2014 (4) TMI 1303 - AT - Income Tax

Jurisdiction of the Assessing Officer - Change of jurisdiction relating to the areas within the jurisdiction of the different Directors General or Chief Commissioners or Commissioners - HELD THAT - As assessee has objected the jurisdiction of the AO within the time limit as has been specified u/s 124(3)(a), therefore, the application moved by the assessee for challenging the jurisdiction was a valid one. As noted Section 124(4) lays down that where an assessee calls in question the jurisdiction of the AO, then the AO shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made to CCIT or DG CIT. Need to refer to Director General, Chief Commissioner or Commissioner concerned - Section 124(2), it is apparent that incase the assessee objects about the jurisdiction and the AO is not satisfied, AO is bound to refer the question of the jurisdiction to the Director General or the Chief commissioner or the Commissioner, incase it relates to the same Director General or Chief Commissioner or the Commissioner, but where the question of jurisdiction relating to the areas within the jurisdiction of the different Directors General or Chief Commissioners or Commissioners, the AO is bound to refer it to the Director General, Chief Commissioner or Commissioner concerned and if those people are not in agreement, then it should be decided by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may specify this by notification in the Official Gazette. In the impugned case, we noted that the AO himself has decided the issue of the jurisdiction and sent the notice to the assessee u/s. 142(1), which remained uncomplied and accordingly the best judgment assessment was passed u/s. 144. AO was not correct in law in deciding the issue of the jurisdiction himself. We, therefore, set aside the order passed by the Assessing Officer and restore the issue to the AO with the direction that the Assessing Officer may proceed with the assessment after getting the issue relating to the jurisdiction determined in accordance with the provisions of Section 124(2) of the I.T. Act. Appeal filed by the assessee is allowed statistically, whereas the appeal of the Revenue stands dismissed.

Summary

Issues:
1. Challenge to the legality of assessment and jurisdiction of the Assessing Officer under Section 124.
2. Adequacy of opportunity provided to the assessee before passing the order under Section 144.
3. Dispute regarding the estimation of profit and reduction from 12% to 10%.
4. Challenge by the Revenue against the CIT(A) order limiting the net profit estimation to 10%.

Analysis:
1. The assessee raised multiple grounds challenging the assessment's legality and the Assessing Officer's jurisdiction under Section 124. The assessee objected to the jurisdiction within the specified time limit, making the challenge valid. The relevant sections stipulate that if the Assessing Officer is not satisfied with the jurisdiction claim, the matter must be referred for determination. In this case, the Assessing Officer unilaterally decided on jurisdiction without following the prescribed procedure. The Tribunal set aside the assessment and directed a proper determination of jurisdiction before proceeding with the assessment.

2. The assessee contended that the Assessing Officer did not provide adequate opportunity before passing the order under Section 144. The Tribunal's decision to set aside the assessment on jurisdictional grounds obviated the need to address this issue separately.

3. The dispute over the estimation of profit, with the CIT(A) reducing it from 12% to 10%, was a key point of contention. The Assessing Officer had estimated income at 12% of gross receipts, but the CIT(A) reduced it to 10% based on jurisdictional considerations. The Tribunal's decision to set aside the assessment rendered this issue moot.

4. The Revenue challenged the CIT(A) order that restricted net profit estimation to 10% instead of the 12% initially determined by the Assessing Officer. However, since the Tribunal set aside the assessment, the Revenue's appeal became inconsequential. As a result, the assessee's appeal was allowed, and the Revenue's appeal was dismissed.

This judgment underscores the importance of following due process in determining jurisdiction and providing opportunities for fair assessment. The Tribunal's decision to set aside the assessment and direct a proper determination of jurisdiction ensures adherence to legal procedures and safeguards the rights of both parties involved in the dispute.