2016 (10) TMI 1228 - AT - Income Tax

JCIT exercise the powers and perform the function as conferred on or assigned to an Assessing Officer - Validity of the assessment order - Additional Commissioner of Income Tax authority of law to act as an Assessing Officer and to pass the impugned assessment order - Held that - It is noted that Ld. CIT-DR as well as the Assessing Officer (present incumbent) who was personally present during the course of hearing before us, jointly stated that no such order (as prescribed under section 127(1) required to be passed by the jurisdictional Commissioner of Income tax) is available in the records. Thus, it is clear that there was no valid transfer of jurisdiction to the Additional Commissioner of Income Tax who had passed the impugned assessment order. Thus, impugned assessment order had been passed without assuming jurisdiction as per law. Similar view has been expressed by Jodhpur Bench of ITA in the case City Garden Vs. ITO (2012 (6) TMI 109 - ITAT JODHPUR) wherein it has been held that in the absence of a specific order issued in pursuance to Section 120(4)(b) specifically authorizing Joint Commissioner of Income Tax to exercise the powers and perform the function as conferred on or assigned to an Assessing Officer by or under the Act or a notification under section 120 of the Act, he is not competent to act as an Assessing Officer and pass an assessment order. It is clear that impugned assessment order has been passed without authority of law in as much as Revenue has not been able to demonstrate that the Additional Commissioner of Income tax who had passed the assessment order had valid authority to perform and exercise the powers and functions of an Assessing Officer of the assessee and to pass the impugned assessment order. Under these circumstances, we have no other option but to hold the same as nullity and, therefore, the impugned assessment order is quashed having been passed without authority of law. Quash the assessment order on jurisdictional ground.

Summary

Issues Involved:
1. Jurisdictional validity of the assessment order passed by the Additional Commissioner of Income Tax.
2. Calculation of interest expenses to dividend income.
3. Disallowance under Section 14A of administrative expenses attributable to exempted income.

Detailed Analysis:

1. Jurisdictional Validity of the Assessment Order:
The primary issue raised by the assessee was the legal competence of the Additional Commissioner of Income Tax to pass the impugned assessment order. The assessee argued that the Additional Commissioner was not authorized under the law to act as an Assessing Officer and pass the assessment order. The Tribunal examined the provisions of Section 2(7A), Section 2(28C), and Section 120 of the Income Tax Act, 1961, and concluded that the Additional Commissioner did not have the requisite authority to act as an Assessing Officer. The Tribunal noted that the Revenue failed to produce any valid order or notification authorizing the Additional Commissioner to perform the functions of an Assessing Officer. Citing various judicial precedents, the Tribunal held that the assessment order passed by the Additional Commissioner was without jurisdiction and thus void ab initio. Consequently, the Tribunal quashed the assessment order.

2. Calculation of Interest Expenses to Dividend Income:
The second issue pertained to the calculation of interest expenses attributable to dividend income. The CIT(A) had adopted a figure of ?4443.16 crores as the gross funds for calculating the interest expenses, whereas the Revenue contended that the correct figure should be ?1745.69 crores, representing the total amount of borrowed funds. The Tribunal did not delve into this issue in detail since the assessment order itself was quashed on jurisdictional grounds.

3. Disallowance under Section 14A:
The third issue was related to the disallowance under Section 14A of the Income Tax Act, which pertains to the administrative expenses attributable to the earning of exempt income. The CIT(A) had restricted the disallowance to ?1 crore, while the Assessing Officer had disallowed 2% of such expenses. Similar to the second issue, the Tribunal did not address this matter in detail due to the quashing of the assessment order on jurisdictional grounds.

Conclusion:
The Tribunal admitted the additional grounds raised by the assessee challenging the jurisdictional validity of the assessment order. After thorough examination, the Tribunal found that the Additional Commissioner of Income Tax did not possess the legal authority to act as an Assessing Officer and pass the impugned assessment order. Consequently, the assessment order was quashed as null and void. The Tribunal did not adjudicate the other grounds on merits due to the quashing of the assessment order. The appeal of the assessee was partly allowed, and the Revenue's appeal was dismissed as infructuous.