R Murugappa @ Muruvappan, Pondicherry V. ITO, Ward-4, Pondicherry

ITA 904/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1810 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 02-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Set aside
• Section: 147; 68; 5(2); 292BB; 143(2); 124(5)

Judgement Text

आयकर अपील य अ धकरण, ‘सी’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘C’ BENCH, CHENNAI ी वी . द ु गा राव, या यक सद य एवं ी जी. मंज ु नाथ, लेखा सद य के सम$ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I .T. A. No. 9 0 4/ Chn y/ 2 0 1 9 ( नधा रणवष / A ss e ss m en t Ye ar : 2 011 - 12) Mr. R.Murugappa @ Muruvappan 265, J.N. Street, Pondicherry-605 001. V s The Income Tax Officer, Ward-4, Pondicherry. PAN: ALCPM 5291N (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/ Appellant by : Mr. R.Venkata Raman, ACA & Mr .Deepak Jain, FCA यथ क ओरसे/Respondent by : Mr. Sajit Kumar, JCIT स ु नवाईक तार ख/D a t e o f h e a r i n g : 14.07.2022 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 29.07.2022 आदेश / O R D E R PER G. MANJUNATHA, AM: This appeal filed by assessee is directed against order of learned Commissioner of Income Tax (Appeals), Puducherry, dated 14.03.2019 and pertains to assessment year 2011-12. 2. The assessee has raised following grounds of appeal:- “ 1) The order of the Commissioner of Income Tax (Appeals), Puducherry dated 14.03.2019 in I. T.A.No.96/CIT(A)-PDY/2016-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in sustaining the addition of 2 ITA No.904/Chny/2019 Rs.2,70,00,000/- representing the cash deposits in the bank account No.406346314 on the application of section 68 of the Act in the computation of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the presumption of the bank account belonging to the Appellant with a view to consider the cash deposits as the unexplained credit/income within the scope of section 68 of the Act consequently in the hands of the Appellant was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) failed to appreciate that the sustenance of the addition made in the hands of the Appellant was wrong, erroneous, unjustified, incorrect and not sustainable in law. 5. The CIT (Appeals) went wrong in recording the findings in paras 6.7 & 6.8 of the impugned order without assigning proper reasons and justification. 6. The CIT (Appeals) failed to appreciate that the contradictions and perversity in the findings of facts in the order of assessment pointed out by the Appellant during the appellate proceedings while maintaining the stand on the wrong approach in bringing to tax the cash deposited in to the said bank account as unexplained income/credit in the hands of the Appellant were completely overlooked and brushed aside, thereby vitiating the findings in paras 6.7 & 6.8 of the impugned order. 7. The CIT(Appeals) failed to appreciate that in any event the alternate plea for summoning the assessment records with a view to furnish the details obtained from the Branch Manager of Indian Bank to the Appellant to comply with the principles natural justice before deciding the appeal was overlooked and ought to have appreciated that any order passed in violation of the principles natural justice should be reckoned as nullity in law. 8. The CIT (Appeals) failed to appreciate that there was no 3 ITA No.904/Chny/2019 proper opportunity given before passing of the impugned order as well as before completing the re-assessment and any order passed in violation of the principles natural justice would be nullity in law. 9. The CIT (Appeals) failed to appreciate that the ex-parte order of reassessment was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law and ought to have appreciated that the procedure prescribed by the Apex Court in the case reported in 259 ITR 19 was not followed admittedly while there was absolutely no material to justify the assumption of jurisdiction u/s 147 of the Act, thereby vitiating the findings in para 6.6 of the impugned order.” 3. The assessee has also filed a petition for admission of additional grounds vide letter dated 17.05.2022 and relevant grounds of appeal taken by the assessee are reproduced as under:- I. The notice uls.148 dated 10.09.2014 issued by the Income Tax Officer, Ward- 1(1) Pondicherry is bad in law and consequently order of assessment dated 10.03.2016 passed u/s.144 r.w.s 147 is void ab initio. 2. Without prejudice to Ground No.1 the order of assessment dated 10.03.2016 passed u/s.144 r.w.s 147 by the Income Tax Officer, Ward-4, Pondicherry is bad in law since the same is without issuing notice u/s. 148 and solely on the basis of 148 notice issued by the non jurisdictional Assessing Officer. 3. Without prejudice to Ground Numbers 1 & 2, the order of assessment dated 10.03.2016 passed u/s.144 r.w.s 147 is barred by limitation.” 4 ITA No.904/Chny/2019 4. The learned A.R. for the assessee referring to petition filed by the assessee for admission of additional grounds submitted that these additional grounds could not be raised at the time of filing of appeal before the Tribunal due to inadvertence and it could not be visualized by the assessee even during the appeal proceedings before the learned CIT(A). However, these additional grounds are jurisdictional in nature and goes to route of the matter and further, facts relating to said additional grounds are very much available on record before the Assessing Officer. Therefore, in light of decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383, additional grounds filed by the assessee may be admitted. 5. The learned DR, on the other hand, strongly opposing petition filed by the assessee for admission of additional grounds submitted that all along the assessee never challenged jurisdiction of the Assessing Officer either during the assessment proceedings or even before first appellate proceedings, however, for the first time, the assessee has taken legal grounds challenging jurisdiction of the Assessing Officer, 5 ITA No.904/Chny/2019 therefore, same cannot be admitted. The learned DR further submitted that as per provisions of section 124(3) of the Income Tax Act, 1961, no person shall be entitled to call in question the jurisdiction of an Assessing Officer after expiry of one month from the date on which he was served with notice u/s.142(1) or 143(2) of the Income Tax Act, 1961, and further, where he has not made any return even notice issued u/s.148 of the Income Tax Act, 1961. Therefore, at this stage, ground take by the assessee challenging jurisdiction of the Assessing Officer cannot be entertained. 6. We have heard both the parties and considered petition filed by the assessee for admission of additional grounds. We have carefully gone through grounds taken by the assessee challenging validity of 148 notice issued by the Assessing Officer in light of provisions of section 124, 127 and 129 of the Income Tax Act, 1961, and we find that grounds taken by the assessee are purely legal grounds, which goes to root of the matter in questioning jurisdiction of the Assessing Officer to assess income of the assessee and said grounds can be taken up for first time at any time of proceedings, including proceedings before the Tribunal as held by the Hon'ble 6 ITA No.904/Chny/2019 Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (supra). Therefore, we are of the considered view that additional grounds filed by the assessee needs to be admitted and therefore, we admit additional grounds filed by the assessee for adjudication. 7. The first issue that came up for our consideration from additional ground filed by the assessee is validity of 148 notice dated 10.09.2014 issued by the Income Tax Officer, Ward-1(1), Puducherry and consequent assessment order passed u/s.144 r.w.s 147 dated 10.03.2016. The learned A.R. for the assessee referring to notice issued by the Income Tax Officer, Ward-1(1), Puducherry dated 10.09.2014 submitted that notice u/s.148 of the Act for reopening of assessment was issued by the Assessing Officer, who is having no jurisdiction on the assessee, which is evident from the fact that subsequently on 22.04.2015 the Income Tax Officer, Ward-1(1), Puducherry, has transferred case to the Income Tax Officer, Ward-4, Puducherry, with reason for transfer that jurisdiction vests with the Income Tax Officer, Ward-4, Puducherry. Therefore, assessment framed u/s.144 r.w.s. 147 of the Income Tax Act, 7 ITA No.904/Chny/2019 1961 dated 10.03.2016, pursuant to 148 notice issued by non- jurisdictional Assessing Officer is void, ab initio and liable to be quashed. The learned A.R. for the assessee further referring to transfer proforma, which was furnished before us and copies of order sheet entries from records of the Assessing Officer submitted that there is no dispute about issue of 148 notice by the non-jurisdiction Assessing Officer and further, it is also not in dispute that case has been transferred to jurisdiction Assessing Officer for the reason that jurisdiction vests with the Income Tax Officer, Ward-4, Puducherry. Further, there is no reference to transfer of case as required u/s.127 of the Act, nor notice issued u/s.129 of the Act for change of incumbent of an office. Therefore, in absence of such orders from the competent authority, notice issued by the Income Tax Officer, Ward-1(1), Puducherry u/s.148 of the Act, is invalid and consequential assessment order passed u/s/.144 r.w.s. 147 is void ab initio and liable to be quashed. In this regard, the AR relied upon decision of the Hon’ble Gujarat High Court in the case of Shirishbhai Hargovandas Sanjanwala Vs. ACIT (2017) 396 ITR 167 and also Pankajbhai Jaysukhlal Shah vs. ACIT (2020) 425 ITR 70 and also had relied upon decision of the Hon’ble 8 ITA No.904/Chny/2019 High Court of Calcutta in the case of PCIT Vs Nopany & Sons (2022) 286 taxman.com 388. 8. The learned DR, on the other hand, referring to annexure ‘A’ of jurisdictional details of O/o. PCIT, Puducherry submitted that all Assessing Officers have territorial jurisdiction over the cases of Union territory of Puducherry and further, cases have been allocated to jurisdiction of each Assessing Officer based on alphabets of name of the assessees and their income. Therefore, once all AOs having jurisdiction over assessees in the territorial jurisdiction, then question of issuing notice by non-jurisdictional Assessing Officer does not arise. The learned DR further referring to provisions of section 124(5) of the Act, submitted that as per said provision, every Assessing Officer shall have all powers conferred by or under this Act, on an Assessing Officer in respect of income accruing or arising or received within area, if any, over which he has been vested with jurisdiction by virtue of direction or order issued sub-section (1) or (2) of section 120 of the Income Tax Act, 1961. Therefore, there is no merit in the arguments of the assessee that notice issued u/s.148 of the Act is invalid and consequent proceedings are liable to be quashed. The learned DR has also taken 9 ITA No.904/Chny/2019 support from the provisions of section 124(3) and submitted that if at all any person needs to question jurisdiction of the Assessing Officer, he shall question said jurisdiction at the first available option, that too within one month from the date on which he was served with notice or before completion of assessment, whichever is earlier. In this case, the assessee never questioned jurisdiction of the Assessing Officer upto the stage of first appellate authority. However, for the first time grounds has been taken to challenge jurisdiction of the Assessing Officer before the Tribunal and thus, grounds filed by the assessee should not be entertained. 9. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The jurisdiction of an Assessing Officer is decided by virtue of any direction or order issued under sub-section (1) or (2) of section 120 of the Income Tax Act, 1961, where Board shall decide jurisdiction of an Assessing Officer based on criteria of territorial area, persons or classes of persons, or income or classes of income and cases or classes of cases and such jurisdiction has been conferred to the Assessing 10 ITA No.904/Chny/2019 Officer by an order. In this case, as per annexure ‘A' of jurisdiction details of O/o. PCIT., Puducherry, Income Tax Officer, Ward-1, Puducherry has jurisdiction over business assesses with name starting from alphabet “A,B,C,F, G & J”, having returned income upto Rs.10 lakhs and corporate assessees name starting from alphabet ‘A’ to ‘M’ having returned income upto Rs.15 lakhs. The Income Tax Officer, Ward-4, having jurisdiction over business assessees name starting with alphabet “H, I, K & M” having returned income upto Rs.10 lakhs and salary cases name starting from “A to M” having returned income upto Rs.10 lakhs. Therefore, as per the Board order, jurisdiction of the Income Tax Officer, Ward-1, Puducherry and the Income Tax Officer, Ward-4, Puducherry has been separately defined. Therefore, concerned A.O. can exercise their jurisdictional power over the assessees having names starting with alphabet mentioned against their jurisdiction. In this case, name of the assessee starts with alphabet ‘M’ and the assessee is a business assessee. Therefore, obviously jurisdiction over the assessee lies with the Income Tax Officer, Ward-4, Puducherry, but not with ITO., Ward-1(1), Puducherry. 11 ITA No.904/Chny/2019 10. In this case, admittedly, ITO., Ward-1(1), Puducherry had issued notice u/s.148 dated 10.09.2014. It is also an admitted fact that the Income Tax Officer, Ward-1(1), Puducherry has transferred case to the Income Tax Officer, Ward-4, Puducherry, through transfer proforma, as per which reasons for transfer of case was specified as jurisdiction vests with the Income Tax Officer, Ward-4, Puducherry. Further, the Income Tax Officer, Ward-4, Puducherry does not issue notice u/s.148 of the Income Tax Act, 1961. In fact, there is no dispute with regard to notice issued u/s.148 of the Act . The Revenue itself has admitted fact that 148 notice was issued by the Income Tax Officer, Ward-1(1), Puducherry. It is also admitted fact that there is no reference to any order from the Board or PCIT, Puducherry, in terms of section 120(1) or 124(1) or 124(2) of the I.T.Act, 1961 for transferring case from Income Tax Officer, Ward-1(1) to Income Tax Officer, Ward-4, Puducherry, by specific order. In fact, the Income Tax Officer, Ward-1(1), Puducherry himself has transferred case to the Income Tax Officer, Ward-4, Puducherry, because jurisdiction over the assessee is clearly vests with the Income Tax Officer, Ward-4, Puducherry. The Revenue had also failed to bring on record 12 ITA No.904/Chny/2019 any evidence to prove that any notice issued u/s.129 of the Income Tax Act, 1961 for change of incumbent of office at least to prove their case that new officer has assumed proper jurisdiction. In absence of any such details, it can be safely concluded that Income Tax Officer, Ward-1(1), Puducherry does not have any jurisdiction over the assessee and consequently, he cannot issue notice u/s.148 of the Act, 1961 to the assessee. Since, the Assessing Officer, who had issued notice u/s.148 of the Act and the Assessing Officer, who had completed assessment u/s.144 r.w.s 147 of the Act is different, unless, there is statutory notice as required to be issued u/s.148 from the jurisdictional Assessing Officer, consequent assessment order passed by the Assessing Officer u/s.144 r.w.s 147 is void ab initio and liable to be quashed. 11. The assessee has relied upon various judicial precedents in support of his arguments, including decision of the Hon’ble Gujarat High Court in the case of Shirishbhai Hargovandas Sanjanwala Vs. ACIT (supra), where the Hon’ble High Court under identical set of facts held that issuance of reassessment notice by the Assessing Officer, who has no jurisdiction to 13 ITA No.904/Chny/2019 assess the assessee was bad in law and further, it was not a mere irregularity or defect which could be cured. The relevant findings of the Hon’be High Court are as under:- “5. It can thus be seen that even the department agrees that normal assessment of the petitioner lies before circle 4(2), Ahmedabad whereas in the present case, impugned notice has been issued by the Assistant Commissioner of circle 5(2), Ahmedabad. This according to the department happened since in the sale deed, the petitioner was described as an agriculturist. As an agriculturist, having a particular residential address, his assessment would be made by the Assistant Commissioner, circle 5(2) and that is how the impugned notice came to be issued by the said officer. 6. The stand of the department ignores the fact that the petitioner is regularly assessed year after year and originally was within the jurisdiction of income-tax . circle-9. Now after restructuring, his assessment takes place before the Assistant Commissioner, circle 4(2), Ahmedabad. Therefore, the Assistant Commissioner, Circle 5(2) had no jurisdiction to assess the petitioner. She could not have issued notice for reassessment. This is not a mere irregularity or a defect which can be cured, but question of jurisdiction of the authority to reopen the assessment. In administrative or quasi judicial matters, where exercise of powers are well regulated and segregated through rules and regulations or administrative instructions, no authority or officer who is not vested with the jurisdiction of the 14 ITA No.904/Chny/2019 particular nature can exercise such powers which would be purely a case of lack of authority failing which there would be a total anarchy and any officer positioned at any place may choose to exercise jurisdiction over any assessee. 7. Reference to section 292BB of the Act by the counsel of the revenue would need summary rejection. The said provision guards against any objection to service of notice particularly when an assessee has despite any defective service of notice participated in the proceedings. Such is not the facts in the present case. The present case is where the issuance of notice itself is bad issued by the authority who was not competent. This is a case of defect in issuance of notice and not service of notice.” 12. The assessee had also relied upon decision of the Hon’ble Gujarat High Court in the case of Pankajbhai Jaysukhal Shah Vs. ACIT (2020) 425 ITR 70 and the Hon’ble High Court under identical set of facts held that where reasons for reopening of assessment was recorded by the Assessing Officer, who had jurisdiction over the petitioner, while notice u/s.148 for this purpose was issued by another Assessing Officer, who had no jurisdiction, then said notice was bad on this count. The relevant findings of the Hon’ble High Court are as under:- 15 ITA No.904/Chny/2019 “ A notice under section 148(1) would be a valid notice if the jurisdictional Assessing Officer records the reasons for reopening the assessment as contemplated under sub-section(2) of section 148 and, thereafter, the same officer namely the jurisdictional Assessing Officer issues the notice u/s.148(1). In the instant case, while the reasons f or reopening the assessment has been recorded by the jurisdictional Assessing Officer viz. the Deputy Commissioner Circle-2, Jamnagar, the impugned notice under section 148(1) has been issued by the Income Tax Officer, Jamnagar who had no jurisdiction over the petitioner. Hence, such notice was bad on the count of having been issued by an officer who had no authority in law to issue such notice. As a necessary corolla it follows that no proceedings could have been taken under section 147 in pursuance of such invalid notice. In the aforesaid premises, the impugned notice under section 148(1) as well as all the proceedings taken pursuant thereto cannot be sustained. The impugned notice issued under section 148, and all the proceedings pursuant thereto including the assessment order are, hereby, quashed and set aside.” 13. The assessee had also relied upon the decision of ITAT., Lucknow Bench in the case of Mohd. Rizwan Vs. ITO (2015) 40 ITR(T) 153, where the Tribunal held that reassessment by jurisdictional Assessing Officer on the basis of notice issued by the ITO collecting AIR information, but having no jurisdiction over the assessee is invalid. 16 ITA No.904/Chny/2019 14. A similar view had been expressed by the Hon’ble Calcutta High Court in the case of PCIT Vs. Nopani & Sons (2022) 286 taxmann.com 388, where it has been clearly held that where case of the assessee was transferred from ITO, Ward-3 to ITO., Ward-4, impugned order u/s.143(3) was by ITO, Ward (4) without issuing notice u/s.143(2) and only in pursuance with notice issued by the ITO, Ward-3, who had no jurisdiction over the assessee at relevant time, said impugned order would be null and void. 15. The sum and substance of ratios laid down by various High Courts and Tribunals are that if the Assessing Officer, who had jurisdiction over the assessee completes assessment u/s.143(3) of the Act, on the basis of notice issued by the non- jurisdictional Assessing Officer is bad in law and void ab initio. Although, the learned DR justified assessment order passed by the Assessing Officer having jurisdiction over the assessee on the basis of 148 notice issued by non-jurisdictional Assessing Officer in light of provisions of section 124(3) and 124(5) of the Act, we do not find any substance in the arguments advanced by the learned DR for simple reason that section 124(5) deals with powers of the Assessing Officer in respect of income 17 ITA No.904/Chny/2019 accruing or arising or received within the area, if any, such powers can be derived with by virtue of direction or order issued under sub-section (1) or (2) of section 120 of the Income Tax Act, 1961. If you go by said provisions of the Act, then, case of the assessee clearly lies with the jurisdiction of the ITO, Ward 4, Puducherry, but not with the ITO., Ward-1(1), Puducherry. Therefore, when the ITO, Ward-1(1), Puducherry does not have jurisdiction over the assessee, he ought not to have issued notice u/s.148 of the Income Tax Act, 1961. Further, having issued notice u/s.148 and transferred case to jurisdiction officer, the ITO, Ward-4(1), the incumbent Assessing Officer should have started case by issue of fresh notice u/s.148 or section 143(2) of the Act or notice u/s.129 of the Act to assume jurisdiction on change of incumbent of office. In this case, the Assessing Officer, who completed assessment u/s.144 r.w.s 147 of the Act has not issued any notice and thus, assessment framed on the basis of 148 notice issued by non- jurisdiction officer is invalid and liable to be quashed. Hence, we quash reassessment order passed by the Assessing Officer u/s.144 r.w.s147 of the Income Tax Act, 1961, dated 10.03.2016. 18 ITA No.904/Chny/2019 16. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 29 th July, 2022 Sd/- Sd/- ( वी. द ु गा राव) (जी. मंज ु नाथ) (V.Durga Rao) (G.Manjunatha) "या यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे"नई/Chennai, 'दनांक/Dated 29 th July, 2022 DS आदेश क त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु ,त (अपील)/CIT(A) 4. आयकर आय ु ,त/CIT 5. *वभागीय त न1ध/DR 6. गाड फाईल/GF.