2008 (10) TMI 660 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Jurisdiction of ITO - notice u/s 147 was issued by the ITO, Ward 25(4) on the basis of the address mentioned in the bank account of the assessee with the SBI - Having received the notice u/s.148 issued by the ITO, Ward 25(4) the assessee raised objection challenging the jurisdiction of the ITO, Ward 25(4). HELD THAT - The fact that the present assessee filed his return of income for the AY 1995-96 before the ITO, Ward 24 (1) is not in dispute. In the assessment for the AY 1995-96, the AO charged interest u/s. 234A against which the assessee filed an application u/s.154 before the ITO, Ward 24(1), who completed the assessment for the AY 1995-96. The ITO, Ward 24(1) then passed an order u/s. 154 and reduced the interest u/s. 234A. It is thus clear that the ITO, Ward 24(1) exercised jurisdiction over the assessee when he passed the order u/s. 154 on an application filed by the assessee u/s.154 with reference to the return of income for the AY 1995-96. The present notice has been issued u/s.147 by the ITO, Ward 25(4), when the jurisdiction over the assessee s case was with ITO, Ward 24(1), New Delhi. Thus, from this aspect of the matter also, the notice u/s.147 issued by ITO, Ward 25(4) was without jurisdiction. Moreover, the ITO, Ward 33(2) who passed the present assessment order without issuing any fresh notice u/s.148 cannot be said to have a valid jurisdiction over the assessee unless and until the case has been transferred to him from ITO, Ward 25(4), by an order passed u/s.147 by any competent authority. In the present case, the ITO, Ward 33(2) had exercised the jurisdiction merely on the basis of intimation given by the ITO, Ward 25(4), and merely on file being transferred by the ITO, Ward 25(4) of his own to the ITO, Ward 33(2). The Hon ble Delhi High Court in the case of CIT vs. Smt. Anjali Dua 2008 (7) TMI 958 - DELHI HIGH COURT held that the notice issued u/s.148 by the then ITO, Ludhiana was without jurisdiction inasmuch as the assessee had shifted from Ludhiana to New Delhi and had been filing his return of income for AY. 1997-98 onwards at New Delhi. We are inclined to uphold the order of the CIT(A) in holding that the assessment made by the ITO, Ward 33(2) is without jurisdiction and thus invalid and is thus to be cancelled. The order of the CIT(A) is thus upheld. Appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) issuing the notice under Section 148.
2. Validity of the assessment completed by the AO, Ward 33(2), New Delhi.
3. Requirement of fresh notice under Section 148 by the AO, Ward 33(2).
4. Transfer of jurisdiction without an order under Section 127.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) Issuing the Notice under Section 148:
The primary issue is whether the AO, Ward 25(4), had jurisdiction to issue the notice under Section 148. The AO issued the notice based on information from the Dy. Director of IT (Inv.), Faridabad, indicating that the assessee had introduced funds of Rs. 4,75,000 through an accommodation entry in his bank account using an address under the jurisdiction of Ward 25(4). However, the assessee objected, stating his address was in Karol Bagh, under the jurisdiction of Ward 33(2). The CIT(A) found that the AO, Ward 25(4), did not have jurisdiction over the assessee and thus the notice was invalid.

2. Validity of the Assessment Completed by the AO, Ward 33(2), New Delhi:
The assessment was completed by the AO, Ward 33(2), based on the initial notice issued by the AO, Ward 25(4). The CIT(A) held that since the initial notice was issued without jurisdiction, the subsequent assessment by Ward 33(2) was also invalid. The Tribunal upheld this view, emphasizing that the AO, Ward 33(2), should have issued a fresh notice under Section 148 after the case was transferred.

3. Requirement of Fresh Notice under Section 148 by the AO, Ward 33(2):
The CIT(A) and the Tribunal both agreed that the AO, Ward 33(2), should have issued a fresh notice under Section 148 before proceeding with the assessment. The failure to issue a fresh notice rendered the assessment invalid. The Tribunal noted that the AO, Ward 33(2), merely continued the proceedings without issuing a new notice, which was a procedural lapse.

4. Transfer of Jurisdiction without an Order under Section 127:
The transfer of the case from AO, Ward 25(4) to AO, Ward 33(2) was done without an order under Section 127, which is required for transferring jurisdiction between different AOs. The Tribunal highlighted that the transfer was done merely based on an intimation and without any formal order, further invalidating the proceedings.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that the assessment made by the AO, Ward 33(2), was without jurisdiction and thus invalid. The initial notice under Section 148 was issued without proper jurisdiction, and the subsequent failure to issue a fresh notice under Section 148 by the AO, Ward 33(2), compounded the procedural errors. The appeal filed by the Revenue was dismissed, affirming the invalidity of the assessment proceedings.