2020 (9) TMI 84 - AT - Income Tax

Validity of re-assessment proceedings u/s 147 - non-issuance of notice u/s 148 by DCIT(International Taxation) - AO Dasuya had no jurisdiction to issue the notice u/s 148 when it was duly intimated to the AO, Dasuya and Hoshiarpur that the Assessee is NRE - Transfer of jurisdiction of AO - as submitted that the assessment has been framed by the DCIT (International Taxation) on the basis of the borrowed satisfaction of the ITO, Dasuya instead of himself forming the belief regarding the escapement of income of the assessee - HELD THAT - ITO Dasuya did not have any jurisdiction over the assessee and, as such, the notice u/s 148 of the Act by the ITO, Dasuya being without jurisdiction was not valid. Though, the fact, that the assessee was a non-resident Indian, was duly mentioned to the ITO, Hoshiarpur and the entire record along with reply of the assessee was transferred to ITO, Dasuya, apart from that the ITO Dasuya also was informed vide separate replies, as mentioned above, that the assessee was a permanent resident of USA, ITO Dasuya, continued to proceed with the re-assessment and issued notices u/s 148 of the Act. The fact that the assessee was an NRI was very much on the record. ITO Dasuya had no jurisdiction to initiate reopening of the assessment by way of issuance of notice u/s 148 of the Act. However, thereafter he transferred the case to ADIT (International Taxation) fully convinced that he himself had no jurisdiction to make assessment in the case of the assessee. Admittedly, no notice u/s 148 of the Act by the DCIT (International Taxation), Chandigarh to the assessee was issued. Since the ITO, Dasuya had no jurisdiction to reopen the assessment, hence, any notice issued by him has no legal validity. So far as the DCIT (International Taxation), Chandigarh is concerned, he admittedly did not issue any notice u/s 148 to the assessee, therefore, the very reopening of the assessment without issuance of notice u/s 148 of the Act by the Assessing officer of the competent jurisdiction, is bad in law. Argument of the Ld. DR that the ITO, Dasuya had transferred the case to DCIT (International Taxation ), Chandigarh and, hence, there was no requirement of issuing of fresh notice u/s 148 of the Act as per the provisions of section 127 (4) - No force in the above contention of the Ld. DR. Firstly, the re-assessment proceedings initiated by the ITO, Dasuya were without jurisdiction and the same were void abinitio, hence, any transfer of such void proceedings to the Assessing officer of competent jurisdiction did not validate his action and the proceedings. Even otherwise, as per the provisions of section 127, ITO, Dasuya himself had no jurisdiction to suo motu transfer the case to the DCIT (International Taxation). Rather, the transfer of the case as per the provisions of section 127 (1) of the Act, can be ordered by the competent authority prescribed in the said provisions - Decided in favour of assessee.

Summary

Issues:

1. Jurisdiction of Assessing Officer to issue notice u/s 148
2. Validity of re-assessment order framed by DCIT (International Taxation)
3. Admissibility of documentary evidence regarding justification of deposits in bank account
4. Validity of reopening of assessment without issuance of notice u/s 148 by competent jurisdiction

Jurisdiction of Assessing Officer to issue notice u/s 148:

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) by the assessee, challenging the jurisdiction of the Assessing Officer at Dasuya to issue a notice u/s 148. The issue arose when substantial deposits were found in the assessee's bank account. Despite the assessee's claims of being a non-resident Indian living in the USA, the ITO Dasuya proceeded with the reassessment and issued notices u/s 148. The ITO Dasuya transferred the case to ADIT (International Taxation) based on the assessee's non-resident status. The DCIT (International Taxation) continued the proceedings without issuing a notice u/s 148, leading to the conclusion that the reassessment was invalid due to lack of jurisdiction.

Validity of re-assessment order framed by DCIT (International Taxation):

The main contention of the assessee was the validity of the reassessment order by DCIT (International Taxation) without the issuance of a notice u/s 148. The ITO Dasuya's transfer of the case to DCIT (International Taxation) did not validate the proceedings as the initial notice u/s 148 was without jurisdiction. The absence of a notice u/s 148 from DCIT (International Taxation) rendered the reassessment unsustainable in the eyes of the law, leading to the quashing of the assessment.

Admissibility of documentary evidence regarding justification of deposits in bank account:

The assessee submitted documentary evidence during the proceedings to justify the deposits in the bank account. However, the CIT(A) rejected the evidence without sufficient reasoning, which was against the facts and circumstances of the case. The rejection of documentary evidence without cogent material was a ground of appeal, indicating procedural irregularities in the assessment process.

Validity of reopening of assessment without issuance of notice u/s 148 by competent jurisdiction:

The reopening of the assessment without a valid notice u/s 148 by the Assessing Officer of competent jurisdiction was a critical issue in the appeal. The ITO Dasuya's lack of jurisdiction to initiate the reassessment and the absence of a notice u/s 148 from DCIT (International Taxation) rendered the entire reassessment process invalid. The argument that the transfer of the case validated the proceedings was dismissed, emphasizing the importance of adherence to jurisdictional requirements.

In conclusion, the appeal was allowed, and the reassessment order by DCIT (International Taxation) was quashed due to procedural irregularities and lack of jurisdiction in initiating the reassessment process.