2012 (3) TMI 713 - AT - Income Tax

Summary

Issues involved:
The judgment deals with the issue of assumption of jurisdiction under sec. 143(2)/142(1) of the Income-tax Act.

Consideration of Jurisdiction under sec. 143(2)/142(1):
The case involved the Cane Development Council filing a return of income as a Local Authority and claiming exemption under sec. 2(15) of the Act. The Assessing Officer issued notice u/s 143(2)/142(1) and completed the assessment in the status of Artificial Juridical Person. The assessee contended that the assessment order was illegal as the status was changed without proper notice. The CIT(A) held that the status was indeed that of an Artificial Juridical Person and annulled the assessment, directing remedial action under sec. 150 of the Act.

Interpretation of Legal Definitions:
The definition of "person" under sec. 2(31) of the Act includes a local authority and an artificial juridical person as distinct entities. The income of a local authority is exempt under sec. 10(20) of the Act, with specific criteria defining a "local authority." The Cane Development Council did not meet the criteria for a local authority, thus its status could not be considered as such.

Validity of Assessment Status Change:
The Assessing Officer issued notice under sec. 143(2) in the name of the assessee as a local authority, but later assessed it as an artificial juridical person. The ITAT decision highlighted that jurisdictional defects cannot be cured by obtaining consent, similar to a precedent involving a status change from individual to HUF. The ITAT concluded that the status change was improper, upholding the CIT(A)'s decision to cancel the assessment.

Conclusion:
The appeal by the Revenue was dismissed, affirming the cancellation of the assessment due to the incorrect change in the assessee's status. The judgment was pronounced on 30th March, 2012.