2020 (3) TMI 866 - AT - Income Tax

Reopening of assessment u/s 147 - Jurisdiction of ITO to issue notice - notice u/s 148 was issued to the legal heir on behalf of the deceased assessee by ITO, Ward-1(4), Jaipur after seeking approval of JCIT, Range-1, Jaipur whereas the jurisdiction over the deceased assessee was with ITO, Ward 2(1), Jaipur under JCIT Range-2, Jaipur - HELD THAT - ITO Ward 1(4), Jaipur herself has stated that the jurisdiction over the case does not lie with her but with ITO Ward 2(1), Jaipur. The aforesaid communication has been written to the Pr. CIT very next month of issuance of notice on 26.03.2015. Apparently, there was no further communication from the office of ld Pr. CIT and PAN of the deceased assessee was not transferred to ITO Ward 2(1) and continues with ITO Ward 1(4) and having issued the notice u/s 148, she continued with the proceedings and passed the assessment order u/s 147 read with 143(3) of the Act. Therefore, even though notice has been issued by ITO, Ward 1(4), Jaipur but once she is clear that the jurisdiction over the matter lies with ITO, Ward 2(1), Jaipur, merely because the permission has not been received from the ld. Pr. CIT for transfer of PAN, she cannot proceed and pass the assessment order in absence of requisite jurisdiction at first place which is governed by last known residence address of the deceased assessee as mandated by section 124(1)(b) of the Act. Therefore, where there is no dispute that the jurisdiction over the deceased assessee lies with ITO Ward 2(1), Jaipur, the assessment order passed by ITO Ward 1(4) cannot be sustained and set-aside for want of requisite jurisdiction. Where there is no dispute that the jurisdiction over the deceased assessee lies with ITO Ward 2(1), Jaipur, the assessment order passed by ITO Ward 1(4) cannot be sustained and set-aside for want of requisite jurisdiction. Regarding contention of the ld. DR that the assessee has not challenged the jurisdiction within the prescribed time limit provided u/s 124(3) - We find that the assessee has also challenged the service of notice u/s 148 and 142(1) and in any case where the ITO Ward 1(4) herself is clear that the jurisdiction in the case of the decease assessee doesn t lie with her and lies with ITO, Ward 2(1), Jaipur and has written a letter as earlier as 21.04.2015 to ld. Pr. CIT and there has been no action by the office of ld Pr. CIT till the passing of the assessment order, there is no basis to blame the assessee for filing the late objections as the provisions of section 124(3) comes in play only on satisfaction of provisions of section 124(1) of the Act. We are of the considered view that jurisdiction over the deceased assessee lies with the ITO, Ward 1(4), Jaipur and for want of requisite jurisdiction, assessment order passed u/s 143(3) read with 147 by ITO, Ward 2(1), Jaipur deserves to be set aside. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdictional challenge to the assessment order passed under sections 143(3) and 147.

Detailed Analysis:

Jurisdictional Challenge:
The appeal was against the order of the ld. CIT(A)-1, Jaipur, where the assessee challenged the assessment order under sections 143(3) and 147. The key contention was the lack of jurisdiction of the Assessing Officer (AO) over the deceased assessee's case. The notice u/s 148 was issued to the legal heir after seeking approval from a different jurisdictional Commissioner. The legal heir raised objections regarding jurisdiction before the AO, citing ignorance of law due to not being a regular income tax assessee. The AO proceeded with the assessment despite the objections. The appellant argued that the AO cannot benefit from the assessee's ignorance of the law. The ld. CIT(A) rejected these contentions, leading to the appeal before the ITAT.

The ld. DR argued that as per section 124(3) of the Act, jurisdictional challenges must be raised within one month of receiving notices u/s 148/142(1). The assessee raised jurisdictional issues much later, near the time-barring date of assessment. However, the ITAT found that the AO did not have jurisdiction over the deceased assessee's case. The reasons recorded by the AO indicated that the income had escaped assessment, but the jurisdictional issue was crucial. The AO himself admitted the lack of jurisdiction and acknowledged that it lay with a different ward. Despite this, the AO proceeded with the assessment. The ITAT emphasized that the last known residence address of the deceased assessee determined jurisdiction, as per section 124(1)(b) of the Act.

The ITAT noted that the AO's acknowledgment of lacking jurisdiction and the absence of action by the higher authorities to transfer the case indicated a clear lack of jurisdiction. The assessment order passed by the AO without proper jurisdiction was set aside. The ITAT held that the appellant's late objection was justified given the circumstances. As the assessment order was set aside on jurisdictional grounds, other grounds on the merits of the case were rendered moot and not addressed. Consequently, the appeal of the assessee was allowed, and the assessment order was set aside.

In conclusion, the ITAT's decision focused on the crucial issue of jurisdiction, emphasizing the importance of proper jurisdiction in assessment proceedings and ruling in favor of the appellant due to the lack of jurisdiction of the Assessing Officer over the deceased assessee's case.