2021 (3) TMI 1196 - AT - Income Tax

Jurisdiction of Assessing Officer u/s 120 - Transfer of case u/s 124 - jurisdiction of DCIT, Circle-3, Gurgaon and ACIT, Circle-13(1), New Delhi - HELD THAT - The assumption of jurisdiction by DCIT, Circle-3, Gurgaon in AY 2012-13 is not free from doubt in the light of the undisputed fact that jurisdiction in other years was exercised by ACIT, Circle-13(1), New Delhi. Moreover, from perusal of the Paper Book filed by the assessee, it is obvious that the assessee had filed details before the Ld. CIT(A) on merits of the additions made by the Assessing Officer, alongwith supporting evidence. It is also clear that the Ld. CIT(A) had obtained Remand Report from the Assessing Officer and further that the assessee had submitted Rejoinder to the Remand Report of the AO. In view of the foregoing, it is obvious that the Ld. CIT(A) was in error in making observation at para 3.8 of his impugned appellate order dated 15.12.2016 that the appellant had not filed any written submissions on the issue of disallowances/ additions made by the AO. Assessee had a legitimate expectation from the DCIT, Circle-3, Gurgaon, that the objection raised against the jurisdiction assumed by DCIT, Circle-3, Gurgaon will first be decided by the DCIT, Circle -3, Gurgaon, before he would proceed to make assessment. When the jurisdiction exercised by DCIT, Circle-3, Gurgaon, is not free from doubt; the jurisdiction of Ld. CIT(Appeals)-1, Gurgaon, who passed the impugned appellate order against which assessee has filed the present appeal, is also not free from doubt; because jurisdiction of CIT(Appeals) is related to jurisdiction of the Assessing Officer. CIT(A) was in error in disregarding the submissions made by the assessee on mertis of the additions made in the assessment order; and in wrongly observing that the assessee had not filed any written submissions on the issue of disallowances / additions made by the Assessing Officer. In view of the foregoing, we are setting aside all the disputes raised in the present appeal before us, to the file of the Assessing Officer with the direction to pass fresh assessment order as per law. We direct the Assessing Officer to first decide the dispute raised by the assessee regarding the jurisdiction assumed by the DCIT, Circle-3, Gurgaon

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Merits of the additions made by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:

The primary issue raised by the assessee was that the Deputy Commissioner of Income Tax (DCIT) Circle-3, Gurgaon, did not have jurisdiction over the assessee, as the assessee was previously assessed by the DCIT Circle-13(1), New Delhi. The assessee argued that the jurisdiction should have remained with the DCIT Circle-13(1), New Delhi, as per the notification issued by the Central Board of Direct Taxes (CBDT) and the provisions of Section 120 of the Income Tax Act, 1961. The assessee filed objections under Section 124 of the Act immediately upon receiving the statutory notice under Section 143(2) from the DCIT Circle-3, Gurgaon, but the objections were not addressed. The tribunal observed that the regular jurisdiction of the assessee was indeed with the ACIT, Circle-13(1), New Delhi, for several assessment years, including those before and after the assessment year in question (2012-13). The tribunal concluded that the DCIT Circle-3, Gurgaon, should have first decided the jurisdictional objection before proceeding with the assessment. Consequently, the tribunal found that the assumption of jurisdiction by the DCIT Circle-3, Gurgaon, was not free from doubt, thereby affecting the jurisdiction of the Commissioner of Income Tax (Appeals)-1, Gurgaon, as well.

2. Merits of the Additions:

The second issue pertained to the merits of the additions made by the Assessing Officer, which included ?21,68,127 on account of credit card payments and ?1,37,875 on account of hotel services. The assessee contended that these expenses were incurred on behalf of NTF (India) Pvt. Ltd., where the assessee was the Managing Director, and that the company had claimed these expenses in its profit and loss account. The assessee provided supporting evidence and submissions to the Commissioner of Income Tax (Appeals), but the CIT(A) dismissed the appeal, stating that no written submissions were made by the assessee on the issue of disallowances/additions. The tribunal found that the assessee had indeed filed detailed submissions and supporting evidence before the CIT(A), and the CIT(A) had even obtained a remand report from the Assessing Officer. Therefore, the tribunal concluded that the CIT(A) erred in disregarding the submissions and in making the observation that no written submissions were filed by the assessee.

Conclusion:

The tribunal set aside the entire assessment order and directed the Assessing Officer to first decide the jurisdictional issue raised by the assessee. The tribunal further directed that a fresh assessment order be passed by the Assessing Officer exercising proper jurisdiction over the assessee, and to adjudicate the merits of the additions after providing a reasonable opportunity to the assessee. The appeal was thus partly allowed for statistical purposes.