2010 (2) TMI 978 - AT - Income Tax

Summary

Issues Involved:
Jurisdiction of Assessing Officer under section 124(1)(b) and 124(2) of the Income-tax Act, 1961 for framing assessment orders, validity of notice issued under section 148, proper application of mind by Assessing Officer in proceedings under section 147/148.

Jurisdiction under section 124(1)(b) and 124(2):
The Commissioner of Income-tax (Appeals) held that the Assessing Officer lacked jurisdiction for framing the assessment orders, declaring them as bad in law. It was observed that the Assessing Officer did not consider the objections raised regarding territorial jurisdiction and only relied on section 124(1)(b) of the Income-tax Act, 1961. The Commissioner emphasized that the Assessing Officer exceeded his powers by disregarding other relevant sections, such as section 124(2), which pertained to disputed jurisdiction. The failure to consider these provisions rendered the assessment orders lacking proper jurisdiction, making them ultra vires and void ab initio.

Validity of Notice under section 148:
The Commissioner also found the issuance of notice under section 148 to be bad in law due to the lack of proper satisfaction recorded by the Assessing Officer to proceed against the assesses under section 147/148. It was noted that the proceedings were conducted mechanically without the Assessing Officer applying his mind to determine the income that had escaped assessment. The Commissioner highlighted that legal precedent required the proper application of mind by the Assessing Officer in such cases, which was found to be lacking in this instance, rendering the proceedings under section 147/148 without legal sanction.

Decision and Directions:
The Appellate Tribunal restored the matters back to the file of the Assessing Officer for both issues. Regarding jurisdiction under section 124(1)(b) and 124(2), it was noted that the failure to refer the matter to the higher authorities was an irregularity, not an illegality. The Tribunal directed the Assessing Officer to determine his jurisdiction over the assesses and consider section 124(2) if necessary. For the proceedings under section 147, the Tribunal acknowledged that while the reopening may be based on information from a superior officer, the Assessing Officer must record reasons and arrive at satisfaction independently. The Tribunal directed the Assessing Officer to reconsider the issue in light of legal precedent and determine if there is any income chargeable to income-tax. Both appeals were treated as allowed for statistical purposes, emphasizing the need for proper jurisdiction and application of mind in tax assessments.