2012 (5) TMI 239 - AT - Income Tax

Deemed Divided - Assessment order u/s. 144 r.w.s. 147 - Notice u/s 148 - held that - in reopening of a completed assessment there is nothing arbitrary about any of these provisions and that rigorous checks and controls have been provided on the exercise of power by the AO to initiate an action for re-assessment. In the forefront of these checks and controls is the requirement of the section 148 of the Act to issue proper notice. Application of section 292BB - held that - On plain reading of section of 292BB we find that the said section is in respect of certain procedural lapses in respect service of notice, but in the case under consideration the question is of acquisition of jurisdiction which is a mandatory requirement of the Act. The CIT(A) discussed this aspect of the matter of irregularity and nullity in detail. No consent can confer jurisdiction upon a Court if the Courts has no jurisdiction, and if we take the view that the AO can have jurisdiction only provided he complies with the conditions laid down in sections 147 and 148 of the Act. Since the order of the AO is without jurisdiction we therefore find that the CIT(A) has rightly quashed the order of the AO. - Decided against the revenue.

Issues Involved:
1. Validity of assessment order under section 144 read with section 147 of the Income Tax Act.
2. Deletion of deemed dividend under section 2(22) of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment Order Under Section 144 Read with Section 147 of the Income Tax Act:

The Revenue's appeal and the assessee's cross-objection challenge the order of the CIT(A) regarding the assessment year 2006-07. The primary issue is whether the assessment order passed under section 144 read with section 147 is valid.

The appellant company filed its return of income, which was initially processed without changes. The case was later selected for scrutiny, and the taxable income was determined. Subsequently, the assessment was reopened by the ACIT Circle 15(1), New Delhi, who issued a notice under section 148. The appellant contested the reopening, arguing that the ACIT in New Delhi did not have jurisdiction, as the appellant was assessed in Vapi, Gujarat. The reassessment was completed by the ACIT Vapi Circle without issuing a fresh notice under section 148.

The CIT(A) ruled that the assessment was invalid due to the lack of jurisdiction, as the AO did not issue a notice under section 148, which is mandatory. The CIT(A) relied on judgments from the Supreme Court and Calcutta High Court to support this decision.

The Revenue argued that the AO issued a notice under section 148, and the letter dated 13-12-2010 satisfied the conditions of the notice. The Revenue also contended that procedural mistakes could be cured under section 292BB of the Act. However, the assessee maintained that issuing a notice under section 148 is a mandatory provision, and the failure to do so invalidated the assessment.

The Tribunal examined the relevant provisions of sections 147 and 148, emphasizing that issuing a proper notice under section 148 is a built-in safeguard for the assessee. The Tribunal agreed with the CIT(A) that the letter dated 13-12-2010 could not be treated as a notice under section 148, as it would collapse the safeguards provided by the Act. The Tribunal also noted that the jurisdictional AO must record reasons for reopening the assessment, which was not done in this case.

The Tribunal rejected the Revenue's argument that procedural irregularities could be cured under section 292BB, as the issue was about acquiring jurisdiction, not procedural lapses. The Tribunal concluded that the AO's failure to comply with the conditions laid down in sections 147 and 148 meant that the order was without jurisdiction. Therefore, the CIT(A) rightly quashed the order.

2. Deletion of Deemed Dividend Under Section 2(22) of the Income Tax Act:

The second issue raised by the Revenue was the deletion of the deemed dividend amounting to Rs. 1,15,72,981 under section 2(22) of the Act. The CIT(A) did not address this issue on merit, as the legal issue regarding the validity of the assessment was decided in favor of the assessee.

Since the Tribunal confirmed the CIT(A)'s order on the legal issue, it did not express any opinion on the merits of the case regarding the deemed dividend. Consequently, the cross-objection filed by the assessee became infructuous.

Conclusion:

The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection. The assessment order was quashed due to the lack of jurisdiction, and no opinion was expressed on the merits of the deemed dividend issue.

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