2010 (10) TMI 770 - AT - Income Tax

Jurisdictional defect- Held that -Assessing Officer who has been empowered to exercise jurisdiction over the case of the assessee can record reasons and issue notice under s. 148. Proceedings undertaken by Non-jurisdictional ITO have not been validly initiated against the assessee. Therefore, the assessment made on the basis of invalid notice is also invalid and unsustainable in the eyes of law. Decided in favor of the assessee

Summary

Issues:
1. Jurisdictional validity of notice under section 148 and recording of reasons under section 147.
2. Validity of assessment based on an invalid notice.
3. Application of section 292B for curing jurisdictional defects.

Analysis:

Issue 1: Jurisdictional validity of notice under section 148 and recording of reasons under section 147

The appeal involved the jurisdictional validity of the notice under section 148 and the recording of reasons under section 147. The assessee contended that the ITO at Delhi, who issued the notice, did not have jurisdiction over the case, as the assessee was regularly assessed by a different ITO. The argument was based on the provision that only the Assessing Officer empowered to exercise jurisdiction over the case can record reasons and issue notices under section 148. The Departmental Representative defended the action, stating that the Delhi ITO had valid reasons to believe the assessee was assessable in Delhi due to information received. The contention was that the proceedings were validly initiated and any defects were saved by section 292B.

Issue 2: Validity of assessment based on an invalid notice

Upon review, it was found that the reasons were recorded and the notice was served by a non-jurisdictional ITO. Subsequently, the case was transferred to the correct jurisdictional ITO. The assessment was made based on the invalid notice, leading to a lack of proper assumption of jurisdiction by the ITO. The Tribunal held that the assessment made on the basis of an invalid notice was also invalid in the eyes of the law. It was clarified that section 292B could not cure a fundamental jurisdictional defect.

Issue 3: Application of section 292B for curing jurisdictional defects

The Tribunal emphasized that while section 292B could address administrative or clerical omissions, it could not remedy a fundamental jurisdictional defect that goes to the root of the matter. Consequently, the assessment was deemed invalid and unsustainable in law. As a result, the cross-objection of the assessee was allowed, and the appeal of the Revenue was dismissed. The Tribunal did not delve into the merits of the additions due to the aforementioned finding.

In conclusion, the Tribunal ruled in favor of the assessee, highlighting the importance of jurisdictional validity in initiating assessments and emphasizing that fundamental defects cannot be rectified by administrative provisions like section 292B.