patna for AY 2014-15, and subsequently by ITO Ward-6(5), Patna for both assessment years. The assessee repeatedly requested that its records be transferred to the jurisdictional assessing officer in Kolkata, but the requests were not acted upon. Thereafter, assessment orders were passed by the Patna officer making various additions. 

Although the Commissioner (Appeals) had remanded the matter for fresh assessment, the assessee challenged the very jurisdiction of the Patna Assessing Officer before the ITAT. 

The assessee contended that its registered office, business operations, trade licence and service tax registration were all located in Kolkata. All income tax returns had consistently been filed from Kolkata. The CBDT’s jurisdiction notification dated October 22, 2014 clearly vested jurisdiction with the Kolkata Assessing Officer. The assessee had timely objected to the jurisdiction and had even approached the Calcutta High Court seeking correction of its jurisdiction. Therefore, the notices issued by the Patna Assessing Officer and the subsequent assessment orders were void. 

The department argued that the PAN allotment letter mentioned ITO Ward-6(2), Patna as the jurisdictional officer for filing returns. According to the Department, the assessee had not sought correction of its PAN jurisdiction at the relevant time, and no prejudice had been caused because the assessments were otherwise completed on merits. 

The Tribunal rejected the Department’s contention after examining the statutory framework governing jurisdiction under Section 120 of the Income Tax Act.

It observed that the assessee’s only business address was in Kolkata. The PAN application itself contained only the Kolkata address. The PAN allotment letter was also sent to the Kolkata address. Merely mentioning Patna in the PAN communication could not override the jurisdiction prescribed by CBDT notifications. 

The Tribunal explained that Section 120 empowers income tax authorities to exercise jurisdiction only in accordance with directions issued by the CBDT. Concurrent or alternative jurisdiction can exist only if specifically authorised under the statutory provisions. 

The Bench relied upon the Delhi High Court’s decision in PCIT v. UV Realtors Private Limited, where it was held that once an assessee raises an objection regarding territorial jurisdiction within the prescribed time, the Assessing Officer must have the jurisdictional dispute resolved before completing the assessment.

The Tribunal also relied upon the Kolkata Bench decision in DCIT v. Boast Traders Pvt. Ltd., which held that an error in the Department’s electronic system or PAN allocation cannot confer jurisdiction upon an officer who otherwise lacks authority under the CBDT notification. 

An important factor considered by the Tribunal was that NSDL itself admitted that the assessee had not mentioned any Assessing Officer code while applying for PAN. Due to digitisation by the PAN facilitation centre, the PAN had mistakenly been allotted under Patna jurisdiction.

NSDL subsequently requested the Income Tax Department to migrate the PAN to the correct jurisdiction, namely ITO Ward-6(2), Kolkata. The Tribunal treated this as further evidence that the Patna jurisdiction had arisen because of an administrative error rather than any statutory allocation. 

After considering the facts and legal position, the Tribunal concluded that the territorial jurisdiction over the assessee vested with the Income Tax Officer at Kolkata and not the officers at Patna.

Accordingly, it held that the notices issued under Section 143(2) by the Patna Assessing Officers were without jurisdiction; the assessment orders passed pursuant to those notices were legally unsustainable; and the assessments for both Assessment Years 2014-15 and 2015-16 deserved to be quashed.

Since the appeals were allowed on the jurisdictional issue, the Tribunal held that the remaining grounds became academic and required no adjudication. 

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