ITAT Quashes Reassessment for NRI Over Jurisdictional Defect in Section 148 Proceedings

ITAT Quashes Reassessment for NRI Over Jurisdictional Defect in Section 148 Proceedings

The assessee, a non‑resident working in Dubai, was issued a notice under Section 148 of the Income Tax Act for AY 2015‑16 alleging unexplained investments. The Assessing Officer reopened the case after noticing immovable property purchases worth Rs. 39.62 lakh and time deposits of Rs. 30.36 lakh. Despite the assessee’s explanation that funds came from salary remittances abroad and maturity of earlier fixed deposits, the AO treated Rs. 36.12 lakh as unexplained income under Section 69.

Ld. DRP Decided: On appeal, the DRP deleted the addition related to fixed deposits but sustained the addition for the Kerala property. The assessee challenged the jurisdiction of the AO, arguing that, being an NRI, only the International Taxation AO had authority to issue a notice under Section 148. The Revenue argued that the defect was cured under Section 292BB, as the assessee had participated in the proceedings.

Main Issue: Whether reassessment procedures ordered under Section 148 by an Assessing Officer without jurisdiction over a non-resident taxpayer are lawful.

ITAT’s Decision: The Tribunal noted that the assessee had always been filing returns as an NRI, which was evident from the records. Despite this, the impugned notice under Section 148 was issued by an Assessing Officer who admittedly had no jurisdiction over NRIs. The Revenue tried to justify this by pointing to the shortage of time before the limitation date, but the Tribunal held that such administrative constraints cannot confer jurisdiction where none exists. Citing the HC’s ruling in Nimir Kishore Mehta and M.I. Builders (P.) Ltd., it reiterated that a notice by a non‑jurisdictional officer is void ab initio and cannot be validated by subsequent transfer of records.

The Tribunal rejected the Revenue’s argument based on Section 292BB, observing that this provision cannot cure a jurisdictional defect. Since the AO acknowledged that the assessee was an NRI in the order under Section 148A(d), the proceedings lacked authority from the outset. Thereafter, the notices issued under Sections 148A(b), 148A(d), and 148 were held invalid, and the complete reassessment process was quashed.

Thus, the grounds on merit, being academic, were disposed of, and the appeal was decided in favor of the assessee.

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