2018 (3) TMI 936 - AT - Income Tax

Reopening of assessment - AO s jurisdiction over the matter - Disallowing deduction u/s 54B - Held that - ACIT- 1 Agra, who recorded the reasons to believe escapement of income and issued the notice u/s 148 of the Act admittedly did not exercise jurisdiction over the matter. In fact, evidently, this was the reason why the matter was transferred from the ACIT- 1, Agra to the ITO 4(2) Agra. Therefore, the formation of the reasons to believe escapement of income is in direct violation of the provisions of section 147 of the Act. Since the reasons to believe escapement of income in this case were recorded by the AO who did not exercise the relevant jurisdiction, i.e., jurisdiction over the matter, such reasons are non-est, being in flagrant violation of the express provisions of section 147 read with those of section 2(7A) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction u/s 54B for investment in agriculture land.
2. Legality of proceedings u/s 147/148 of the IT Act.
3. Disallowance confirmed by ld. CIT (A).
4. Benefit for deduction u/s 54F and 54B.
5. Confirmation of interest charged u/s 234A, 234B & 234C.
6. Assessment framed u/s 143/147 of the IT Act without jurisdiction.

Analysis:

1. The appellant appealed against the disallowance of deduction u/s 54B for investing in agriculture land in the name of a minor daughter. The contention was that the disallowance was erroneous and illegal. The Tribunal examined the issue and found that the ACIT-I, Agra, who initiated the reassessment proceedings, did not have jurisdiction over the matter. The assessment proceedings were continued by the ITO-4(2), Agra, who had jurisdiction. The Tribunal held that the reasons to believe escapement of income, recorded by the ACIT-I, Agra, were void ab initio as they were in violation of the provisions of section 147 of the Act. Consequently, the Tribunal allowed the appeal on this ground.

2. The appellant challenged the legality of the proceedings u/s 147/148 of the IT Act. The Tribunal observed that the ACIT-I, Agra, who issued the notice u/s 148, did not have jurisdiction over the matter. The Tribunal held that the notice issued by an officer lacking jurisdiction was void ab initio, rendering all subsequent proceedings and the assessment order invalid. Citing relevant legal provisions, the Tribunal quashed the assessment as being without jurisdiction.

3. The appellant contested the addition confirmed by the ld. CIT (A). The Tribunal analyzed the jurisdictional aspect of the case and found that the reassessment proceedings were initiated by an officer without jurisdiction. Consequently, the Tribunal held that the entire proceedings, including the addition confirmed by the ld. CIT (A), were void ab initio. As a result, the Tribunal allowed the appeal on this ground.

4. The appellant argued for the benefit of deduction u/s 54F and 54B, contending that section 50C of the IT Act did not apply. The Tribunal, after examining the jurisdictional issues, declared the reassessment proceedings and subsequent assessment order void ab initio due to the lack of jurisdiction of the initiating officer. Therefore, the Tribunal allowed the appeal on this ground as well.

5. The appellant raised objections regarding the confirmation of interest charged u/s 234A, 234B & 234C. The Tribunal, considering the jurisdictional irregularities in the initiation of the reassessment proceedings, deemed the entire assessment process as void ab initio. Consequently, the Tribunal allowed the appeal on this ground, holding the interest charges to be invalid.

6. The appellant contended that the assessment framed u/s 143/147 of the IT Act was without jurisdiction. The Tribunal examined the jurisdictional issues and found that the officer who initiated the reassessment proceedings lacked jurisdiction. Therefore, the Tribunal held that the assessment order was void ab initio and quashed it accordingly. The Tribunal allowed the appeal on this ground, declaring the assessment as being without jurisdiction.