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2022 (3) TMI 1541 - AT - Income TaxJurisdiction to reassess - Jurisdiction over Appellant as employed in the Army - Army Salary Circle AO or Income-tax Officer Ward 3(5) Gurugram - HELD THAT - It is now well settled that it is only the AO holding charge over an assessee for assessment purposes who could issue a notice for reassessment. No AO other than the assessee s own AO could issue a notice for reassessment. ITO Ward 3(5) Gurugram has issued the notice u/s 148 to the Appellant as employed in the Army after having recorded a satisfaction as to the alleged escapement of income of the Appellant. ITO Ward 3(5) Gurugram does not seem to have made any inquiry on the relevant issues before issuing a notice u/s 148 to the Appellant. No material in this behalf has been brought before us by the Department. As in Lt. Col. Paramjeet Singh 1996 (3) TMI 120 - PUNJAB AND HARYANA HIGH COURT has ruled that if the assessment proceedings of an assessee is to be reopened or if the income for the relevant assessment year is to be reassessed it is the Income-tax Officer who could assess the same in the first instance who has jurisdiction to proceed in the matter u/s 147 r.w.s. 148 unless of course the case had been transferred by a competent authority to another AO u/s 127 of the Act. No such transfer order u/s 127 of the Act has been produced before us to validate the jurisdiction as assumed by the ITO Ward 3(5) Gurugram. It is thus clear that the assumption of jurisdiction to reassess the Appellant by the Gurugram AO is irregular and fallacious. Assumption of jurisdiction by a different AO at Gurugram who was other than the AO holding jurisdiction over the assessee for the relevant year was invalid. Status of Appellant selling the agricultural lands - whether the property is an HUF property or individual? - HELD THAT - There is nothing on record brought before us whether the above named assessees (4 brothers) have applied for any PAN for HUF or whether any account was opened in the name of HUF or earlier there was any existing PAN. Neither there is any mentioned in the deed that all the individuals had entered into the agreement as HUF or jointly representing HUF. At the time of issuance of notice the AO could not have created HUF by allotting separate PAN or create any entity without any information provided by the assessees. Even the sale consideration was received individually. The action of the assessee also does not indicate that the transaction was entered in the capacity of HUF albeit it was entered in the individual capacity collectively. In these circumstances it is difficult to uphold the contention of the assessee and accordingly we reject the same.
Issues Involved:
1. Jurisdiction of the Assessing Officer (AO). 2. Validity of the reassessment proceedings under sections 147/148 of the Income-tax Act. 3. Determination of the correct assessment year for the transaction. 4. Classification of the income as capital gains or business income. 5. Status of the assessee (Individual vs. Hindu Undivided Family - HUF). 6. Distance of the agricultural land from municipal limits and its impact on taxability. Detailed Analysis: 1. Jurisdiction of the Assessing Officer (AO): The appellants contended that the AO at Gurugram had no jurisdiction to issue notices under section 148 as they were salaried employees assessed by different AOs in their respective jurisdictions. The tribunal found that the appellants were indeed under the jurisdiction of specific Salary Circle AOs, and no transfer of jurisdiction was effected under section 127 of the Act. Therefore, the assumption of jurisdiction by the AO at Gurugram was deemed irregular and invalid. The tribunal relied on the precedent set by the Delhi Bench of the ITAT in the case of Attar Singh & Ors., where similar jurisdictional issues were decided in favor of the assessee. 2. Validity of the Reassessment Proceedings under Sections 147/148: The appellants argued that the reassessment proceedings were initiated without proper inquiry and were based on insufficient material. The tribunal observed that the AO did not conduct necessary inquiries before issuing the notices and mechanically assumed jurisdiction. The tribunal held that the notices under section 148 were invalid due to the lack of proper jurisdiction and the mechanical approach of the AO. 3. Determination of the Correct Assessment Year: The appellants contended that the transaction should be assessed in the year 2006-07, based on the collaboration agreement dated 14.12.2006, and not in the year 2010-11 when the sale deed was registered. The tribunal noted that the transfer of land should relate back to the date of the collaboration agreement as per section 47 of the Registration Act, 1908. However, the tribunal did not delve into this issue further as it had already quashed the reassessment proceedings on jurisdictional grounds. 4. Classification of the Income as Capital Gains or Business Income: The AO had classified the income from the sale of land as business income, while the CIT(A) reclassified it as capital gains. The tribunal did not specifically address this issue in detail, as the primary focus was on the jurisdiction and validity of the reassessment proceedings. However, it was noted that the AO's assessment included both capital gains and business income components. 5. Status of the Assessee (Individual vs. Hindu Undivided Family - HUF): The appellants argued that the land was ancestral property and should be assessed in the status of HUF. The tribunal acknowledged the argument but noted that there was no evidence of the assessees having applied for a PAN for HUF or conducting transactions in the capacity of HUF. The tribunal concluded that the transactions were carried out in individual capacities and rejected the contention of assessing the income in the status of HUF. 6. Distance of the Agricultural Land from Municipal Limits: The appellants claimed that the agricultural land was beyond 8 km from any municipal limit, making it non-taxable as a capital asset. The AO, based on the Sub-Registrar's report, stated that the land was within 3 km of the municipal limits. The tribunal did not find it necessary to adjudicate this issue due to the quashing of the reassessment proceedings on jurisdictional grounds. Conclusion: The tribunal quashed the reassessment proceedings under section 148 due to the lack of proper jurisdiction by the AO at Gurugram and the mechanical approach in issuing the notices. Consequently, all appeals were allowed in favor of the assessees.
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