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2015 (5) TMI 152 - AT - Income TaxService of notice u/s 143(2) - jurisdiction of the assessing officer to issue notice - Held that - Notice in the case of the Assessee has been issued on 13.8.2009 u/s 143(2) by the AO, Agra. Sec. 143(2) uses the word service of the notice , not issuing of the notice but since the Assessee has not rebutted this fact by filing Affidavit, therefore, we have held in the preceding paragraphs that this is a case where it would be deemed that the notice has been duly served on the Assessee. In view of this fact, after the expiry of 3 days the Assessee should have filed the objection about the jurisdiction within 30 days i.e. upto 15.9.2009 but the Assessee has not filed any such objection. Therefore, we do not find any illegality or infirmity in the order of CIT(A) in this regard but the remote question before is if the AO, Agra was having jurisdiction on the Assessee how can he himself transfer the file to the AO, Ward 5(3), New Delhi merely on the basis of change of address in the PAN. There is a separate provision made u/s 127 in this regard. On perusal of this section it is apparent that u/s 127(2) if the AO from whom the case is to be transferred and the AO to whom the case is to be transferred are not under the jurisdiction of same Chief Commissioner or Commissioner, the Chief Commissioner or Commissioner to whom such AO are subordinate are in agreement, then, the Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred has to give a reasonable opportunity of being heard to the Assessee before passing the order for transfer. It is not denied in the case of the Assessee that the AO at Agra and the AO at New Delhi were under the jurisdiction of different CCIT as well as different Commissioners. Therefore, the AO, Agra does not have any jurisdiction to transfer the file to AO at New Delhi. The filed could have been transferred only by the Chief Commissioner or the Commissioner of the AO, Agra after giving hearing to the Assessee. In this case, we noted that the AO, Agra has not complied with the mandatory requirement of Sec. 127 but suo moto transferred the file from Agra to AO, New Delhi as if he has entered into the shoes of the Chief Commissioner or Commissioner of Income Tax. A transfer can be made by the Commissioner from one officer to another under section 127 of the Income Tax Act, 1961. But it should be for good reason after a show-cause notice to the assessee, where transfer is from one station to another. Where no reasons were assigned for the transfer and a writ petition was filed against the same before the High Court, it was explained that the Commissioner had recorded his reasons, though he did not communicate the same. The High Court in Deep Malhotra vs. Chief CIT, 334 ITR 232 (P&H) pointed out that there are a number of decisions of the High Court and that of the Supreme Court in Ajantha Industries vs. CBDT, (1975 (12) TMI 1 - SUPREME Court) as to the need for a speaking order. Since the alleged reasons recorded were not part of the order, the orders were held to be invalid, while leaving it open to the Commissioner to pass a fresh order. In the impugned case there is a violation of the provisions of Sec. 127 and in view of there being no transfer order being passed by the Chief Commissioner or Commissioner, we hold that the order passed by the AO, Ward-5(3), New Delhi for the impugned assessment year is invalid and void ab initio - Decided in favour of assessee.
Issues Involved:
1. Service of notice under section 143(2) of the Income Tax Act. 2. Jurisdiction of the assessing officer. 3. Validity of the assessment framed by the ITO Ward 5(3), New Delhi. 4. Computation of income and the addition made by the assessing officer. 5. Double taxation of the same income. 6. Interest income from the bank without allowing for interest expenditures. 7. Basis of the assessment order on internal systems and procedures of the department. 8. Issuance of PAN from Agra and its implications on jurisdiction. Detailed Analysis: 1. Service of Notice under Section 143(2) of the Income Tax Act: The Assessee contended that no notice under section 143(2) was served on any of the directors of the company, including Shri Shrimohan Khandelwal. The Tribunal observed that the notice under section 143(2) was issued by the ITO, Ward-4(2), Agra on 13.8.2009 and sent to the address given in the return of income. Additionally, another copy of the notice was served upon one of the directors, Shri Mohan Khandelwal, at his residential address in Agra. The Tribunal upheld the CIT(A)'s view that the notice was duly issued and served within the stipulated time, referencing decisions from the Delhi High Court which established a presumption of service when notices sent by registered post were not returned undelivered. 2. Jurisdiction of the Assessing Officer: The Assessee argued that its registered office was in Delhi and it had been filing returns with the ITO Ward 5(3), New Delhi, thus the jurisdiction should lie there. The Tribunal noted that the PAN application form 49A had both a residential address in Agra and an office address in New Delhi. The Tribunal rejected the plea that jurisdiction could be determined based on the residential address of a company, emphasizing that a company, being an artificial judicial person, cannot have a residential address. The Tribunal concluded that the jurisdiction should be based on the principal office/registered office of the company as per sections 120 and 124 of the Income Tax Act. 3. Validity of the Assessment Framed by the ITO Ward 5(3), New Delhi: The Tribunal found that even if the ITO Ward 4(2), Agra had the initial jurisdiction, the assessment framed by the ITO Ward 5(3), New Delhi was invalid in the absence of an order under section 127 of the Act by the Commissioner of Income Tax transferring the jurisdiction. The Tribunal cited several judgments, including ITO vs. Krishan Kumar Gupta and CIT vs. Smt. Anjali Dua, to support the view that the transfer of jurisdiction without a proper order under section 127 renders the subsequent assessment invalid. 4. Computation of Income and the Addition Made by the Assessing Officer: The Assessee contended that the addition of Rs. 23,60,322/- was unjustified as it followed the "revenue recognition" accounting policy. The Tribunal did not specifically address this issue in detail as it quashed the assessment order on jurisdictional grounds. 5. Double Taxation of the Same Income: The Assessee argued that taxing the income in the assessment year under appeal would result in double taxation. The Tribunal did not delve into this issue as it quashed the assessment order on jurisdictional grounds. 6. Interest Income from the Bank Without Allowing for Interest Expenditures: The Assessee claimed that the assessing officer erred in taking the interest income from the bank without allowing for interest expenditures. The Tribunal did not address this issue in detail due to the quashing of the assessment order on jurisdictional grounds. 7. Basis of the Assessment Order on Internal Systems and Procedures of the Department: The Assessee argued that the assessment order was based on internal systems and procedures of the department which were not confronted to the Assessee. The Tribunal did not specifically address this issue as it quashed the assessment order on jurisdictional grounds. 8. Issuance of PAN from Agra and Its Implications on Jurisdiction: The Tribunal noted that the PAN was issued based on the residential address in Agra, but emphasized that the jurisdiction of a company should be determined based on its registered office. The Tribunal criticized the mechanical manner in which the PAN was allotted based on the residential address and reiterated that jurisdiction should be based on the principal office/registered office of the company. Conclusion: The Tribunal quashed the assessment order passed by the ITO Ward 5(3), New Delhi, on the grounds of invalid jurisdiction transfer without a proper order under section 127. The other grounds raised by the Assessee were not adjudicated as the assessment order itself was declared void ab initio. The appeal filed by the Assessee was allowed.
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