2016 (3) TMI 174 - AT - Income Tax

Validity of reopening of assessment - validity of notice - Held that - Since it has been established that notice under section 148 of the Act was issued by the Assessing Officer having no jurisdiction over the assessee, the reopening is bad in law and, therefore, the assessment framed consequent thereto is not sustainable in the eyes of law. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Validity of notice under section 148 during the pendency of regular assessment proceedings.
3. Obligation of the assessee to inform the old Assessing Officer about the change in jurisdiction.
4. The effect of filing a return in the wrong jurisdiction and its subsequent processing.
5. Application of judgments from higher courts regarding the use of sections 143(3) and 147.
6. Validity of reopening the assessment based on the reasons recorded by the Assessing Officer.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The core issue revolves around whether the Income-tax Officer-5(4), Kanpur had jurisdiction over the assessee for the assessment year 2009-10. The assessee initially filed returns with Income-tax Officer-5(4), Kanpur, as he was only a salaried employee. However, with additional income sources, the jurisdiction shifted to Income-tax Officer-3(2), Kanpur. The Tribunal confirmed that the reopening of the assessment by Income-tax Officer-5(4), Kanpur was invalid as he no longer had jurisdiction over the assessee.

2. Validity of Notice under Section 148 During Pendency of Regular Assessment Proceedings:
The Tribunal examined whether a notice under section 148 could be issued during the pendency of regular assessment proceedings. It was argued that the correct procedure would have been to issue a notice under section 143(2). The Tribunal upheld the view that issuing a notice under section 148 was without jurisdiction, especially since regular proceedings were pending before Income-tax Officer-3(2), Kanpur.

3. Obligation of the Assessee to Inform the Old Assessing Officer:
The Tribunal considered whether the assessee was obligated to inform the previous Assessing Officer about the change in jurisdiction. It was concluded that the assessee was not under any obligation to inform the earlier Assessing Officer. It was the duty of the Department to transfer the return to the correct jurisdiction.

4. Effect of Filing a Return in the Wrong Jurisdiction and Its Subsequent Processing:
The Tribunal noted that the return filed with Income-tax Officer-3(2), Kanpur was processed under section 143(1), making it a valid return. The Tribunal referred to the decision in Paint Trade Linkers v. ITO, which held that once a return is processed, it cannot be considered invalid even if filed in the wrong jurisdiction. Therefore, the notice under section 148 issued by Income-tax Officer-5(4) was without jurisdiction.

5. Application of Judgments from Higher Courts:
The Tribunal discussed the application of Supreme Court and jurisdictional High Court judgments, which state that section 143(3) does not prevent the Assessing Officer from taking action under section 147. However, in this case, the Tribunal found that the reopening was based on incorrect jurisdiction, making the notice under section 148 invalid.

6. Validity of Reopening the Assessment Based on the Reasons Recorded by the Assessing Officer:
The Tribunal scrutinized the reasons recorded for reopening the assessment. It was found that the reasons lacked the necessary belief of income escapement and contained factual inaccuracies. The Tribunal concluded that the reopening was not justified and annulled the assessment.

Conclusion:
The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) to annul the assessment. The notice under section 148 was issued by an officer without jurisdiction, rendering the reopening invalid. The appeal of the Revenue was dismissed.