2015 (2) TMI 410 - HC - Income Tax

Reopening of assessment - whether ITAT possessed jurisdiction to return a finding on whether the AO‟s order was a nullity, and can give the verdict that such adjudication cannot go into the merits of such of the proceedings? - Held that - In the present case, there is no dispute that the reassessment notice was issued by the AO on 22.03.2010; upon its receipt, the assessee reiterated its earlier return on 21.04.2010. Since its response led to objections as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision under Section 124(3)(a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the reassessment proceedings. The impugned order is consequently set aside; the question of law urged by the Revenue is answered in its favour. The matter is remitted for consideration on the merits of the appeal concerning the additions made in the reassessment proceedings.

Summary

Issues:
1. Jurisdiction of Assessing Officer under Section 147 of the Income Tax Act, 1961.
2. Validity of the ITAT's order allowing the assessee's appeal.
3. Interpretation of Section 124(3) regarding challenging the jurisdiction of an Assessing Officer.

Analysis:
1. The High Court addressed the issue of jurisdiction under Section 147 of the Income Tax Act, 1961. The respondent's assessment was reopened under Section 147, and the original assessee, later renamed, contested the jurisdiction of the Assessing Officer (AO) who completed the assessment under Section 144. The ITAT accepted the assessee's contention that the AO lacked jurisdiction due to the change in assessing officers from Ward 6(2) to Ward 8(1) and 8(3). The Revenue challenged this finding, citing Section 124(3) and a judgment of the Allahabad High Court.

2. The Court examined the validity of the ITAT's order allowing the assessee's appeal. The Revenue argued that the ITAT's decision was legally unsustainable, emphasizing Section 124(3) and the Allahabad High Court judgment. The Court noted that Section 124(3) limits an assessee's ability to challenge an AO's jurisdiction after specific timeframes, which the assessee failed to meet in this case. Consequently, the Court set aside the ITAT's order and remitted the matter for consideration on the merits of the appeal regarding the reassessment additions.

3. Regarding the interpretation of Section 124(3), the Court clarified that while an assessee can question an AO's jurisdiction, Section 124(3) imposes time restrictions on raising such objections. The Court highlighted that objections must be raised within specific timeframes mentioned in Section 124(3)(a) upon receiving certain notices. As the assessee failed to timely object to the jurisdiction after receiving the reassessment notice, the ITAT's decision was deemed incorrect. The Court upheld the Revenue's argument on this issue and directed the parties to appear before the ITAT for further proceedings.

In conclusion, the High Court's judgment addressed the jurisdictional issues under Section 147, the validity of the ITAT's order, and the interpretation of Section 124(3) concerning challenging an Assessing Officer's jurisdiction, ultimately ruling in favor of the Revenue and remitting the matter for further consideration.