Shri A.K. Prashanth, Davangere V. ITO, Davangere

ITA 987/BANG/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0567 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 14-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P RAO
• Assessee Lawyers: CHYTHANYA
• Keywords: Business income; Assessment record; Capital Gains
• Section: 143(3); 142(1); 143(1); 147; 148; 10; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH, BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI N.L.KALRA AM ITA NO.987 (BANG.)/2008 (ASSESSMENT YEAR: 2001-02) SHRI A.K.PRASHANTH, M/S ATHANI BROTHERS INDUSTRIES, BAMBOO BAZAR, DAVANAGERE APPELLANT VS THE INCOME-TAX OFFICER, WARD-2, DAVANAGERE RESPONDENT APPELLANT BY : SHRI CHYTHANYA REVENUE BY : SHRI K. P. RAO O R D E R PER N.L.KALRA, AM ; THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER O F LEARNED CIT(A), HUBLI DATED 14-03-2008. 2. FIRST GROUND OF APPEAL IS GENERAL AND WILL STAND DISPOSE OF IN VIEW OF THE FINDINGS TO BE RECORDED AGAINST OTHER GROUNDS OF APPEAL. 3. GROUNDS OF APPEAL NO.2 TO 7 ARE AGAINST THE JURISDICTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 148 AND COMPLETING THE ASSESSMENT. THESE GROUNDS OF APPEAL ARE AS UNDER: 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE LEARNED ITO IN INITIATING THE RE-ASSESSMENT PROCEEDINGS U/S 147 AGAINST THE APPELLANT. ITA NO.987(B)/08 2 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN BRUSHING ASIDE THE CONTENTION OF THE APPELLANT THAT THE LEARNED ITO DOES NO T HAVE JURISDICTION OVER THE APPELLANT TO ISSUE NOTICE U/S 1 48 AND INITIATING THE RE-ASSESSMENT PROCEEDINGS U/S 147. 4. THE LEARNED CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE LEARNED ITO IS VESTED WITH RELEVANT JURISDICTION TO ASSESS THE APPELLANT BRUSHING ASIDE THE CONTENTION OF THE APPELLANT. 5. THE LEARNED CIT(A) IS NOT JUSTIFIED IN IGNORING THE MONETARY LIMITS SET OUT IN THE NOTIFICATION CONFERRING JURISDICTION AND HIS ACTION OF HOLDING THE JURISDICTION OF THE LEARNED ITO INSPITE OF THE FACT THAT THE INCOME OF THE CAS E OF THE APPELLANT EXCEEDED THE MONETARY LIMIT, IS THEREFORE , BAD IN LAW. 6. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT ONLY TH E AUTHORITY HIGHER RANK CAN PERFORM THE FUNCTIONS O THE AUTHORITY LOWER IN RANK , THAT TO ONLY UPON THE DIRECTION S OF THE BOARD. HE HAS FAILED TO APPRECIATE THAT VICE VERSA IS NOT POSSIBLE. HE IS THEREFORE, NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE LEARNED ITO (BEING AN AUTHORITY LOWER IN RANK ) IN ABROGATING HIMSELF WITH THE JURISDICTION OF ACIT/DCIT (I.E.AN AUTHORITY HIGHER IN RANK). 7. THE ACTION OF THE LEARNED CIT(A) IN JUSTIFYING THE ILLEGAL ASSUMPTION OF JURISDICTION BY THE LEARNED ITO ON THE BASIS THAT THE ORIGINAL RETURN WAS FILED WITH INCOME BELOW RS.2.00 LAKHS IS BASED ON INCORRECT APPRECIATION OF FACTS IN AS MUCH AS HE IGNORED THE FACT THAT THE APPELLANT IN HIS ORIGINAL RETURN HAD DECLARED AN INCOME OF RS.27,11,536/- FURTHER, THE LEARNED CIT(A) IS NOT JUSTIFIED IN INTRODUCING HIS OWN LOGIC AND REASONING TO SUSTAIN THE ILLEGAL ACTION OF THE LEARNED ITO ON THE BASIS OF POLICY OF THE BOARD FOR TRANSFER OF CASE. ITA NO.987(B)/08 3 4. THE NECESSARY FACTS ARE AS UNDER. IN THIS CASE, TH E ASSESSEE FILED THE RETURN OF INCOME DECLARING AN INCOME OF RS.27,11,536/-. T HE ASSESSMENT U/S 143(3) WAS COMPLETED ON 25-03-2004 VIDE WHICH BUSINESS INCOME WAS ASSESSED AT RS.35,000/- AND LONG TERM CAPITAL GAINS AT RS.27,11,536/-. THE ACIT, CIRCLE-1, DAVANAGERE INFORMED THE ITO, WARD-2 I.E. THE OFFICER HAVING JURISDICTION OVER THE ASSESSEE THAT T HE ASSESSEE HAS SHOWN IN THE BALANCE SHEET A SUM OF RS.43,37,500/- WITH THE CAPTION A.K.PRASHANTH(HUF) SALE OF AGRICULTURAL LAND. IT WAS STATE D THAT NO RETURN OF INCOME OF HUF WAS FILED AS IT WAS NOT HAVING ANY TAXABLE INCOME. THE SALE OF LAND WAS IN RESPECT OF LAND AT AVEREGERE AT SURVE Y NO.186/P. DURING THE COURSE OF ORIGINAL SCRUTINY ASSESSMENT, THE AO ASKED THE ASSESSEE TO FILE THE DETAILS OF SALE OF HUF LANDS. BUT SUCH DETAILS OF SALE WE RE NOT FURNISHED. THE ASSESSEE DID NOT FURNISH COPY OF SALE DEED ENTERED WITH THE GOVERNMENT OF KARNATAKA ON 15-03-2001 OR PROOF FOR HIS CLAIM THAT T HE ABOVE LAND BELONGS TO HUF. PERUSAL OF THE SALE DEED DATED 15-03-2 001 SHOWS THAT SHRI A.K.PRASHANTH I.E. THE ASSESSEE IS THE OWNER OF THE LAND AN D SUCH LANDS WERE PURCHASED BY HIM THROUGH A REGISTERED SALE DEED IN THE FINANCIAL YEAR 1999-2000 & 2000-01. SUCH DOCUMENTS WERE NOT FILED BEFO RE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, BEC AUSE FILING OF SUCH DOCUMENTS WOULD HAVE REVEALED TO THE AO THAT THE LAND BELONGED TO THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AND THE AO WOULD HAVE A SSESSED THE CAPITAL GAIN ARISING OUT OF SALE OF LAND. THE ASSESSEE FILED ONLY STAMPED RECEIPT FOR HAVING RECEIVED THE SALE CONSIDERATION OF RS.46.0 0 LAKHS FROM THE ITA NO.987(B)/08 4 GOVERNMENT OF KARNATAKA ON 15-03-2001 DURING THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS. THE TERRITORIAL JURISDICTION OF AS SESSEES HUF WAS WITH WARD-2, DAVANGERE AND THEREFORE, THE ACIT REQUESTE D THE CONCERNED ITO TO TAKE FURTHER NEEDFUL ACTION IN THE CASE OF HUF. A NOTICE U/S 142(1) WAS ISSUED ON 19-03-2004 IN THE CASE OF SHRI A.K.PRASHAN TH(HUF) CLLING FOR THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02. IN RESPONSE TO THAT NOTICE, A RETURN WAS FILED ON 18-05-2004 VIDE WHICH NIL INCOM E WAS DECLARED. IT WAS MENTIONED THAT THE LAND SOLD ARE SITUA TED BEYOND 8 KMS OF DAVANGERE CITY AND HENCE, ARE NOT INCLUDIBLE IN THE INCOME UNDER THE HEAD CAPITAL GAINS. IN SUPPORT OF THE CLAIM THAT LAND BELONGS TO HUF, THE ASSESSEE FILED A COPY OF THE WILL DATED 18-01-1984 EXECUT ED BY SMT.VEERAMMA ATHANI (GRAND MOTHER OF ASSESSEE) IN THE WILL, IT WAS STATED THAT SMT.VEERAMMA ATHANI RECEIVED VARIOUS MOVABLE AND IMM OVABLE PROPERTIES FROM HER HUSBAND AND THE SAME ARE PASSED O N TO HER GRAND SON NAMELY SHRI A.K.PRASHANTH. THE IMMOVABLE PROPERTIES SPECI FIED IN THE WILL ARE LANDS AT SURVEY NO.186/P OF AVEREGERE, DAVANGERE. T HE WILL WAS NOT REGISTERED WITH THE SUB-REGISTRAR. EVEN ALONGEWITH THE H UF RETURN FOR THE ASSESSMENT YEAR 2001-02, THE ASSESSEE DID NOT FILE THE S ALE DEED DATED 15- 03-2001. 5. A NOTICE U/S 148 WAS ISSUED IN THE CASE OF ASSESSEE ON 23-12- 2005, AFTER RECORDING REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX AMOUNTING TO RS.46.00 LAKHS ESCAPED ASSESSMENT. THE SAID NOTICE WAS ISSUE D WITH THE APPROVAL OF ADDL.CIT, DAVANGERE. THE SAID NOTICE U/S 148 W AS SERVED ON 27-12-2005. THE ASSESSEE REQUIRED TO HAVE COPY OF THE REASONS RECORDED FOR ITA NO.987(B)/08 5 RE-OPENING OF THE ASSESSMENT AND SUCH REASONS WERE FU RNISHED TO THE ASSESSEE ON 22-12-2006. A SEPARATE ORDER WAS PASSED ON 26-12-2006. THE INCOME HAS BEEN ASSESSED AS RS.52,22,100/- AS AGAINST RE TURNED INCOME OF RS.27,11,536/- 6. BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDED THA T THE ITO, WARD-2, DAVANGERE WAS NOT HAVING JURISDICTION OF ASSESSEE IN RESPECT OF RE- OPENING OF THE ASSESSMENT AND COMPLETION OF ASSESSMENT. ACCORDING TO LEARNED AR, THE JURISDICTION TO PASS THE ASSESSMENT ORDE R WAS WITH THE ACIT, CIRCLE-I, DAVANGERE. FOR THE FOLLOWING REASONS, IT WAS CONTENDED THAT THE ORDER PASSED BY THE ITO IS WITHOUT JURISDICTION AND DESERVES TO BE CANCELLED. I) CIRCLUAR NO.14/2006 DATED 28-12-2006 STATED THAT ANY IN COME- TAX AUTHORITY HIGHER IN RANK CAN EXERCISE THE POWERS AN D FUNCTIONS OF AN AUTHORITY LOWER IN RANK. II) THE CIT, DAVANGERE ISSUED A NOTIFICATION VIDE WHICH HE ASSIG NED THE JURISDICTION TO DCIT/ACIT/ITO. AS PER THE JURISDICTIO N NOTIFICATION, THE JURISDICTION IN THE CASE OF ASSESSEE WAS WI TH DCIT/ACIT. III) INSTRUCTION NO.6/2007 PRESCRIBED THE INCOME LIMITS FOR ASSIGNING THE CASE TO DCIT/ACIT. AS PER THESE INSTRUCT IONS, THE CASE WAS TO BE ASSIGNED TO ACIT/DCIT IV) ATTENTION WAS DRAWN TO SEC.120 OF THE IT ACT. AS PER SEC.120 OF IT ACT, INCOME-TAX AUTHORITIES CAN EXERCISE POWERS AND FUNCTIONS CONFERRED ON OR AS THE CASE MAY BE ASSIGNED T O SUCH AUTHORITY BY OR UNDER THE ACT. SINCE IN THE INSTANT CA SE, THE INCOME RETURNED WAS MORE THAN RS.5.00 LAKHS. THE JURISDIC TION VESTED WITH DCIT/ACIT, CIRCLE-1, DAVANGERE. ITA NO.987(B)/08 6 V) ORIGINAL ASSESSMENT IN THIS CASE WAS TO BE COMPLETED BY ACIT/DCIT, CIRCLE-1, DAVANGERE, THEREFORE, THE ITO, WARD-2, DAVANGERE WAS NOT HAVING JURISDICTION IN RE-OPENING OF THE ASSESSMENT OR COMPLETING THE ASSESSMENT. 7. THE LEARNED AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) DWARAKAPRASAD AGARWAL VS B.D.AGARWAL (2003) 117 CO.CASE NO.1(SC). II) CIT VS BHARATKUMAR MODI164 ITR 273(BOM.) 246 ITR 693(BOM) III) C.GANGACHARAN VS C.NARAYANAN 158 ITR 97(SC) AND 242 ITR 156(SC) IV) KARAN SINGH AND OTHER VS. CHAWAN PASWAN AND OTHERS, A IR 154 SC 340 WHERE IT IS STATED BY THE HONBLE SUPREME C OURT THAT A DECREE PASSED BY THE COURT WITHOUT JURISDICTION IS A NULLITY. V) SUNDER DASS VS RAM PRAKASH AIR 1977 SC 1201, THE SA ME PRINCIPLE IS STATED IN THIS CASE ALSO. VI) RAJA JAGADAMBIKA PRATAP NARAIN SINGH VS CBNDT 975 CTR(SC) 206, 100 ITR 690. IN THIS CASE, IT IS STATED THAT MERELY BECAUSE AN ORDER HAS BEEN PASSED BY THE OFFICER AND HAS NOT BEEN APPEALED AGAINST, IT DOES NOT BECOME LEGAL A ND FINAL. VII) KISTOOR MALL & ANR VS C.P.SINGH, 140 ITR 95(RAJ.) STATING ABOUT THE MEANING OF JURISDICTION OF QUASI JUDICIAL AUTHORITIES LIKE THE ITO ACTING UNDER OLD/NEW ACT, EVEN IN RELATION TO COURTS JURISDICTION IS A CHAMELEON-HUE WORD WHICH KEEPS CHANGING DEPENDING ON CONTEST AND SUBJECT MATTER, THIS VIEW IS SUPPORTED BY HALSBURYS LAW OF ENGLAND. VIII) WEST BENGAL STATE ELECTRICITY BOARD VS DCIT 278 ITR 218(CAL.) WHERE IT IS STATED THAT NO JURISDICTION CAN BE CONFIRMED BY DEFAULT OR BY AGREEMENT AND DECISION WITHOUT JURISDICTION IS A NULLITY. IX) KARAN SINGH VS CHAMAN PASWAN AIR 1954 SC 340 WHERE IT IS HELD THAT DEFECT OF JURISDICTION CAN BE PECUNIARY OR TERRITORIAL AND INCURABLE IF APPLIED. X) BALAWANT N.VISWAMITRA VS Y.S.MULE(2004) 8 SC 706 AND ALSO IN CASE OF CIT VS PARL MEHANICAL ENGINEERING AND FOUNDRY WORKS PVT.LTD., 267 ITR 19SC) STATING THAT ONCE THE JURISDICTION IS CREATED THE SAME MUST BE PROSPECTIVE BUT NOT RETROSPECTIVE. ITA NO.987(B)/08 7 8. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E LEARNED AR HELD THAT THE ITO, W-2, DAVANGERE HAS JURISDICTION OVER THE ASSESSEE AND THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) IS AS UNDER: 8.1 JURISDICTION OF THE ITO OVER THE CASE AND ISSUE OF NOTICE U/S 148: THE APPELLANT HAS RELIED ON CIRCULAR NO.14/2006 WHERE EXPLANATION TO SECTION 120 (1) HAS BEEN INCORPORATED TO CLARIFY THE INCOME-TAX AUTHORI TY STATING THAT AUTHORITY HIGHER IN RANK MAY EXERCISE THE POWER AND PERFORM THE FUNCTIONS OF INCOME-TAX AUTHORITY LOWER IN RANK IF IT IS SO DIRECTED BY THE BOARD AND THE SAME WILL BE E FFECTIVE FROM 01-04-1998, FURTHER RELIED ON THE CIT, DAVANAGERE JURISDICTIONAL ORDER WHERE INCOME-TAX OFFICER, WARD-2, DAVANAGERE AREA WISE JURISDICTION IS SHOWN AND THER E IS NO DISPUTE RAISED ABOUT THE AREA WISE JURISDICTION. FUR THER, AR RELIED UPON INSTRUCTION NO.6/2007 DATED 18-07-2007 FIXI NG THE INCOME WISE JURISDICTION AMONG THE ITOS ACITS A ND DCITS WHERE INCOME BELOW RS.5.00 LAKHS IS JURISDICTION ITOS. THE AR HAS ALSO RELIED UPON THE VARIOUS CASE LAWS IN RESPECT OF THE JURISDICTION AS REFERRED ABOVE, IN NU TSHELL IT MEANS THAT CASE OF THE ASSESSEE IS OF ABOVE RS.5.00 L AKHS, THEREFORE THE ITO WILL NOT HAVE JURISDICTION OVER TH E CASE, ONLY OFFICER ABOVE RANK OF ITO CAN EXERCISE JURISDICTION, ITO EXERCISES JURISDICTION OVER THE LOWER INCOME GROUP C ASES BUT NOT THE VICE-VERSA. THEREFORE, IT IS ARGUED THAT THE ISSUE OF NOTICE U/S 148 BY THE AO IS OUT OF JURISDICTION AND THE ASSESSMENT IS NULL AND VOID. IT IS SEEN THAT THE BOARD AND CONCERNED COMMISSION ERS HAVE ISSUED CIRCULARS, INSTRUCTIONS AND DIRECTIONS F ROM TIME TO TIME IN RESPECT OF INCOME-WISE JURISDICTION OF ITO S, ACITS AND OTHERS AND AS POINTED OUT BY THE AR IN A BRAD S ENSE THE ITO WILL HAVE CASES OF INCOME LIMIT BELOW RS.5.00 LAKHS. AR ITA NO.987(B)/08 8 HAS NOT TAKEN INTO ACCOUNT THE SCHEME OF THE INCOME -WISE JURISDICTION WHICH HAS BEEN CHANGED FROM TIME TO TIME . IN VIEW OF THE INCOME-WISE JURISDICTION AND ALSO IN VIEW OF THE RETURNS BEING FILED FROM JUNE TO DECEMBER I.E. MIDDLE O F THE YEAR THERE HAS TO BE FREQUENT TRANSFER OF CASES, TO AVOID THE SAME THE BOARD HAS DIRECTED THE RESPECTIVE COMMISSI ONERS TO INCOME-WISE JURISDICTION BUT TO TRANSFER THE SAM E AFTER THE MONTH OF MARCH OF CONCERNED YEAR. IN VIEW OF THIS IT SO HAPPENS THAT THE JURISDICTION OF THE CASE BELONGS TO ITO, W-2, DAVANAGERE SINCE THE RETURN FILED IN THE REGULAR COU RSE WAS BELOW RS.2.00 LAKHS INCOME-LIMIT. BUT, IN THE MEANTIME, ITO HAS RECEIVED INFORMATION FROM THE ASST. COMMISSIONER OF INCOME-TAX, C-1, DVANAGERE TO INVESTIGATE A PARTICULAR ENTRY STANDING IN THE NAME OF A.K.PRASHANTH(HUF) FOR SALE OF AGRICULTURAL LAND FOR RS.43,37,500/- AFTER THE INVESTIGA TION SAME IT IS REALIZED BY THE AO THAT THE INCOME HAS ES CAPED AS PER THE MEANING OF SECTION 147 OF THE ACT AND THERE IS NEE D TO REOPEN BY ISSUING NOTICE U/S 148 OF THE ACT. ACCOR DINGLY AND SINCE AS PER THE PRESENT UNCOMPLETED RETURN WHICH IS BELOW RS.2.00 LAKHS INCOME LIMIT WAS WITH THE ITO, W-2, DAVANAGERE, IT WAS NECESSARY TO REOPEN THE EARLIER YE AR CASE THOUGH IT IS ABOVE RS.2.00 LAKHS INCOME LIMIT. WITH DUE OBEDIENCE TO THE DIRECTIONS OF THE BOARD TO AVOID F REQUENT TRANSFERS THROUGH OUT THE YEAR THE JURISDICTION OF THE ENTIRE CASE VESTS WITH THE PRESENT OFFICER NOW HAVING JURIS DICTION TILL THE YEAR END AND HE CAN REOPEN AND COMPLETE ASSESSME NT ALSO. ACCORDINGLY, WITH THE VALID JURISDICTION THE A O HAS ISSUED THE NOTICE U/S 148 AND COMPLETED THE ASSESSME NT WHICH IS IN ACCORDANCE WITH THE JURISDICTION. BY VIRT UE OF THESE DIRECTIONS, THE AO HAS VALID JURISDICTION AS P ER LAW AND BOARDS GUIDELINES, THEREFORE, THIS GROUND HAS BEEN DE CIDED AGAINST THE APPELLANT. ITA NO.987(B)/08 9 IN RESPECT OF CASE LAWS QUOTED BY THE AR THE SUM AND SUBSTANCE IS THAT THE AO CANNOT ISSUE NOTICE U/S 148 WITHO UT JURISDICTION AND IF HE ISSUES SO IT IS NULL AND VOID. THIS PRINCIPLE IS FOLLOWED FROM THE HALSBURS LAWS OF ENGLAND IN VARIOUS DECISIONS AS REFERRED BY HE AR AND DISCUSSE D ABOVE, IN THE INSTANT CASE THE AO WITH DUE OBEDIENCE TO THE DIRECTIONS OF THE CBDT HAS REOPENED THE CASE AND CO MPLETED THE ASSESSMENT. 9. DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LEARNED AR HAS RAISED THE FOLLOWING CONTENTIONS: THE LEARNED ITO DOES NOT HAVE JURISDICTION AS PER THE DIRECTION ISSUED U/S 120(2). THE JURISDICTION VESTS WITH THE LEARNED ACIT AND SUCH JURISDICTION IS BOTH TERRITORIAL AND PECUNIARY. THEREFORE, THE LEARNED ITO LACKS JURISDICTION INHERENTLY. SUCH INHERENT LACK OF JURISDICTION GOES TO THE ROOT OF THE ASSESSMENT RENDERING THE ASSESSMENT NULL AND VOID. EVEN IF THE LATEST RETURN FILED AT THE TIME OF ISSUANCE OF NOTICE U/S 148 MAY HAVE FALLEN LESS THAN RS.5.00 LAKHS, THE APPELLANT FILED HIS RETURN IN PURSUANCE TO THE SAID NOTICE AND THE SAID RETURN REFLECTED INCOME MORE THAN RS.5.00 LAKHS. IN SUCH CASE, THE LEARNED ITO OUGHT TO HAVE TRANSFERRED THE FILE TO THE LEARNED ACIT. THE JURISDICTION OVER THE APPELLANT FOR EARLIER YEARS WAS WITH THE ITO. AS THE INCOME EXCEEDED RS.5.0 LAKHS IN THE ORIGINAL RETURN FOR THE IMPUGNED ASSESSMENT EAR, THE SAME WAS TRANSFERRED TO ACIT. ON THE SAME LINES, WHEN THE RETURN FILED IN PURSUANCE TO SEC.148 SHOWED INCOME EXCEEDING RS.5.00 LAKHS HE OUGHT TO HAVE TRANSFERRED TH E FILE TO ACIT. ITA NO.987(B)/08 10 SEC.124 AFTER AMENDMENT DEALS ONLY WITH TERRITORIAL JURISDICTION AND DOES NOT DEAL WITH PRESENT SITUATION WHICH IS A COMBINATION OF BOTH TERRITORIAL AND PECUNIARY AS PER SECTION 120(3), THEREFORE, SECTION 124(3) IS NOT APPLICABLE AND APPELLANT CAN RISE QUESTION ON JURISDICTION WITHOUT EMBARGO PLACED U/S 124(3) ASSUMING THAT SECTION 124(3) IS APPLICABLE, AS THE APPELLANTS CASE IS COVERED U/S 148, WHICH IS NOT ENVISAG ED U/S 124(3), SUCH RESTRICTION IS NOT APPLICABLE AS PER M.I.BUILDERS (P)LTD., VS ITO(2008) 117 ITJ 42 (LUCKNOW TRIBUNAL) EVEN OTHERWISE, THE LEARNED CIT(A) HAS CONSIDERED THE AFORESAID GROUND IN HIS APPELLATE ORDER AND THE DEPARTMEN T HAS NOT RAISED ANY CROSS OBJECTION AGAINST ADMISSION OF SUCH GROUND BY LEARNED CIT(A) AS PER THE REQUIREMENT OF SEC.124(4), THE LEARNED ITO WAS REQUIRED TO HAVE REFERRED THE MATTER OF JURISDICTION TO THE LEARNED CIT(A) U/S 124. HOWEVER, HE HAS FAILED TO COMPLY WITH SEC.124(4) AND PROCEEDED TO PASS ASSESSMENT ORDER. IN THE ASSESSMENT ORDER LEARNED ITO HAS NOT DISCUSSED ANYTHING ON JURISDICTION. THEREFORE, ORDER OF THE LEARNED ITO IS NULL AND VOID DUE TO BOTH LACK OF INHERENT JURISDICTION AS WELL AS NON- COMPLIANCE WITH THE STATUTORY MANDATE OF SECTION 124(4). 10. ON THE OTHER HAND, LEARNED DR SUBMITTED THAT IT IS N O WHERE MENTIONED THAT THE ASSESSMENT CONCLUDED BY THE ACIT, C ANNOT BE RE- OPENED BY AN ITO. THE ITO RECEIVED THE FILE ON TRANSFER FROM THE ACIT, BECAUSE THE LATEST RETURN OF INCOME WAS LESS THAN RS.5.00 LAKHS. THE ITA NO.987(B)/08 11 LEARNED DR DREW OUR ATTENTION TO SEC.124(4) AND STATED THAT JURISDICTION OFAO CANNOT BE QUESTIONED BY ANY PERSON AFTER EXPIRY OF TIME, PROVIDED U/S 148 FOR MAKING THE RETURN. SINCE THE ASSESSEE NEVER Q UESTIONED THE NOTICE ISSUED BEFORE THE EXPIRY OF TIME SPECIFIED U/S 148 AND ALSO DURING THE ASSESSMENT PROCEEDINGS, HENCE HIS OBJECTION IS REQUIRED T O BE REJECTED. THE LEARNED AR IN THE COUNTER REPLY STATED THAT THE HONB LE SUPREME COURT IN THE CASE OF DEEPAK AGRO FOODS VS STATE OF RAJASTHAN AND OTHERS (2008) 16 VST 454, IN WHICH THE FOLLOWING OBSERVATION WERE MADE. ALL IRREGULAR OR ERRONEOUS OR EVEN ILLEGAL ORDERS CAN NOT BE HELD TO BE NULL AND VOID AS THERE IS A FINE DISTINC TION BETWEEN THE ORDERS WHICH ARE NULL AND VOID AND ORDERS WHICH ARE IRREGULAR, WRONG OR ILLEGAL. WHERE AN AUTHO RITY MAKING ORDER LACKS INHERENT JURISDICTION, SUCH ORDE R WOULD BE WITHOUT JURISDICTION, NULL, NON EST AND VOID AB INITIO AS DEFECT OF JURISDICTION OF AN AUTHORITY GOES TO THE R OOT OF THE MATTER AND STRIKES AT ITS VERY AUTHORITY TO PASS AN ORDER AND SUCH A DEFECT CANNOT BE CURED EVEN BY CONSENT OF TH E PARTIES. HOWEVER, EXERCISE OF JURISDICTION IN A WRONGFUL MANNE R CANNOT RESULT IN A NULLITY IT IS AN ILLEGALITY, CAPABLE OF BEING CURED IN A DULY CONSTITUTED LEGAL PROCEEDINGS. 11. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF WEST B ENGAL STATE ELECTRICITY BOARD VS DCIT (2005) 278 ITR 218 HAS HELD TH AT NO JURISDICTION CAN BE CONFERRED BY DEFAULT OR BY AGREEMENT AND A DEC ISION WITHOUT JURISDICTION IS A NULLITY. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS SHITAL PRASAD KHARAG PRASAD (2006) 280 ITR 541 (ALL.) HELD THAT ITA NO.987(B)/08 12 FILING OF RETURN IN CONSEQUENCE OF ILLEGAL SERVICE OF NOTICE WILL NO T VALIDATE THE RE-ASSESSMENT PROCEEDINGS. 12. THE LEARNED AR RELIED ON THE DECISION OF BANGALORE BEN CH IN THE CASE OF ZIAULLAH SHERIFF VS ACIT(2008) 116 TTJ 76, IN WHICH IT HAS BEEN HELD THAT SINCE THE AO HAD EXERCISED THE JURISDICTION WITH OUT THE AUTHORITY, THEREFORE, THE ORDER PASSED BY THE AO SUFFERS FROM THE LA CK OF JURISDICTION AND THE ORDER IS AN ILLEGAL ORDER. OUR ATTENTION WAS DRA WN TO THE DECISION OF LUCKNOW BENCH IN THE CASE OF M/S M.I.BUILDERS (P) LTD., VS ITO (2008) 117 TTJ 42, IN WHICH IT WAS HELD THAT THE AO WAS NOT HAV ING JURISDICTION TO ISSUE NOTICE AND THEREFORE, THE ASSESSMENT WAS HELD AS INVALID. 13. WE HAVE HEARD BOTH PARTIES. PAGES 69-71 OF THE P APER BOOK FILED BY THE LEARNED AR CONTENTS COPY OF THE NOTIFICATION VIDE W HICH THE CIT, DAVANGERE ASSIGNED JURISDICTION OF DAVANGERE. THE JURISDIC TION OF DCIT/ACIT, AS PER THIS NOTIFICATION READS AS UNDER: II. THE DEPUTY COMMISSIONER OF INCOME-TAX/ASSISTANT COM MISSIONER OF INCOME-TAX WILL HAVE JURISDICTION OVER I) ALL PERSONS WHOSE RETURN OF INCOME SHOWS TOTAL INCOME LO SS OF RS.5.0 LAKHS OR MORE WITHIN THE TERRITORIAL JURISDICTION OF THE ADDL.CIT,JCIT, DAVANGERE RANGE, DAVANGERE. II) ALL PERSONS RESPONSIBLE FOR DEDUCTION COLLECTION OF TAX DEDUCTED AT SOURCE IN THE TERRITORIAL JURISDICTION OF ITOS . WARD-1,WARD-2, WARD-3 & WARD-4 OF DAVANGERE RANGE. 1. DEPUTY/ASSISTANT COMMISSIONER OF JURISDICTION AS INCOME-TAX, CIRLE-1, DAVANGERE. MENTIONED ABOVE. AO CODE-431-C-1. ITA NO.987(B)/08 13 IN THE EXPLANATORY NOTES TO THE NOTIFICATION, THE RETURN OF INCOME AS MENTION IN THE NOTIFICATION IS TO BE CONSIDERED AS PER EXP LANATORY NOTES. THE EXPLANATORY (2) IS AS UNDER; A) WHERE THE ASSESSMENT OF ONLY ONE ASSESSMENT YEAR IS PENDING ON 1 ST APRIL, 2003 OR 1 ST APRIL OF THE SUBSEQUENT ASSESSMENT YEARS, THE RETURN OF THE SAID ASSESSMENT YEAR B) WHERE THE ASSESSMENT OF MORE THAN ONE ASSESSMENT YE AR ARE PENDING AS ON 1 ST APRIL, 2003 OR 1 ST APRIL OF THE SUBSEQUENT ASSESSMENT YEARS, THE RETURN SHOWING THE HIGHEST TO TAL INCOME OR LOSS AMONG RETURNS OF THE PENDING ASSESSME NT YEARS. C) WHERE NO ASSESSMENT IS PENDING ON 1 ST APRIL, 2003 OR ON 1 ST APRIL OF SUBSEQUENT ASSESSMENT YEARS, THE RETURN OF T HE LATEST ASSESSMENT YEAR FOR WHICH THE ASSESSMENT HAS BEEN MAD E. 14. WE HAVE TO CONSIDER AS TO WHETHER THE ITO, WARD-2, DAVANGERE WAS HAVING JURISDICTION OVER THE ASSESSEE IN RESPECT OF ISSUING OF NOTICES AND COMPLETION OF ASSESSMENT, AS PER JURISDICTION NOTIFICATION REFERRED TO ABOVE. NOTICE U/S 148 HAS BEEN ISSUED ON 23-12-2005 . BEFORE THAT DATE, THE ASSESSEE HAS FILED RETURNS FOR THE ASSESSMENT YEARS 2002-03, 2003-04, 2004-05 AND 2005-06. COPY OF SUCH RETURNS ARE AVAILA BLE IN THE PAPER BOOK FILED BY THE REVENUE. IT IS TRUE THAT IN ALL SUCH RE TURNS, THE INCOME DECLARED IS LESS THAN RS.5.00 LAKHS. IT IS ALSO NOT A DIS PUTED FACT THAT THE FILE WAS TRANSFERRED BY THE ACIT TO ITO, WARD-2, DAVANGER E. AS PER THE JURISDICTION, THE ITO, WARD-2, DAVANAGERE WOULD HAVE THE JURISDICTION OVER THE ASSESSEE AS ON 23-12-2005, IN CASE, ANY ASSESSMEN T SUBSEQUENT TO THE ASSESSMENT OF 2001-02 WAS PENDING, BECAUSE IN THE RETUR N SUBSEQUENT TO ITA NO.987(B)/08 14 THE ASSESSMENT YEAR 2001-02, THE RETURNS FILED SHOWED A N INCOME OF LESS THAN RS.5.00 LAKHS. IN THE EXPLANATORY NOTE, IT IS MENTIONE D THAT THE RETURN OF INCOME IS TO BE SEEN THAT THE ASSESSMENT YEAR FOR WH ICH THE ASSESSMENT IS PENDING AND IF NO ASSESSMENT IS PENDING THAN THE RETUR N OF LAST ASSESSMENT YEAR FOR WHICH THE ASSESSMENT HAS BEEN MAD E. THE WORD ASSESSMENT AS MENTIONED IN SEC.2(8) OF IT ACT, MEANS THA T THE ASSESSMENT INCLUDES RE-ASSESSMENT. WHEN A PERSON FILED THE RETURN O F INCOME, THAN IT IS PROCESSED U/S 143(1) AND AN INTIMATION IS SENT. UNDER SEC.246 OF IT ACT, AN INTIMATION U/S 143(1) WAS MADE APPEAL ABLE THOUGH THAT SEC. PROVIDED THAT AN ASSESSEE CAN FILE AN APPEAL AGAINST THE ORDER O F ASSESSMENT. THUS, THE LEGISLATION CLEARLY MARKED A DIFFERENCE BETWEEN THE INT IMATION AND ASSESSMENT. HENCE IF NO ASSESSMENT WAS PENDING THAN AS PER JURISDICTION NOTIFICATION ONE HAS TO SEE THE RETURN OF LATEST ASSESSME NT YEAR FOR WHICH THE ASSESSMENT HAS BEEN MADE. IT IS WORTHWHILE TO MENT ION THAT TIME LIMIT FOR ISSUING INTIMATION U/S 143(1) IS MENTIONED IN THAT SECTION WHILE, SEC.153 DEALS WITH THE TIME LIMIT OF MAKING ASSESSMENT. AS PER SECTION 153, NO ORDER OF ASSESSMENT CAN BE MADE AFTER EXPIRY OF TIME LIMIT PROVIDED IN THAT SECTION. THIS MEANS THAT AN INTIMATION AND ASSE SSMENT ARE TWO DIFFERENT ASPECTS. MAKING OF A ASSESSMENT CAN BE EITHER U/S143(3) OR 147 READ WITH SEC.148. HOWEVER, THE MAKING OF AN ASSESSMENT INCASE OF SEARCH CASES ARE COVERED BY DIFFERENT PROVISIONS OF THE IT ACT. 15. THE RECORDS WHICH HAVE BEEN MADE AVAILABLE TO US, DOE S NOT INDICATE AS TO WHETHER ANY ASSESSMENT WAS PENDING ON 2 3-12-2005 I.E. THE DATE ON WHICH THE NOTICE U/S 148 WAS ISSUED. HENCE, WE REQUIRED THE ITA NO.987(B)/08 15 LEARNED AR TO FILE A DECLARATION AS TO WHETHER ANY ASSESS MENT IS PENDING ON THE DATE WHEN THE NOTICE WAS ISSUED. A DECLARATION HAS BEEN FILED ACCORDING TO WHICH NO ASSESSMENT PROCEEDINGS WERE PEND ING AS ON 23-12- 2005. AS PER SUB-CLAUSE-C OF CLAUSE-2 OF EXPLANATORY NOT ES OF THE JURISDICTION NOTIFICATION ISSUED BY THE CIT, DAVANGERE, THE J URISDICTION WAS TO BE DECIDED ON THE BASIS OF THE RETURN OF LATEST ASSES SMENT YEAR FOR WHICH THE ASSESSMENT WAS MADE. THE ASSESSMENT WAS MADE FOR THE ASSESSMENT YEAR 2001-02, FOR WHICH THE RETURN OF INCOME WAS MORE TH AN RS.5.00 LAKHS. HENCE, ACCORDING TO THE JURISDICTION NOTIFICATION TH E JURISDICTION OVER THE ASSESSEE WAS WITH THE DCIT/ACIT, HENCE THE N OTICE ISSUED BY THE ITO IS WITHOUT JURISDICTION. 16. EVEN FOR THE ARGUMENT SAKE WE ACCEPT THAT SINCE TH E FILE WAS TRANSFERRED BY THE ACIT/DCIT, CIRCE-1, DAVANGERE TO TH E ITO AND DUE TO THAT ITO WAS NOT HAVING JURISDICTION TO ISSUE NOTICE U/S 148 BUT THE ITO WAS NOT HAVING JURISDICTION TO COMPLETE THE ASSESSMENT AS THE ASSESSMENT HAS BEEN COMPLETED AFTER 01-04-2006. AS PER CLAUSE-2(B ) OF THE JURISDICTION NOTIFICATION, THE ASSESSMENT OF 2001-02 WAS PENDING AS ON 01-04-2006 AND THEREFORE, THE JURISDICTION SHOULD HAVE BEEN TRANSFERRED BY THE ITO TO ACIT. THE CONCERNED ITO WAS NOT HAVING JURISDICTION TO COMPLET E THE ASSESSMENT. IN VIEW OF SUCH FACTS, THE ASSESSMENT MADE BY THE AO IS INVALID AND FOR THIS PROPOSITION, WE RELY ON THE DECISION OF THE BANGALORE BENC H IN THE CASE OF ZIAULLA SHERIFF VS ACIT (SUPRA). HOWEVER, WE ARE MAKING IT C LEAR THAT THE AO WILL VERIFY FROM THE ASSESSMENT RECORDS THAT NO ASSES SMENT WAS PENDING AS ON 23-12-2005 I.E. DATE ON WHICH NOTICE WAS ISSUED. ITA NO.987(B)/08 16 17. IF THE FACTS GIVEN BY THE ASSESSEE IN RESPECT OF PEND ENCY OF NO PROCEEDINGS, AS ON 23-12-2005 ARE CORRECT THAN THE IT O WAS HAVING NO JURISDICTION TO ISSUE NOTICE U/S 148. EVEN IF THE PROCEED INGS WERE PENDING AS ON 23-12-2005, THAN AS ON 01-04-2006, THE PROCEEDIN GS OF THE ASSESSMENT YEAR UNDER QUESTION WAS PENDING AND THEREFO RE, THERE WAS NO JURISDICTION TO COMPLETE THE ASSESSMENT. HENCE, THE ITO WAS HAVING NO JURISDICTION TO COMPLETE THE ASSESSMENT. THE ASSESSMENT IS THEREFORE, INVALID IN THE EYE OF LAW AND IT IS CANELLED. SINCE WE ARE CANCELING THE ASSESSMENT ORDER, WE ARE TH EREFORE, NOT ADJUDICATING THE OTHER GROUNDS OF APPEAL, BECAUSE SUCH A DJUDICATION WILL BE ACADEMIC. 18. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 2009. (SHAILENDRA KUMAR YADAV) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE DATE : COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR, ITAT, BANGALORE