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2007 (3) TMI 658 - AT - Income TaxValidity Of Assessment Order passed by CIT(A) - Determination status of assessee is resident or non-resident? - income from property at Primrose Road as deemed let out and the rent being taken on notional basis - Income accrued in India - Determination of jurisdiction of AO - determination of quantum of interest u/s 244A - In the instant case as the facts stand the assessee claimed the status of a non-resident for the reasons brought out in the earlier paragraph and had filed it with the Assessing Officer (International Taxation). In view of specific delegation of exercising the power as an Assessing Officer only on persons who could be called non-residents the Assessing Officer (International Taxation) on finding that the assessee does not satisfy the conditions of a non-resident. The proper course of action that was expected of him is to transfer the file to the Assessing Officer who had territorial jurisdiction over the assessee as a resident or to such officer who would have jurisdiction over the assessee. In the instant case the Assessing Officer having noted from the facts on record and on applying the principles of law that he would not have jurisdiction over the assessee he may express his reasons therefor in the order sheet which may form the basis for the Commissioner of Income-tax for transferring the file to the Officer who would have a jurisdiction over him. Since the very crux of jurisdiction is shaken in the instant case that is the Assessing Officer (International Taxation) having found the assessee to be a resident he exercised jurisdiction over him. Since he had exercised jurisdiction without authority and without any authorization therefor the order passed by him suffers from lack of jurisdiction. Such an order would therefore become an illegal order and non est in the eye of law. We hold accordingly and quash the order. Though it may not be necessary to go into the merits of the issue before us namely inclusion of rent on notional basis and the calculation error in interest under section 244A of the Act we would as an abundant precaution cover these two issues also. Working of interest u/s 244A - HELD THAT - CIT (A) may not be said to be justified in not accepting the claim. The assessee has claimed that interest is payable for a longer period goes to the very root of chargeability of interest in favour of the assessee and therefore it is only proper he should have considered the same and it is not an isolated ground from the other grounds. Since it is raised along with the other grounds the same should have been considered. However since it is a matter of examination and calculation also the Assessing Officer is directed to examine the same and rework the same in accordance with the provisions of law. The assessment not being in accordance with law is quashed subject to our observations as above - In the result the appeal is allowed.
Issues Involved:
1. Residential status of the assessee. 2. Jurisdiction of the Assistant Commissioner of Income-tax (International Taxation). 3. Inclusion of notional rent from property. 4. Admission of additional evidence. 5. Quantum of interest under section 244A of the Income-tax Act. 6. Levy of surcharge on the assessee. Issue-wise Detailed Analysis: 1. Residential Status of the Assessee: The assessee challenged the order of the Commissioner of Income-tax (Appeals) which held the status of the assessee as "resident." The assessee argued that he was in India for only 180 days during the financial year 2000-01 and thus did not qualify as a resident under section 6(1)(a) of the Income-tax Act, 1961. The assessee contended that the term "employment outside India" should be interpreted broadly to include business activities. However, the Tribunal concluded that the term "employment" does not include business activities and upheld the status of the assessee as a "resident." 2. Jurisdiction of the Assistant Commissioner of Income-tax (International Taxation): The assessee filed the return of income with the Assistant Commissioner of Income-tax (International Taxation), Circle-19(1), Bangalore, claiming non-resident status. The Tribunal found that the jurisdiction of the Assistant Commissioner of Income-tax (International Taxation) is limited to non-residents. Since the assessee was determined to be a resident, the Tribunal held that the Assistant Commissioner of Income-tax (International Taxation) did not have jurisdiction to assess the assessee and quashed the assessment order on the grounds of lack of jurisdiction. 3. Inclusion of Notional Rent from Property: The assessee challenged the inclusion of notional rent from a property at Primrose Road, arguing that he was unable to occupy the property due to personal circumstances. The Tribunal referred to section 23(2) of the Act, which allows for the annual value of a property to be taken as nil if the owner cannot occupy it due to employment, business, or profession at another place. The Tribunal rejected the assessee's claim, stating that since the assessee and the property were in the same city (Bangalore), the notional rent should be included in the total income. 4. Admission of Additional Evidence: The assessee sought to admit additional evidence in the form of a letter from the Reserve Bank of India, which stated that a resident Indian could continue as a partner in a firm on becoming a non-resident Indian. The Commissioner of Income-tax (Appeals) had refused to admit this evidence. The Tribunal did not specifically rule on the admissibility of this additional evidence but focused on the jurisdictional issue and the residential status of the assessee. 5. Quantum of Interest under Section 244A of the Income-tax Act: The assessee challenged the determination of the quantum of interest under section 244A of the Act. The Tribunal directed the Assessing Officer to examine and rework the interest calculation in accordance with the provisions of law, as the Commissioner of Income-tax (Appeals) should have considered this claim. 6. Levy of Surcharge on the Assessee: The assessee argued that surcharge was not leviable on a non-resident for the assessment year in question. However, since the Tribunal upheld the status of the assessee as a resident, this ground became infructuous. Conclusion: The Tribunal allowed the appeal, quashing the assessment order due to lack of jurisdiction by the Assistant Commissioner of Income-tax (International Taxation). The Tribunal also addressed the issues of notional rent inclusion and interest calculation under section 244A, directing the Assessing Officer to rework the interest calculation. The levy of surcharge on the assessee was deemed irrelevant due to the resident status determination.
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