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2019 (12) TMI 136 - AT - Income TaxReopening of assessment - notice u/s 148 issued by an incompetent officer - notice by AO with no jurisdiction - HELD THAT - In Principal CIT-II, Lucknow v. Mohd. Rizwan, Prop. M/s M.R. Garments Moulviganj, Lucknow 2017 (3) TMI 1792 - ALLAHABAD HIGH COURT , thus, in effect, holds, answering the question in favour of the assessee, that where a notice u/s 148 was issued by an incompetent officer, i.e., one who has no jurisdiction, and subsequently, on the objection of the assessee with regard to the jurisdiction, the matter is transferred to the Assessing Officer having jurisdiction, a valid assessment cannot be made by him without issuing a fresh notice under section 148. Since the AO, having jurisdiction over the assessee, completed the reassessment without issuance of notice under section 148, the reassessment order passed is invalid and cannot be sustained. It is, accordingly, set aside and cancelled. - Decided in favour of assessee.
Issues Involved:
1. Validity of jurisdiction of the Deputy Commissioner of Income-tax (Dy. CIT) in reassessment. 2. Validity of reassessment order due to lack of mandatory notices under sections 148 and 143(2) of the Income-tax Act. 3. Justification for sustaining the addition of ?3.45 lakhs by the CIT(A). Issue-wise Analysis: 1. Validity of Jurisdiction of Dy. CIT in Reassessment: The appellant contended that the reassessment order by the Dy. CIT was invalid as there was no valid transfer of jurisdiction from the Income-tax Officer (ITO)-1(3), Lucknow to the Dy. CIT. The reassessment order was argued to be illegal due to the absence of mandatory notices under sections 148 and 143(2) of the Income-tax Act. The appellant further argued that jurisdiction cannot be conferred by the consent of the assessee. 2. Validity of Reassessment Order Due to Lack of Mandatory Notices: The appellant's counsel emphasized that the reassessment order was invalid as the Dy. CIT did not issue the mandatory statutory notices under sections 148 and 143(2) of the Act. The ITO-1(3) initiated proceedings under section 147 by issuing a notice under section 148, but the Dy. CIT, who had jurisdiction, failed to issue fresh notices. The counsel relied on the judgment in 'Principal CIT v. Mohd. Rizwan' by the Allahabad High Court, which held that a reassessment order is invalid if the notice under section 148 is issued by an officer without jurisdiction and the jurisdictional officer does not issue a fresh notice. 3. Justification for Sustaining the Addition of ?3.45 Lakhs: The appellant argued that the CIT(A) was not justified in sustaining the addition of ?3.45 lakhs, as the appellant had provided cogent evidence supporting the availability of funds from his mother’s agricultural income and pension income. The CIT(A) was criticized for not appreciating these evidences and for rejecting them without valid reasons. Judgment Summary: Jurisdiction of Dy. CIT: The tribunal noted that the ITO-1(3) issued the notice under section 148 and later transferred the case to the Dy. CIT, Range-6, who had jurisdiction. The reassessment order was passed by the Dy. CIT without issuing fresh notices under sections 148 and 143(2). The tribunal referred to the Allahabad High Court’s decision in 'Principal CIT v. Mohd. Rizwan', which established that a reassessment order is invalid if the jurisdictional officer does not issue a fresh notice under section 148 after the case is transferred. Mandatory Notices: The tribunal emphasized that section 148(1) mandates the Assessing Officer with jurisdiction to serve a notice before making a reassessment. Since the Dy. CIT did not issue a fresh notice under section 148, the reassessment order was deemed invalid. The tribunal cited several judgments, including 'Commissioner of Income Tax v. Thayaballi Mulla Jeevaji Kapasi' and 'Y. Narayana Chetty v. Income Tax Officer', which reiterated the necessity of a valid notice under section 148 for a reassessment to be valid. Addition of ?3.45 Lakhs: Given the invalidity of the reassessment order due to jurisdictional issues and lack of mandatory notices, the tribunal did not delve into the merits of the addition of ?3.45 lakhs. The reassessment order was set aside and cancelled, rendering the issue of the addition moot. Conclusion: The tribunal allowed the appeal, setting aside and cancelling the reassessment order due to the invalidity arising from the lack of jurisdiction and non-issuance of mandatory notices under sections 148 and 143(2) of the Income-tax Act. The tribunal's decision was based on established legal precedents emphasizing the necessity of proper jurisdiction and statutory compliance in reassessment proceedings.
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