2014 (10) TMI 1000 - AT - Income Tax

Legality of notice issued u/s 142(1)/143(2) - scrutiny through CASS - notices issued by the ITO, Ward 1(1), Bathinda, himself not by the ITO, Faridkot - Jurisdiction of ITO - notices invalid and without the authority of law - Jurisdiction of Assessing Officers - Transfer u/s 127 - HELD THAT - The Accountant of the assessee-firm represented the matter who stated the case of the assessee was assessed with A.O., Bathinda and accordingly the assessee was required to file the copy of the return, etc. The objection of the CIT(A) is that this is an information which has been noted in the order-sheet dated 15.09.2009 and no legal objection was in the proper form. Such type of objection or information do not make any difference since the ITO has noted the facts of the case and accordingly the file was transferred but only on 18.01.2010, which in fact, could have been done immediately on 15.09.2009, keeping in view the provisions contained u/s 124(3)(a), but the same was not done. Treat the said information dated 15.09.2009 as legal objection u/124(3)(a) of the Act. Therefore, the assessee and in the absence of any transfer order of the case from ITO, Bathinda, to ITO, Faridkot, the argument made by the learned DR do not help the revenue and the notice issued is bad in law and the assessment so made is directed to be quashed. Thus, ground no. 1 of the assessee is allowed.

Summary

Issues involved:
Appeal against CIT(A) order for assessment year 2008-09, jurisdiction of assessing officer, validity of notice issued u/s 142(1)/143(2), application of section 145(3), relief amount calculation, under valuation of closing stock, addition in scrap account, addition of expenses, legal grounds for appeal, jurisdictional transfer of assessment, objections raised by assessee, compliance under Section 124(3)(a), confirmation of CIT(A) order, proper legal objection, assessment quashing, appeal grounds adjudication.

Detailed Analysis:

Issue 1: Jurisdiction of Assessing Officer and Validity of Notice
The appellant contested the jurisdiction of the assessing officer (A.O.) and the validity of the notice issued under sections 142(1)/143(2) of the Income-tax Act, 1961. The appellant argued that as a registered firm, they had consistently filed returns with the A.O. in Bathinda, and previous assessments were also conducted by the same A.O. The appellant challenged the validity of the notice issued by a different A.O. in Faridkot, citing legal precedents and the requirement for a single A.O. to have jurisdiction over the assessee. The Tribunal found merit in the appellant's argument, noting that the A.O. in Faridkot lacked jurisdiction, and the notice was invalid. Consequently, the assessment based on this notice was directed to be quashed.

Issue 2: Relief Amount Calculation and Application of Section 145(3)
The appellant raised concerns regarding the relief amount granted by the CIT(A) and the application of section 145(3) of the Act. However, since the Tribunal allowed the appeal on jurisdictional grounds, these issues were not decided on merit.

Issue 3: Under Valuation of Closing Stock and Addition in Scrap Account
The appellant challenged the addition made on account of alleged under valuation of the closing stock of cotton and in the scrap account. These issues were not adjudicated on merit due to the success of the appellant's appeal on jurisdictional grounds.

Issue 4: Addition of Expenses and Compliance under Section 124(3)(a)
The appellant contested the addition of expenses and argued that the A.O. in Faridkot had no jurisdiction to issue the notice. The Tribunal considered the objections raised by the appellant and found that the A.O. in Bathinda should have transferred the case promptly, as required by Section 124(3)(a) of the Act. As the transfer did not occur, the Tribunal deemed the notice invalid and directed the quashing of the assessment.

Issue 5: Confirmation of CIT(A) Order and Proper Legal Objection
The Departmental Representative (DR) relied on the decision of the CIT(A) and argued that the appellant did not raise a proper legal objection. However, the Tribunal found that the objections raised by the appellant were sufficient, especially considering the delay in transferring the case to the appropriate jurisdiction. The Tribunal concluded that the notice was invalid and upheld the appellant's appeal.

Issue 6: Adjudication of Appeal Grounds and General Nature of Ground 7
The Tribunal did not adjudicate on the merit of grounds 2, 3, 4, 5, and 6 due to the success of the appeal on jurisdictional grounds. Ground 7, being general in nature, was not deemed to require adjudication.

In conclusion, the Tribunal allowed the appellant's appeal, quashed the assessment based on the invalid notice, and pronounced the order in favor of the appellant on 30th October 2014.