2019 (9) TMI 1740 - AT - Income Tax

Validity of assessment framed by Addl. CIT Range-23 New Delhi - valid jurisdiction to act as the AO in the case of the assessee - HELD THAT - Board may assign the power to any Income Tax Authority to exercise powers of the AO having regard to territorial area etc. or the Board may authorise or empower Pr. Director General Pr. Chief Commissioner etc. to issue order in writing to assign powers of the A.O. to other Authorities including Addl. Commissioner of Income Tax as AO. Considering the provisions of Section 2(7A) which defines the definition of the Assessing Officer would make it clear that Addl. Commissioner of Income Tax could function as an AO when jurisdiction have been assigned to him by virtue of the directions or orders issued u/s 120(4)(b). However in the present case the Revenue Department has failed to produce any Order or Notification in favour of Addl. CIT Range-23 New Delhi to act as an AO despite giving sufficient opportunities. No order or direction of the Board or any other Authority have been produced on record u/s 120(1)(2) and (4) of the I.T. Act 1961 empowering the Addl. CIT Range-23 New Delhi to act as an AO in the present case to pass the impugned assessment order. In the present case the Addl. CIT Range 23 New Delhi lacks in jurisdiction over the case of assessee. In the absence of any Order or Notification issued by the Board or any other Income Tax Authority in this behalf contentions of Ld. D.R. are rejected. We are of the view that Addl. CIT Range-23 New Delhi do not have jurisdiction over the case of assessee and since he did not assume the jurisdiction legally and validly therefore the impugned assessment order framed by him is vitiated and illegal and without jurisdiction. Appeal of Assessee allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the Additional Commissioner of Income Tax (Addl. CIT), Range-23, New Delhi, had the legal and valid jurisdiction to act as the Assessing Officer (A.O.) in the case of the assessee.

2. Whether the assessment order passed by the Addl. CIT, Range-23, New Delhi, is valid in the absence of a jurisdictional order under Section 120(4)(b) of the Income Tax Act, 1961.

3. Whether the absence of an order under Section 127 for the transfer of jurisdiction affects the validity of the assessment order.

4. Whether the provisions of Section 124(3) of the Income Tax Act, 1961, apply to the case, given the jurisdictional challenges raised by the assessee.

ISSUE-WISE DETAILED ANALYSIS

1. Jurisdiction of the Addl. CIT as Assessing Officer

Relevant legal framework and precedents: Section 2(7A) of the Income Tax Act defines an "Assessing Officer" and includes an Addl. CIT if directed under Section 120(4)(b) by the Board. Section 120 outlines the jurisdiction of income-tax authorities, allowing the Board to issue directions for exercising powers and performing functions by income-tax authorities.

Court's interpretation and reasoning: The Tribunal noted that the Addl. CIT could function as an Assessing Officer only if jurisdiction was conferred by an order under Section 120(4)(b). In this case, no such order was produced by the Revenue, despite opportunities given.

Key evidence and findings: The assessee filed an RTI application seeking jurisdictional orders, but the Revenue's response did not provide the necessary documentation. The Tribunal found no evidence of an order or notification conferring jurisdiction on the Addl. CIT.

Application of law to facts: The Tribunal applied the legal framework and concluded that without a valid jurisdictional order, the Addl. CIT could not act as the Assessing Officer.

Treatment of competing arguments: The Revenue argued that the assessment order mentioned an assignment by the Commissioner of Income Tax, but the Tribunal found this insufficient without supporting documentation.

Conclusions: The Tribunal concluded that the Addl. CIT lacked jurisdiction, rendering the assessment order illegal and void.

2. Absence of Order under Section 127

Relevant legal framework and precedents: Section 127 of the Income Tax Act requires an order for transferring jurisdiction, with reasons recorded and communicated to the assessee.

Court's interpretation and reasoning: The Tribunal emphasized the mandatory nature of recording and communicating reasons for jurisdictional transfers under Section 127.

Key evidence and findings: There was no order under Section 127 transferring the case to the Addl. CIT, Range-23, New Delhi.

Application of law to facts: The absence of a Section 127 order further supported the Tribunal's finding of lack of jurisdiction.

Treatment of competing arguments: The Tribunal did not find any compelling argument from the Revenue to counter the absence of a Section 127 order.

Conclusions: The lack of a Section 127 order contributed to the Tribunal's decision to quash the assessment order.

3. Applicability of Section 124(3)

Relevant legal framework and precedents: Section 124(3) limits the ability to challenge the jurisdiction of an Assessing Officer after a certain period, provided the officer has jurisdiction under Section 120.

Court's interpretation and reasoning: The Tribunal determined that Section 124(3) did not apply because the Addl. CIT did not have jurisdiction under Section 120.

Key evidence and findings: The Tribunal found no valid jurisdictional order under Section 120, rendering Section 124(3) inapplicable.

Application of law to facts: Without jurisdiction under Section 120, the limitations of Section 124(3) could not be invoked.

Treatment of competing arguments: The Revenue's reliance on Section 124(3) was rejected due to the lack of jurisdictional authority.

Conclusions: The Tribunal concluded that Section 124(3) did not bar the jurisdictional challenge.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Considering the totality of the facts and circumstances of the case, we are of the view that Addl. CIT, Range-23, New Delhi do not have jurisdiction over the case of assessee and since he did not assume the jurisdiction legally and validly, therefore, the impugned assessment order framed by him is vitiated and illegal and without jurisdiction."

Core principles established: An Addl. CIT can act as an Assessing Officer only with a valid jurisdictional order under Section 120(4)(b). The absence of such an order renders the assessment void. Section 127 orders are mandatory for jurisdictional transfers, and Section 124(3) does not apply if jurisdiction under Section 120 is not established.

Final determinations on each issue: The Tribunal set aside and quashed the assessment order due to the lack of jurisdiction, resulting in the deletion of all additions. The appeal of the assessee was allowed.