2013 (6) TMI 191 - HC - Income Tax

Reopening of assessment - whether the question of jurisdiction of the Assessing Authority not raised before could be raised for the first time in second appeal before the Tribunal - Held that - The contention that no opportunity of hearing was given before transferring raised for the first time before the Tribunal could not be substantiated by producing any evidence. The assessee was the appellant before the Tribunal and it was for him to establish that before transferring the cases, no opportunity of hearing was given and in which he failed. Mere raising the argument which requires determination of fact in absence of any supporting material is liable to be ignored. Decided in favour of the department by holding that the question of jurisdiction of the Assessing Authority in view of Section 124 could not have been raised by the assessee before the Tribunal and the Tribunal is not the competent authority to adjudicate upon when it was not raised in terms of Section 124 before the Assessing Authority. Whether the reasons for reopening are sufficient to hold that there was no nexus between reasonable belief and escapement of assessee s income - Held that - A feeble attempt was made by the assessee that the Tribunal has decided the appeal on merits also but on consideration it is find that the Tribunal itself has noted that the findings recorded by it are only prima facie findings. Therefore, argument of assessee in this regard is not acceptable. Thus the order of the Tribunal cannot be allowed to stand. All the questions of law are decided in favour of the department and the matter is restored back to the ITAT to revisit and redecide the appeals filed by the assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Raising jurisdictional objections for the first time before the Tribunal.
3. Validity of the assessment order without jurisdiction.
4. Requirement of an order under Sections 124 or 127 for jurisdiction.
5. Necessity of opportunity of hearing before jurisdictional changes.
6. Nexus between reasonable belief and income escapement.
7. Validity of reasons recorded for issuing notices under Section 148.
8. Validity of service of notices under Section 148.
9. Validity of Tribunal's order without addressing merits of the case.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The Tribunal held that the Joint Commissioner of Income Tax (Asstt.), Varanasi, who framed the assessment/reassessment proceedings, was not the competent authority, rendering the assessment order a nullity. The department argued that jurisdictional questions should be raised before the Assessing Authority within the period prescribed under Section 124(5) of the Income Tax Act, 1961.

2. Raising Jurisdictional Objections for the First Time Before the Tribunal:
The Tribunal entertained the jurisdictional objection for the first time in the second appeal. The department contended that such objections should be raised before the Assessing Officer within one month from the date of filing the return or before the completion of the assessment, as per Section 124(3)(a).

3. Validity of the Assessment Order Without Jurisdiction:
The Tribunal concluded that the assessment order was without jurisdiction due to the absence of an order under Sections 124 or 127 conferring jurisdiction on the Joint Commissioner. The department maintained that the Tribunal was not competent to entertain jurisdictional questions not raised before the Assessing Officer.

4. Requirement of an Order Under Sections 124 or 127 for Jurisdiction:
The Tribunal's decision was based on the lack of an order under Sections 124 or 127 conferring jurisdiction on the Joint Commissioner. The department argued that the transfer of cases due to administrative changes did not require a separate jurisdiction order, as the Chief Commissioner's notification already assigned territorial jurisdiction.

5. Necessity of Opportunity of Hearing Before Jurisdictional Changes:
The respondent argued that no opportunity of hearing was given before transferring the case to the Joint Commissioner. The Tribunal noted that no evidence was produced to substantiate this claim, and the department failed to produce the transfer order.

6. Nexus Between Reasonable Belief and Income Escapement:
The Tribunal held that there was no nexus between the reasonable belief and the escapement of income. The department argued that the reasons recorded for reopening the assessment were sufficient and contained substance.

7. Validity of Reasons Recorded for Issuing Notices Under Section 148:
The Tribunal found the reasons recorded for issuing notices under Section 148 insufficient. The department contended that the reasons, though brief, were substantial and provided due notice to the assessee.

8. Validity of Service of Notices Under Section 148:
The Tribunal held that the notices under Section 148 were not validly served. The department argued that the notices were issued and served correctly, and any defects could be covered under Section 292B of the Income Tax Act.

9. Validity of Tribunal's Order Without Addressing Merits of the Case:
The Tribunal decided the appeals on preliminary issues without addressing the merits of the case. The department argued that the Tribunal should have considered the merits, especially regarding the profit-earning activities and siphoning off funds by the assessee.

Conclusion:
The High Court concluded that the Tribunal erred in entertaining jurisdictional objections not raised before the Assessing Officer and set aside the Tribunal's order. The case was remanded to the Tribunal to reconsider the appeals on merits, addressing all substantive issues raised by the department. All substantial questions of law were decided in favor of the department and against the assessee.

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