U.P State Food & Essential Commodities Ltd., Lucknow V. Income Tax Officer-vi(2), Lucknow

ITA 520/LKW/2015

AI Insights

The case involves an appeal by the U.P. State Food & Essential Commodities Ltd. against the order of the Income Tax Officer, Range VI(2), Lucknow, which added a substantial amount to the company's income for the assessment year 2011-12. The primary contention was the incorrect application and interpretation of section 10(26AAB) of the Income Tax Act by the lower authorities. The Tribunal also considered additional grounds regarding the jurisdictional authority, noting that the assessment was improperly completed by an officer junior to the one who initiated the proceedings. The Tribunal referenced several precedents to support its decision, emphasizing the importance of jurisdiction and the proper application of legal provisions in tax assessments.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 108350 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2015
• Appeal Filed By: Assessee
• Order Result: AllowedAllowed
• Bench Allotted: A
• Next Hearing Date: 27-11-2022
• Assessment Year: misc
• Appeal Filed On: 21-03-2022
• Other Referred Cases: ACIT Vs. M/s Calico Trends ITA No. 753/LKW/2010, Allahabad Tannery Vs. JCI,T, Berger Paints India Ltd. vs. JCIT, Valvoline Cummins Limited vs. JCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Retrospective amendment; Condonation of delay; Set aside
• Section: 10; 143(3); 142(1); 143(1); 143(2)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “A”, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA Nos.520/LKW/2015 Assessment Year 2011-12 Income Tax Officer, Range VI(2) Lucknow Vs U.P. State Food & Essential Commodities Ltd. 17, Gokhle Marg, Lucknow PAN AAACU 3257 G (Respondent) (Appellant) Shri S.C. Dixit, Advocate Appellant by Shri A.K. Singh, CIT DR Respondent by 15/10/2015 Date of hearing 06/11/2015 Date of pronouncement O R D E R PER SUNIL KUMAR YADAV, JM. 1. This appeal is preferred by the assessee against the order of the Ld. CIT(A), Lucknopw interalia on the following grounds :- “The appellant of the above named most respectfully showeth as under:- 1. Because the order of the learned Assessing Officer is arbitrary, misconceived and against the law of natural justice. 2. Because the order passed by the Learned Commissioner of Income Tax and Income Tax Officer has erred in law and on facts in adding Rs. 97713707.00 to the income of appellant company on the basis of wrong interpretation of the section 2 10 (26AAB) of the Income Tax Act, without considering the facts, submitted by the appellant. 3. Because Learned Both Authority has erred in law and on facts is not considering the facts of the case , That the appellant has filed the reply vide letter dated 15.01.2014. 4. Because the learned Both Authority has erred in law and in facts in disallowing expenses for prior year adjustment for Rs. 1454708.00 on presumption basis without considering the fact submitted while appellant have filed voucher of the prior year adjustment expenses before Assessing Officer. 5. Because the assessment order is being cryptic and having been passed without section of mind it is arbitrary exercise of power. 6. Because the finding recorded by the CIT is clear misreading of document on record and utter disregard of the provisions of law causing grave injustice to the appellant resulting in gross failure of justice to the appellant, if the assessment order is to assessment order vitiated in the eyes of law and against vide order dated 08.10.2012 passed by the Learned CI.T. Appeals- II, Lucknow. 7. Because the learned" Assessing Officer has passed an order dated 28.03.2014 against its finding given in the para 3 of the assessment order and provision of the section 1 0(26AAB) of the Income Tax Act The Assessing. Officer has wrongly disallowed the claim of the exemption u/s. 1 0(26AAB) of the Income Tax Act, is prima'facie, illegal, unlawful and arbitrary. 8. Because the Assessing Officer has given finding in para 5 of the assessment order totally wrong and baseless and meaningless interpretation of the provision of section 10 (26AAB) of the Income Tax Act, while appellant is marketing agriculture produce as per provisions of section 10 (26AAB) of the Income 3 Tax Act, while provisions of section 10(26AAB) of Income Tax are fully attracted on the case of the appellant. 9. Because learned Assessing Officer has written the order sheet in case of -the appellant on basis of exempted income but assessment order has passed by the assessing officer against of the order sheet and facts submitted by the appellant. 10. Because wholly without prejudice to the contentions raised vide ground no. 1 to 9 hereinafter, the "Appellant" is entitled for exemption under section''1 0(26AAB) of the Income Tax Act also, as it is stood approved therein1 our right upto the A.Y. 2009-20 10 in terms of the order dated 08.10.2012 as passed by the Learned Commissioner of Income Tax Appeals- IT, Lucknow. 11. Because the order appealed against is contrary to facts, law and principals of natural justice. 12. Because in relation to the grounds of appeal taken hereinafore, the "Appellant" begs to refer and rely upon the averments that have been made in the statement of facts accompanying the memo of appeal itself. 13. Because the order passed by the learned “assessing officer” is without opportunity and bad in law addition is not sustainable is liable to be deleted. In the interest of the justice. 14. Because learned assessing officer has wrongly rejected the claim of exemption u/s 10 (26AAB) of the Income Tax Act, of the appellant by its impugned assessment order dated 28.03.2014 is liable to be set aside in Interest of justice.” 2. Ld. counsel for the assessee has also moved an application for admission of the following additional grounds:- “1. Because PAN of Assessee/ Appellant is vested under the jurisdiction of Dy. Commissioner of Income Tax for the purpose of assessment. The Assessing Officer has passed assessment order u/s 143 (3), which is totally without 4 jurisdiction and is contrary to the provisions of law and be quashed. 2. That under the facts and circumstances, initiation of proceeding U/s 143(3) of the Act are illegal, without application of mind, mechanical, without jurisdiction and unsustainable in law as well as on merits. 3. Because the CIT (appeals) has erred on facts and in law in not appreciating the facts that Assessment order on dated 28.03.2014 u/s 143(3) passed by the Income Tax Officer are invalid, illegal and without jurisdiction, while the notice u/s 143(2) of the Income Tax Act was issued by the Dy. Commissioner of Income Tax on dated 03.8.2012 and Assessment order passed by the Income Tax Officer u/s 143(3) without any transfer order for jurisdiction u/s 127 of the Income Tax Act. 4. Because the order of the CIT (Appeals) upholding the order passed under section 143(3) by the Assessing officer is contrary to facts, bad in law, without jurisdiction. 5. That it is a pure legal grounds which goes to the root of the matter and no new facts are required to be investigated or placed on records for adjudicating the same.” 3. In support of the admission of additional grounds, Ld. counsel for the assessee has contended that the assessment was initiated by the DCIT Range-6, Lucknow, but the assessment was framed by the ITO-6(II) Lucknow. Therefore, the assessment order was passed by an Officer who is not competent to pass an order. Ld. counsel further contended in the light of these facts, the additional ground may kindly be admitted and be disposed of. 4. Having carefully examined these additional grounds raised before us in the light of evidence available on record, we find that issue of validity of the assessment is legal in nature and goes to the 5 root of the case. We therefore, admit the additional grounds and prefer to adjudicate it at the threshold. 5. During the course of hearing, our attention was invited to the fact that the appeal was filed late by 3 days for which an application of condonation of delay is filed. 6. Having carefully perused the same, we find there is valid reason to condone the delay. We accordingly, condone the delay and admit it for hearing. 7. On additional grounds, Ld. counsel for the assessee has invited our attention to the fact that the DCIT has issued the notice u/s 143(2) of the Act vide notice dated 03.08.2012, thereafter DCIT further issued a notice u/s 142(1) dated 5.08.2013. Later on u/s 142(1) notice was further issued through DCIT Range-6. But finally the assessment order was passed by the ITO Range-6. Ld. counsel for the assessee further placed reliance upon the order of the Tribunal in the case of ACIT Vs. M/s Calico Trends ITA No. 753/LKW/2010 in support of his contention that where the Senior Officer is seized with the matter, the officer subordinate to him loose jurisdiction to frame the assessment. Therefore, the assessment order passed by an Officer Junior to the Officer, who is initiated the proceeding is not valid order. A copy of the Tribunal order is placed on record. 8. Ld. DR simply placed reliance upon the order of the CIT(A). Ld. DR simply argued that the Officer, who is initiated the proceeding and the Officer was completed the proceedings are having a concurrent 6 jurisdiction over the assessee, therefore, there is no illegality in the assessment order. 9. Having carefully examined the order of the lower authorities in the light of rival submissions, we find that undisputedly the notices u/s 143(2) and 142(1) was issued by the DCIT but later on the assessment was completed by the ITO. The identical issue was examined by us in the case of ACIT Vs. M/s Calico Trends (Supra) in which following the order of the Tribunal in the case of Allahabad Tannery Vs. JCI,T the Tribunal held that if an order is passed by Officer Junior to Officer who is initiated the proceeding the order is not valid in the eyes of law. The relevant observations of the Tribunal in the case of M/s Calico Trend are extracted as under for the sake of reference:- “15. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the authorities below and the judgments referred by the assessee, we find that the impugned issue was examined by the Tribunal in the case of Allahadad Tannery vs. JCIT (supra). In that case, the assessment under section 143(2) was initiated by the DCIT and completed by the JCIT. In any case, the Tribunal has also observed in that order that the assessment by the higher authorities may be possible even if the proceedings were initiated by the subordinate authorities, having concurrent jurisdiction. The relevant observations of the Tribunal in the case of Allahadad Tannery vs. JCIT (supra) are extracted hereunder:- “5. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the relevant provisions of the Act and the orders of the authorities below, we find that DCIT, Range-1 has processed the return of income u/s 143(1) of the Act by making adjustments and issued the refund. Notice u/s 143(2) was issued and assessment was framed u/s 143(3) by the Jt.CIT, Range-1. 7 During the course of hearing of the appeal, no controversy was raised with regard to the concurrent jurisdiction of the DCIT and Jt.CIT over the appellant. Meaning thereby both the officers are quite competent to frame an assessment of the returns filed by the assessee. The moot question arises before us is whether the Jt.CIT, who is admittedly senior officer having supervisory power/jurisdiction over the DCIT, can frame the assessment u/s 143(3) of the Act where return of income was processed u/s 143(1) by the DCIT? 5.1 Before dwelling upon the issue, we have to look towards the object and purpose of conferring the concurrent jurisdiction to the authority higher in rank of the income-tax authority/Assessing Officer who was suppose to frame the assessment in normal course. Our attention was invited to the provisions of section 120 of the Act with the submission that through the explanation below sub section (1) inserted by Finance Act, 2006 with retrospective effect from 01/04/88 clarifying that any income-tax authority being a higher authority in rank, may, if so directed by the Board, exercise the powers or perform the function of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub section (1). Meaning thereby the income-tax authority being an authority higher in rank while exercising its supervisory powers, may seize the matter pending with the Assessing Officer who is junior in rank and exercise the powers and perform the functions of that Assessing Officer at any point of time wherever the intervention is called for. If we look the object and purpose of this explanation, we find that the concurrent jurisdiction are provided to authorities higher in rank in order to have better supervision over its subordinates and if they feel necessary, they may seize with the matter and complete the remaining act or function, which was to be exercised by the Assessing Officer who is junior to him. 5.2 We have examined the material referred to by the assessee with regard to concurrent jurisdiction and we find that in exercise of power conferred by section 120(4)(b) of the Act, the Central Board of Direct Taxes (in short CBDT) issued a notification dated 17th September, 2001 conferring 8 the powers and functions of an Assessing Officer on Jt. Commissioner of Income Tax which by virtue of section 2(28C) of the Act includes the Addl. Commissioner of Income Tax. Subsequent to the notification dated 17th September 2001, the CBDT issued an order dated 16th May 2007 to the effect that in view of the increasing gap between the workload and scrutiny assessment, it has been decided to entrust the Range Heads with the responsibility of making assessments in top Revenue potential cases of the range to be selected on the basis of the returned income. 5.3 On the issue of concurrent jurisdiction, the Hon'ble Calcutta High Court in the case of Berger Paints India Ltd. (supra) had explained the meaning of expression ‘concurrent’ to mean two authorities having equal powers to deal with the situation, but the same work cannot be divided between them. The relevant observations of Hon'ble Calcutta High Court are extracted hereunder: “’Concurrent jurisdiction’ means a subordinate authority can deal with the matter equally with any superior authority in its entirety so that either one of such jurisdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer.” 5.4 The distinction between concurrent exercise and joint exercise of jurisdiction was also examined by Hon'ble Delhi High Court in the case of Valvoline Cummins Limited (supra) in which it has been observed as under: “It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other 9 authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an application for anticipatory bail it must deal with it and similarly if the Sessions Judge is seized of an anticipatory bail, he must deal with it. There can be no joint exercise of power both by the High Court as well as by the Sessions Judge in respect of the same application for anticipatory bail.” 5.5 We have examined the facts of both the cases. We find that in this case the process was initiated by the authority higher in rank but the subsequent action was taken by the authority junior in rank. The situation where the process was initiated by the junior officer and subsequent action was taken by the authority higher in rank, was neither examined by their Lordships in this case nor conceptualized. 6. We have also examined the theory of mode of assessment as propounded by the learned D.R. and we find force therein. There are two mode of assessments. One is called preliminary/summary assessment or the assessment framed u/s 143(1) and the other is called regular assessment framed u/s 143(3) of the Act. The CBDT time to time issues the guideline for framing the regular assessment u/s 143(3) after issuing notice u/s 143(2) of the Act. Rest of the assessments are processed u/s 143(1) of the Act. Undisputedly, maximum assessments are framed u/s 143(1) where the Assessing Officer has issued the intimation after making a prima facie adjustment. Along with the intimation the Assessing Officer either raises the demand or issues the refund but whenever case falls within the guidelines issued 10 by CBDT, it is to be taken for scrutiny and the assessment is required to be completed u/s 143(3) of the Act and for completing the assessment u/s 143(3), the Assessing Officer is required to issue a notice u/s 143(2) within a period prescribed u/s 143(2) of the Act. Thereafter the assessment is framed u/s 143(3) after providing proper opportunity of being heard to the assessee. Therefore, there are two mode of assessment and they are independent to each other. 7. We have also carefully examined the other judgments referred to by the assessee. In all those judgments, the proceedings for assessment was initiated by the authority higher in rank and rest of the assessment is completed by the Assessing Officer who is junior to the officer who has initiated the process for assessment. In those cases, it was repeatedly held that once the authority higher in rank has seized with the matter, the authority lower in rank forfeits its jurisdiction to proceed with the matter in any manner and to complete the remaining assessment. The object/basis for giving that finding, according to us, are that once the authority higher in rank seized with the matter pending before the subordinate authority for adjudication, the subordinate authority is ceased with the jurisdiction to proceed further in that matter. The reason for doing so is quite obvious as once the higher authority has started applying his mind to the issue in dispute, the subordinate authority cannot proceed with the matter. If it is not done, there would be chaos in the administration of justice. But in the instant case, the DCIT has completed the one mode of assessment by issuing intimation u/s 143(1) of the Act and the Jt.CIT has initiated and completed the second mode of assessment. Therefore, we do not find any illegality in the assessment as the final assessment was completed by Jt.CIT, Range-1, who is admittedly senior and supervisory authority of DCIT, Range-1. We hasten to add that assessment by the higher authority may be possible even if the proceedings were initiated by the subordinate authority who is also having concurrent jurisdiction but in any case this issue is not before us and we restrict ourselves to the controversy involved. We, therefore, do not find any infirmity and illegality in the 11 assessment order framed by the Jt.CIT, Range-1. Accordingly, we confirm the order of CIT(A) in this regard.” 16. The object of conferring concurrent jurisdiction upon various Officers of the Income-tax Department was examined by the Tribunal in the aforesaid case before holding that the assessment by the higher authority may be possible even if the proceedings were initiated by the subordinate authority, who is also having concurrent jurisdiction. Since the impugned issue has already been adjudicated by the Tribunal and has taken a particular view, we find no justification to take a contrary view in the instant case. 17. We also find force in the contentions of the Department with regard to the judgments referred to by the ld. counsel for the assessee as in all those cases, the process was initiated by the authorities higher in rank and it was completed by the authorities lower in rank, whereas the facts in the instant case are otherwise. Therefore, we are of the considered view that if the process of assessment is initiated by an authority lower in rank and assessment was completed by an authority higher in rank, the assessment would be valid in the eyes of law, as the object of conferring concurrent jurisdiction is to empower the senior officer to supervise the functioning of the junior officers effectively and whenever they feel that the intervention in the assessment being framed by the junior officer is called for, they can seize with the matter and complete the assessment. In the instant case also, the assessment proceedings were initiated by issuing notice under section 142(1) and 143(2) of the Act by the ACIT and DCIT and assessment was completed by the JCIT, having concurrent jurisdiction and we find no illegality therein. We, therefore, find ourselves in agreement with the findings of the ld. CIT(A) in this regard and we confirm the same and reject grounds No.1 & 2 of the appeal of the assessee.” 10. Since, the Tribunal has taken a particular view in the aforesaid cases, we find no justification to take a contrary view in this appeal. Accordingly, we hold the assessment framed by the Assessing Officer to be not sustainable in the eyes of law and therefore, we annul the same. 12 11. Since the assessment order is annulled, we find no justification to deal the issues on merit. Accordingly, the orders of the CIT(A) as well as AO are set aside and the appeal of the assessee stands allowed. 12. In the result, appeal of the assessee stands allowed. (Order was pronounced in the open court on the date mentioned on the caption page) Sd/- Sd/- (A.K. GARODIA ) (SUNIL KUMAR YADAV) Accountant Member Judicial Member Dated: 06/11/2015 Aks Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar