1995 (6) TMI 73 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (ACIT) to make the assessment.
2. Validity of the assessment made by the ACIT.
3. Interpretation and application of Section 124(5) of the Income-tax Act, 1961.
4. Procedural compliance and objections raised by the assessee.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (ACIT) to Make the Assessment:
The primary issue was whether the ACIT, Circle 3(1), Jaipur had the jurisdiction to assess the income of the assessee for the assessment year 1988-89. The CIT(A) had canceled the assessment on the grounds of lack of jurisdiction, asserting that the ACIT could only assess persons whose returns showed a total income/loss of Rs. 2 lakhs and above but below Rs. 5 lakhs, as per Notification No. 16 issued by the CCIT on 29-4-1988. The assessee had filed a return showing an income below Rs. 2 lakhs with the ITO, Bharatpur, and had objected to the ACIT's jurisdiction.

2. Validity of the Assessment Made by the ACIT:
The Tribunal found that the CIT(A) misunderstood the concept of jurisdiction and the effect of the CCIT's notification. The Tribunal clarified that jurisdiction connotes the legal competence or authority of a person to decide a particular matter. Jurisdiction cannot be waived or conferred by the consent of the parties, and lack of jurisdiction renders an order null and void. However, the Tribunal distinguished between lack of jurisdiction and irregular or erroneous exercise of jurisdiction, noting that the latter can be waived by the affected party.

3. Interpretation and Application of Section 124(5) of the Income-tax Act, 1961:
Section 124(5) starts with a non obstante clause and serves as a saving provision against technical objections and disputes relating to jurisdiction. It validates procedural defects or errors in the exercise of jurisdiction if there has been no injustice to the assessee and he has been assessed by an officer having jurisdiction over the area in which the assessee resides or carries on business. The Tribunal emphasized that procedural errors should not invalidate the assessment if the officer had jurisdiction over the area and the income.

4. Procedural Compliance and Objections Raised by the Assessee:
The Tribunal noted that the assessee resided and carried on business within the territorial jurisdiction of the ACIT, and the entire income accrued within that area. The ITO, Bharatpur, had transferred the assessment records to the ACIT in compliance with the CCIT's order. The assessee had requested the transfer of his case to the ACIT's file and did not raise any objection against the ACIT's jurisdiction. The Tribunal concluded that no injustice was caused to the assessee, and any procedural error would be cured by Section 124(5).

Conclusion:
The Tribunal held that the assessment made by the ACIT was fully valid and legal on both facts and law. The CIT(A) erred in canceling the assessment, and the Tribunal directed the CIT(A) to decide other grounds on merits as raised by the assessee in his appeal. The appeal of the Revenue was allowed.