Safiya Malik

The High Court of Chhattisgarh, Division Bench of Justice Sanjay K. Agrawal and Justice Radhakishan Agrawal dismissed an appeal challenging the validity of an income tax assessment, holding that an assessee who fails to object to jurisdiction at the appropriate stage under Section 143(2) of the Income Tax Act cannot later dispute the assessment. The Court noted that no objection was raised even after completion of assessment, rendering the challenge to the territorial jurisdiction of the Income Tax Officer barred under Section 124(3)(a). Upholding the Income Tax Appellate Tribunal’s decision, the Bench confirmed the validity of the assessment made by the Revenue authorities.

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The case concerned an appeal under Section 260A of the Income Tax Act, 1961, wherein the appellant, Harish Kumar Chhabada, questioned the legality of the ITAT’s order dated December 12, 2022. The ITAT had dismissed his appeal against the assessment order passed under Section 143(3) for the assessment year 2012-13.

The appellant, engaged in trading electrical goods under the name M/s. Sona Agency, filed his return of income electronically on September 17, 2012, declaring a total income of ₹2,96,390. At that time, his PAN database reflected his residential address as House No.490, Near Railway Line, Samta Colony, Raipur. Based on this address, the Income Tax Officer (ITO), Ward-1(1), Raipur, issued a notice under Section 143(2) on August 8, 2013, which was served on the assessee on August 21, 2013.

During scrutiny, further notices under Sections 143(2) and 142(1) were issued on August 25, 2014, and December 12, 2014, respectively. Following a notification dated November 15, 2014, which reallocated the territorial jurisdictions of wards in Raipur, the jurisdiction over Samta Colony was transferred to ITO, Ward-2(1), Raipur. Consequently, the ITO, Ward-2(1), passed the assessment order on March 18, 2015, determining total income at ₹28,38,520 after disallowing certain expenses and making additions on account of undisclosed turnover.

The Commissioner of Income Tax (Appeals), Raipur, by order dated July 14, 2016, partly allowed the appeal by deleting disallowances under Section 40(a)(ia) but sustained additions of ₹11,53,939 towards undisclosed turnover. The assessee then approached the ITAT, raising an additional ground alleging lack of jurisdiction due to issuance of notice by a non-jurisdictional officer. The ITAT, however, upheld the validity of the assessment, leading to the present appeal before the High Court.

Counsel for the appellant contended that jurisdiction should have been determined based on the place of business under Sections 2(7A), 124(1)(a), and 120(3) of the Act, not the residential address in the PAN database. The appellant relied on decisions from the Supreme Court and various High Courts, including Kanwar Singh Saini v. High Court of Delhi, Union of India v. Rajeev Bansal, and Principal Commissioner of Income-tax v. Cosmat Traders (P.) Ltd. The Revenue argued that the appellant’s failure to update his PAN database and to raise timely objections under Section 124(3) rendered the challenge untenable.

The Court observed that “the Assessing Officer was justified in issuing the notice at the address available as per the PAN database. Therefore, the Assessing Officer cannot be said to have committed any error.” It relied on the Supreme Court’s ruling in Principal Commissioner of Income-tax, Mumbai v. I-Ven Interactive Ltd., which held that notice issued at the PAN-based address remains valid if the assessee fails to update the change of address in departmental records.

The Bench stated: “A careful perusal of Section 124(3)(a) of the IT Act would show that the assessee cannot question the jurisdiction of an Assessing Officer beyond the period of one month from the date of service of notice or after completion of the assessment, whichever is earlier.”

The Court discussed precedent from the Supreme Court in Seth Teomal v. Commissioner of Income-tax and Wallace Bros. & Co. Ltd. v. CIT, wherein it was held that issues regarding place of assessment are administrative and not subject to appellate adjudication. The Bench stated that “the scheme of the Act shows that no appeal in regard to the place of assessment is contemplated under the Act.” It referred to Section 124(4), which provides that any jurisdictional objection must be determined administratively by the Commissioner or competent authority, not by appellate forums.

Referring to the Supreme Court’s decision in Deputy Commissioner of Income-tax (Exemption) v. Kalinga Institute of Industrial Technology, the Court reiterated that if an assessee participates in proceedings without objecting within the statutory time limit, he forfeits the right to challenge jurisdiction. It recorded that “Section 124(3)(a) precludes the assessee from questioning the jurisdiction of the assessing officer, if he does not do so within 30 days of receipt of notice.” Citing the Delhi High Court’s decision in Commissioner of Income Tax-III v. Shri Shyam Sunder Infrastructure (P) Ltd., the Bench noted that “Section 124(3) limits the availability of such objections to the threshold; such objections are to be articulated at the earliest points of time.”

The High Court held that the notice under Section 143(2) issued by ITO, Ward-1(1), Raipur, based on the PAN database address, was valid and that subsequent transfer of jurisdiction to ITO, Ward-2(1), Raipur, occurred by operation of law. It stated that “by operation of law, the jurisdiction originally exercised by the ITO, Ward-1(1), Raipur, validly devolved upon the ITO, Ward-2(1), Raipur.” The Bench further stated that since the assessee did not raise objections within the period prescribed under Section 124(3)(a), “the plea with regard to territorial jurisdiction of the ITO was barred by virtue of Section 124(3)(a) of the IT Act.”

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“Therefore, the ITAT is absolutely justified in not entertaining the question with regard to jurisdiction of the Assessing Officer.” The Bench distinguished the judgments cited by the appellant, holding that “the decisions relied upon by learned counsel for the appellant are clearly distinguishable in view of the conclusion reached herein-above.”

“For the foregoing reasons, the substantial question of law is answered against the assessee and in favour of the Revenue. Accordingly, we do not find any merit in this appeal, it deserves to be and is hereby dismissed leaving the parties to bear their own cost(s).”

Advocates Representing the Parties:
For the Appellant: Dr. Shiv Kumar Shrivastava, Advocate.
For the Respondent: Mr. Ajay Kumrani, Advocate, on behalf of Mr. Amit Chaudhari, Senior Standing Counsel

Case Title: Harish Kumar Chhabada v. Principal Commissioner of Income Tax
Neutral Citation: 2025:CGHC:50032-DB
Case Number: Tax Case No.138 of 2023
Bench: Justice Sanjay K. Agrawal and Justice Radhakishan Agrawal