2019 (9) TMI 1534 - AT - Income Tax

Reopening of assessment u/s 147 - ITO jurisdiction to issue notice - HELD THAT - It is not in dispute that reasons for reopening of the assessment have been recorded in this case by ITO, Ward 2(3), Noida, who was having no jurisdiction over the case of the assessee. When assessee filed letter before ITO, Ward 2(3), Noida on 07.09.2017 stating therein that return filed originally may be treated as return having filed in response to notice u/s 148 of the Act and is also supported by copy of acknowledgment of return filed originally, the ITO, Ward 2(3), Noida transferred this case to ITO, Ward 2(1), Faridabad, vide letter dated 07.09.2017 (PB 10). The AO while completing the assessment in this case has taken the shelter of provisions of section 129 of the Act. However, the said provision is not applicable because it is a matter of assumption of valid jurisdiction in the matter or to validly initiate the reassessment proceedings against the assessee. It is not a case of succession to exercise jurisdiction by one ITO to another ITO. Since, reasons have been recorded for reopening of the assessment by ITO, Noida who was not authorized to do so, therefore, mere recording of reasons for reopening of the assessment by him is of no consequence and has no value under the law. The AO who has jurisdiction over the case of assessee i.e. ITO, Faridabad admittedly did not record any reasons for reopening of the assessment. Therefore, the issue is covered in favour of the assessee by order of ITAT Agra Bench in the case of S N Bhargawa 2013 (10) TMI 512 - ITAT AGRA Assumption of jurisdiction u/s 147/148 of the Act is illegal and bad in law and, as such, liable to be quashed. Accordingly, set aside the orders of the authorities below and quash the reopening of the assessment u/s 147/148 of the Act. Resultantly the entire addition stands deleted. - Decided in favour of assessee.

Summary

Issues: Jurisdiction of Assessing Officer, Validity of Reassessment Proceedings

Jurisdiction of Assessing Officer:
The case involved a dispute regarding the jurisdiction of the Assessing Officer (AO) over the reassessment proceedings initiated against the assessee. The reasons for reopening the assessment were recorded by an AO from Ward 2(3), Noida, who did not have jurisdiction over the assessee's case. The assessee argued that the subsequent AO from Ward 2(1), Faridabad, who issued the notice under section 148, did not record fresh reasons for reopening. The issue raised was whether the reassessment proceedings were valid given the transfer of the case between AOs from different wards.

The ITAT Delhi, in its judgment, analyzed the jurisdictional aspect of the case. It was noted that the AO who recorded the reasons for reopening the assessment did not have jurisdiction over the assessee's case. The subsequent transfer of the case to another AO did not cure the initial lack of jurisdiction. The ITAT referred to a similar case from the ITAT Agra Bench and held that the assumption of jurisdiction by the AO was illegal and bad in law. The judgment highlighted that the AO who validly assumed jurisdiction must be the one to issue the notice under section 148, emphasizing the importance of jurisdictional validity in reassessment proceedings.

Validity of Reassessment Proceedings:
The validity of the reassessment proceedings under sections 147/148 of the Income Tax Act was challenged based on the jurisdictional issues discussed above. The assessee contended that the initiation of reassessment proceedings was illegal and should be quashed. The key argument was that the AO who recorded the reasons for reopening the assessment did not have the authority to do so, rendering the subsequent proceedings invalid.

The ITAT Delhi, after considering the submissions from both parties, concluded that the assumption of jurisdiction under sections 147/148 of the Act was indeed illegal and bad in law. Citing precedents and legal principles, the judgment held that the AO who validly assumed jurisdiction must be the one to initiate reassessment proceedings. As the reassessment was found to be based on an initial lack of jurisdiction, the ITAT set aside the orders of the authorities below and quashed the reopening of the assessment. Consequently, the addition made during the reassessment was deleted, and the appeal of the assessee was allowed.

In summary, the judgment focused on the crucial aspect of jurisdiction in reassessment proceedings, emphasizing the requirement for the AO to have validly assumed jurisdiction to initiate such proceedings. The decision highlighted the legal principles governing the validity of reassessment actions and provided a clear ruling in favor of the assessee based on the lack of jurisdiction by the concerned AOs.