AO could not issue reassessment Notice if he did not have jurisdiction over assessee

By | October 31, 2015

Assessment year 2010-11

Facts of the case:

One of income-tax officers was designated to collect AIR information and to make necessary enqury .Designated officer having received information from AIR, issued notice under section 148 to assessee . He also made an attempt to frame assessment over assessee .When assessee raised objection about his jurisdiction over assessee, he transferred file to Assessing Officer having jurisdiction over assessee . Now jurisdictional Assessing Officer framed assessment without he himself issuing a fresh notice under section 148 .

Held

Notice that was issued was invalid and, consequently, assessment framed thereto was to be quashed s [Para 8]

In favour of

Assessee                                                IN THE ITAT LUCKNOW BENCH ‘B’

Mohd. Rizwan

v.

Income-tax Officer

SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND A.K. GARODIA, ACCOUNTANT MEMBER

IT APPEAL NOS. 89 & 90 (LKW.) OF 2015
[ASSESSMENT YEAR 2010-11]

APRIL  16, 2015

Rakesh Garg for the Appellant. Punit Kumar for the Respondent.

ORDER

Sunil Kumar Yadav, Judicial Member – These appeals are preferred by the assessee against the respective orders of the learned Commissioner of Income-tax (Appeals).

2. Since these appeals were heard together, these are being disposed of through this consolidated order. We, however, prefer to adjudicate them one after the other.

I.T.A. No. 89/LKW/2015 :

3. This appeal is preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals), inter alia, on the following grounds :

1. Because the notice issued under section 148 through speed post and served on November 18, 2011, is without jurisdiction, since the Assessing Officer issuing the notice had no jurisdiction over the assessee’s case, as such the entire reassessment framed is bad in law and be quashed.
2. Because the assessee being regularly assessed to tax with the Income-tax Officer-V(2), Lucknow. The jurisdiction to issue notice if any was with the Income-tax Officer-V(2) only, the notice issued by the Income-tax Officer-IV(1) and the reassessment framed is without jurisdiction, bad in law and be quashed.
3. Because there being no material to form a belief that income has escaped assessment. The entire proceeding under section 147/148 is without jurisdiction is illegal, bad in law and be quashed.
4. Because merely on the basis of AIR alone no proceedings under section 147/148 can be initiated, such proceedings initiated are void ab initio, the reassessment framed be annulled.
5. Because the assessee having filed the return of income along with tax audit report on February 17, 2012 prior to the framing of the reassessment under section 147 the Assessing Officer was not justified in ignoring the same and framing the assessment ex parte.
6. Because necessary compliance having being made in response to notices issued under section 142(1) there was no reason to frame the assessment ex parte.
7. Because the Assessing Officer has failed to appreciate the facts and circumstances of the case and has arbitrarily made in addition of Rs. 70,19,000 being credits in bank accounts treating the unexplained under section 69, which addition is contrary to the facts is bad in law, be deleted.
8. Because the entire deposits in the bank account being part of the business carried on by the assessee, duly reflected in the books of account maintained and accepted, the Assessing Officer was not justified in treating the same as unexplained and adding the same under section 69 of the Act, the addition made be deleted.
9. Because once the return of income filed along with tax audited accounts has been accepted and the entire transaction of deposits of cash in bank being out of the sale proceeds, the Assessing Officer was not justified in adding a some of Rs. 70,19,000 again specially when the assessee has declared the sales over and above the same. The addition made be deleted.

4. During the course of hearing, learned counsel for the assessee has raised a preliminary objection through grounds Nos. 1 to 5 that notice under section 148 of the Income-tax Act, 1961 (hereinafter called in short “the Act”) was not issued by the Assessing Officer having jurisdiction over the assessee. Therefore, the notice issued by an incompetent officer is invalid and deserves to be quashed. Since the notice under section 148 of the Act is to be held to be invalid, the assessment framed consequent thereto deserves to be quashed. In support of these contentions, learned counsel for the assessee has invited our attention to the notice issued under section 148 of the Act with the submission that this notice was issued by the Income-tax Officer-IV(1) on the basis of AIR information received on November 18, 2011. Copy of the notice is available at page 56 of the compilation of the assessee. Besides queries, notice under section 142(1) of the Act were also issued by the said Income-tax Officer-IV(1), Lucknow for completing assessment under section 147 read with section 143 of the Act. The assessee has raised an objection before the Assessing Officer through letter dated February 23, 2012 stating therein that the Income-tax Officer-IV(1) is not having jurisdiction over the assessee.

5. The jurisdiction over the assessee lies with the Income-tax Officer, Range V, Lucknow. In support of these contentions, learned counsel for the assessee has also filed new range jurisdiction of Lucknow with effect from June 1, 2010, according to which the residential area of the assessee, i.e., Maulviganj falls within the jurisdiction of the Income-tax Officer, Range V. Later on the Income-tax Officer, Range IV(1) has transferred the file to the Income-tax Officer, Range V who was having jurisdiction over the assessee and accordingly the assessment was framed under section 147 read with section 143 of the Act. The Income-tax Officer, Range V has not issued any notice under section 148 of the Act upon the assessee, meaning thereby the notice under section 148 of the Act was issued by an incompetent officer, therefore, the notice under section 148 of the Act was invalid and once it is held to be invalid, the assessment framed consequent thereto deserves to be quashed, as jurisdiction for reassessment under section 147 of the Act can only be assumed by issuance of a valid notice under section 148 of the Act.

6. The learned Departmental representative, on the other hand, has placed reliance upon the order of the learned Commissioner of Income-tax (Appeals).

7. We have carefully examined the orders of the lower authorities in the light of the rival submissions. During the course of hearing, a need was felt to examine the assessment record in order to verify as to whether the Assessing Officer, who has issued notice under section 148 of the Act and has prepared a proposed assessment, was having jurisdiction over the assessee. Accordingly the assessment record was produced and a specific query was raised from the learned Departmental representative to explain as to whether there was any circular of the Central Board of Direct Taxes conferring jurisdiction upon the designated officer receiving information under AIR to issue notice under section 148 of the Act to all the assessees with respect to whom he received information, the answer of the learned Departmental representative was in the negative, as he could not lay his hand on such type of circular of the Central Board of Direct Taxes.

8. During the course of hearing, it has been emerged that one of the officers was designated to collect AIR information and to make necessary enquiry on the basis of the same. After collecting the information from the assessee with regard to the AIR information, a report along with the record is to be submitted to the concerned officer who can take necessary action, but the designated officer has no jurisdiction over all the assessees with respect to whom he received AIR information. In the instant case, the designated officer having received information from the AIR has issued notice under section 148 of the Act to the assessee without ascertaining the facts about his jurisdiction over the assessee. He has also made an attempt to frame assessment over the assessee without having jurisdiction over the assessee. The assessee has raised objection about jurisdiction before the Assessing Officer on receipt of notice under section 148 of the Act. Thereafter, the Assessing Officer has transferred the file to the concerned Assessing Officer, i.e., Income-tax Officer – V having jurisdiction over the assessee. The Income-tax Officer – V has not issued any notice under section 148 of the Act in order to assume jurisdiction to complete the assessment under section 147 of the Act. He has proceeded further on the basis of the notice issued under section 148 of the Act by a designated officer. Since the notice under section 148 of the Act was issued by an officer not having jurisdiction over the assessee, the notice itself is bad and invalid. Therefore, the assessment framed consequent thereto also deserves to be quashed. Since nothing is placed before us to substantiate that the notice under section 148 of the Act was issued by the competent officer, we hold the notice under section 148 of the Act issued to the assessee as invalid and therefore, the assessment framed consequent thereto is quashed. Since the assessment is quashed, the additions made therein are set aside. Accordingly, the appeal of the assessee is allowed.

I.T.A. No. 90/LKW/2015 :

9. This appeal is preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals) confirming the penalty levied under section 271(1)(b) of the Act at Rs. 40 lakhs.

10. Since the assessment itself has been quashed in the foregoing paras, the penalty levied under section 271(1)(b) of the Act is not sustainable in the eye of law. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) and delete the penalty.

11. In the result, the appeals of the assessee are allowed.

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