MUKESH KUMAR JAIN, CHENNAI V. DCIT CORPORATE WARD 5(2), CHENNAI

ITA 1698/CHNY/2019

AI Insights

The case involves Shri Mukesh Kumar Jain, who appealed against the reassessment order for the Assessment Year 2013-14. The reassessment was initially conducted by the Deputy Commissioner of Income Tax, Non-corporate Circle 5(1), and later transferred to various officers across different jurisdictions, ultimately being handled by the Assistant Commissioner of Income Tax, Corporate Circle 5(2). The primary legal contention raised by the assessee was the lack of jurisdiction of the officer who reopened the assessment and the mechanical manner in which the reassessment was conducted. The Tribunal examined the procedural lapses and the transfer of jurisdiction among different officers, leading to the decision to quash the reassessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134237 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 28-05-2019
• Other Referred Cases: ITO vs Rajender Prasad Gupta, ITO vs Mahendra Singh Tyagi, Abhishek Jain vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UTTAMCHAND JAIN LD
• Keywords: Reassessment proceedings
• Section: 2; 143(3); 142(1); 5(2); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण “बी” ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय ी महावीर िसंह, उपा ! एवं माननीय ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.1698/Chn y/2019 (िनधा*रण वष* / As sessment Year: 2013-14) Shri Mukesh Kumar Jain 46, Deewan Rama Road, Purasawalkam, Chennai-600 084. बनाम / V s . DCIT Corporate Ward-5(2), Chennai. थायीलेखासं./जीआइआरसं./PAN/GIR No. A AJP M - 54 77-E (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri Uttamchand Jain (CA)-Ld.AR थ कीओरसे/Respondent by : Shri D. Hema Bhupal (JCIT)- Ld. DR सुनवाईकीतारीख/Date of Hearing : 12-07-2023 घोषणाकीतारीख /Date of Pronouncement : 21-09-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals)-3, Chennai [CIT(A)] dated 18-03-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 on 23-12-2017. Though the assessee has raised multiple grounds of appeal challenging the validity of reassessment proceedings as well as assailing the additions on merits, Ld. AR raised a pertinent legal ground 2 to question the jurisdiction of Ld. AO. For this, Ld. AR has raised specific additional legal grounds on 19.01.2023 which read as under: - 1. For that the order passed by the Assistant Commissioner of Income Tax, Corporate Circle 5(2), U/s. 143(3) is bad in law, illegal and without jurisdiction and/ or in excess of jurisdiction under the facts and circumstances of the case. 2. For that the Notice U/s. 143(2) was issued by the Assistant Commissioner of Income Tax, Non-Corporate Circle 5(1) and in the absence of order U/s. 127, the order passed by the Assistant Commissioner of Income Tax, Corporate Circle, 5(2) is without jurisdiction and needs to be squashed under the facts and circumstances of the case. 3. For that the assessment proceedings are initiated by one officer and assessment order is passed by another officer is bad in law and illegal under the facts and circumstances of the case 4. For that the Assessing Officer has erred not bringing on record the link between the tangible material, if and the formation of the reason to believe as to escapement of income under the facts and circumstances of the case. 5. For that the Assessing Officer has erred in completing assessment u/s.143(3) r.w.s. 147 based on a return which is non-est under the facts & circumstances of the case. 2. To support the same, Ld. AR drew attention to various documents as placed on record. The Ld. Sr. DR controverted the arguments of Ld. AR and placed on record flow of communication from department. Having heard rival submissions and upon perusal of case records, the legal issues, which goes to the root of the matter are adjudicated first. Our adjudication to the same would be as under. Assessment Proceedings 3.1 The assessee being resident individual was assessed u/s 143(3) on 18.03.2016. The assessee e-filed return of income on 16.03.2015 which was picked up for scrutiny and a notice u/s 143(2) was issued on 18.09.2015 by Deputy Commissioner of Income Tax, Non-corporate Circle-5(1) [DCIT, NCC-5(1)]. Subsequently, notice u/s 142(1) was issued by same authority on 25.09.2015. In this notice, the assessee was directed to explain suspicious transactions of Long-Term Capital 3 Gains on shares as per inputs received from investigation wing. However, scrutiny assessment folder was transferred by DCIT, NCC 5(1) to Deputy / ACIT, Non-Corporate Circle-10 (DCIT/ACIT, NCC 10), Chennai vide letter dated 13.10.2015. In this letter, it was submitted that the jurisdiction of the case vest with (DCIT/ACIT, NCC 10) and the case would get time barred on 31.03.2016. Consequently, another notice u/s 142(1) r.w.s. 129 was issued by ITO, Ward-10(3), Chennai on 16.10.2015 calling for certain details from the assessee. However, vide letter dated 18.11.2015, ITO, non-corporate ward 10(3), Chennai informed the assessee as under: - With reference to the above and as per board notification with regard to jurisdiction, your file is transferred to office of ACIT/DCIT, Corporate Circle 5(2), Chennai since you are a company director and receiving director remuneration from M/s Prakash Gold Palace Private Limited Chennai (AACCA4384Q), (also assessed with Corporate Circle 5(2), Chennai). This is for your information and records. Further submissions regarding pending assessment proceedings may be filed before DCIT, CC 5(2), Chennai. Consequently, another hearing notice was issued by DCIT, Corporate Circle 5(2) Chennai on 26-02-2016 and finally an assessment was framed by same authority u/s 143(3) on 18.03.2016 accepting the returned income of the assessee. It could thus be seen that final jurisdiction of the assessee was lying with DCIT, Corporate Circle 5(2), Chennai at the time of framing of assessment. 3.2 Subsequently, the case of the assessee was reopened and notice u/s 148 was issued on 31.08.2016 by ACIT, Non-corporate Circle 5(1), Chennai calling for requisite details from the assessee. However, vide letter dated 21.08.2017, the case records were forwarded to ITO, non- corporate Ward 10(3), Chennai [ITO, NCW 10(3)] since the jurisdiction of 4 the assessee was stated to be vested with that authority. The Income Tax Officer, non-corporate ward 10(3) [ITO, NCW 10(3)] issued notice u/s 142(1) r.w.s. 129 on 31.08.2017. However, vide letter dated 26.09.2017, the case records were again transferred to ITO, Corporate Ward 5(2). The ACIT, Corporate Circle 5(2) issued another notice u/s 142(1) r.w.s. 129 on 14.11.2017 followed by another notice u/s 143(2) dated 12.12.2017. The assessee, vide letter dated 12.12.2017, demanded reasons for reopening and assailed the reassessment proceedings. The reasons were supplied to the assessee by ACIT, Corporate Circle 5(2) on 22.12.2017 along with copy of form for recordoing the reasons for initiating proceedings u/s 148 and for obtaining the approval of the Joint CIT / CIT. This approval was taken by DCIT, Non-Corporate Circle-5 on 12.08.2016. In column No.8, it was mentioned that the assessment was proposed to be made for the first time. In Column No. 7, it was submitted that the provisions of Sec.147(b) were applicable to the case of the assessee. Finally, impugned assessment has been framed by Ld. ACIT, Corporate Circle 5(2) u/s 143(3) r.w.s. 147 on 30.12.2017. In the assessment order, Long Term Capital Gains of Rs.75.38 Lacs, as claimed to be exempt by the assessee, were taxed as unexplained money u/s 69A. 3.3 The Ld. CIT(A) rejected the legal grounds urged by the assessee and upheld the action of Ld. AO qua assessment of capital gains. The Ld. CIT(A) also made an enhancement on the ground that entire sale proceeds were to be added back to the income of the assessee. Aggrieved as aforesaid, the assessee is in further appeal before us 5 wherein the assessee has assailed validity of reassessment proceedings on various grounds including the jurisdiction of Ld. AO. Our findings and Adjudication 4. From scrutiny assessment order passed u/s 143(3), it could very well be seen that final jurisdiction of the assessee was lying with DCIT, Corporate Circle 5(2), Chennai at the time of framing of original scrutiny assessment u/s 143(3). However, the case of the assessee has been reopened for the first time by ACIT, Non-corporate Circle 5(1) by issuing a notice u/s 148 on 31.08.2016. Therefore, the assessment has clearly been reopened by non-jurisdictional AO. This being the case, the notice would be bad in law as held by Jodhpur Tribunal in ITO vs Rajender Prasad Gupta (15 Taxmann.com 335) as well as Lucknow Tribunal in ITO vs Mahendra Singh Tyagi (83 Taxmann.com 71). The Jodhpur Tribunal held that where non-jurisdictional ITO recorded reasons for re- opening, completed the assessment of assessee and issued notice u/s 148, such proceedings would be invalid. Similar is the ratio of decision of Lucknow Tribunal. The revenue has submitted that assessee’s PAN was lying with the particular officer who has reopened the assessment of the assessee and therefore, the reasons were correctly recorded by that officer. However, the same could not be accepted since only jurisdictional AO could have reopened the case of the assessee. Pertinently, initial notice has been issued by ACIT, Non-corporate Circle 5(1) and thereafter, case records were forwarded to ITO, non-corporate Ward 10(3) who, in turn, has transferred the case records to ITO, Corporate Circle 5(2) who has finally completed the assessment. All these officers are under different jurisdictions with different Pr. CIT as 6 jurisdictional head. It is also seen that for aforesaid movement of records, the assessee has neither been provided any notification transferring jurisdiction from one assessing officer to another assessing officer. The revenue is also unable to place on record any communication transferring jurisdiction from one AO to another AO. 5. Another point that could be noted is that the approval to reopen the case of the assessee has been taken in a mechanical manner. In the form for obtaining approval, Ld. AO has wrongly mentioned that the assessment is being framed for the first time. Secondly, Ld. AO has proposed to invoke the provision of clause (b) of Explanation 2 of Section 147, which applies only where return of income has been furnished by the assessee and no assessment has taken place. However, in the present case, the scrutiny assessment u/s 143(3) had already taken place. Therefore, the AO has wrongly invoked the provisions of Clause (b) of Explanation 2 of Section 147, which do not apply to the case of the assessee. The AO has not perused the original assessment records and had proceeded to issue the notice u/s 148 without verification of the documents on record. Accordingly, the inescapable conclusion would be that notice u/s 148 was issued mechanically without due application of mind and therefore, reassessment proceedings could not be sustained in law. 6. For the aforesaid reasons, the reassessment jurisdiction could not be sustained in law. Therefore, we quash the impugned assessment order and allow the corresponding legal grounds urged by the assessee. The case law of Hon’ble High Court of Delhi in the case of Abhishek Jain vs. ITO (94 Taxmann.com 355), as referred to by Ld. Sr. DR, 7 would not help the case of the revenue since in the present case, the reopening has been done by non-jurisdictional officer and that too in a mechanical manner. Therefore, this case law is of no assistance to further the case of the revenue. 7. Since we have quashed impugned assessment order, delving into other legal grounds as well as on merits has been rendered mere academic in nature. 8. The appeal stand allowed in terms of our above order. Order pronounced on 21 st September, 2023 Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा45 / VICE PRESIDENT लेखा सद7 / ACCOUNTANT MEMBER चे9ई Chennai; िदनांक Dated :21-09-2023 DS आदेशकीAितिलिपअ&ेिषत/Copy of the Order forwarded to : 1.अपीलाथ /Appellant 2. थ /Respondent 3. आयकर आयुA/CIT 4.िवभागीय ितिनिध/DR 5.गाडF फाईल/GF