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2019 (12) TMI 349 - AT - Income TaxScrutiny assessment u/s 143(3) - Valid Jurisdiction of Addl. CIT u/s 120(4)(b) - Jurisdiction was not assigned in the manner prescribed u/s 120 - Transfer of case u/s 127 from DCIT to Addl . CIT - Held that - as per section 2(7A) of the Act, AO means inter alia an Addl. CIT who is directed under section 120(4)(b) to exercise or perform all or any of the powers and functions conferred on, or assigned to, an AO under the Act. As per Section 120(4)(b), the CBDT has to first empower the Commissioner to issue orders and then the said authority has to assign or confer the authority of the AO on the Addl. CIT. In the present case none of such notifications/ orders as required by section 120(4)(b) of the Act have bene issued. Further, as per section 127 of the Act when there is a transfer or jurisdiction, then the condition therein has to be fulfilled. In the present case, originally the jurisdiction to make the assessment over the company was with the DCIT. The assessment order has been passed by the Addl. CIT without any transfer or jurisdiction in his favour. Assessment framed under section 143(3) quashed.
Issues Involved:
1. Validity of the assessment orders passed by the Additional Commissioner of Income Tax (Addl. CIT). 2. Jurisdiction of the Addl. CIT to pass assessment orders under section 143(3) of the Income-tax Act, 1961. 3. Requirement of an order under section 120(4)(b) or section 127 for transferring jurisdiction. 4. Admission of additional grounds challenging jurisdiction. 5. Consequences of quashing the assessment orders on penalties levied under section 271(1)(c). Detailed Analysis: 1. Validity of the Assessment Orders: The primary issue raised by the assessee was the validity of the assessment orders passed by the Addl. CIT for AYs 2004-05 and 2005-06. The assessee contended that the assessment orders dated 31-12-2007 were "bad in law, illegal and without jurisdiction" as the Addl. CIT did not possess the legal and valid jurisdiction to pass the assessment orders. The Tribunal examined this contention in detail, focusing on whether the Addl. CIT was properly authorized to act as an Assessing Officer (AO) under the relevant provisions of the Income-tax Act. 2. Jurisdiction of the Addl. CIT: The Tribunal noted that under section 2(7A) of the Act, an AO includes an Addl. CIT only if directed under section 120(4)(b) to exercise or perform the powers and functions of an AO. The Tribunal found that no such direction or order had been issued in this case. The learned CIT Departmental Representative conceded that there were no orders or notifications under section 127 or section 120(4)(b) conferring jurisdiction on the Addl. CIT. Consequently, the Tribunal held that the Addl. CIT did not possess the jurisdiction to pass the assessment orders, rendering them illegal and without jurisdiction. 3. Requirement of an Order under Section 120(4)(b) or Section 127: The Tribunal emphasized the necessity of an order under section 120(4)(b) or section 127 to confer jurisdiction on the Addl. CIT. The Tribunal referred to various precedents, including the case of Tata Communications Ltd., where it was held that without such an order, the Addl. CIT cannot exercise the powers of an AO. The Tribunal reiterated that the absence of an order transferring jurisdiction invalidates the assessment orders passed by the Addl. CIT. 4. Admission of Additional Grounds: The Tribunal admitted the additional grounds raised by the assessee challenging the jurisdiction of the Addl. CIT. The Tribunal noted that these grounds were purely legal and did not require any investigation of new facts. Citing precedents such as National Thermal Power Corpn. Ltd. v. CIT and Jute Corporation of India Ltd. v. CIT, the Tribunal held that legal grounds going to the root of the matter could be raised at any stage. 5. Consequences of Quashing the Assessment Orders: Given that the Tribunal quashed the assessment orders on jurisdictional grounds, the other grounds on jurisdiction and merits became academic and were not adjudicated. Consequently, the penalties levied under section 271(1)(c) for AYs 2004-05 and 2005-06 were also invalidated. The Tribunal confirmed the orders of the CIT(A) deleting the penalties, as the quantum assessments had been quashed. Conclusion: The Tribunal allowed the appeals of the assessee, quashing the assessment orders passed by the Addl. CIT for AYs 2004-05 and 2005-06 on the grounds of lack of jurisdiction. The appeals of the Revenue were dismissed, and the penalties levied under section 271(1)(c) were also invalidated. The judgment underscores the importance of proper jurisdictional authorization for tax assessments.
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