2000 (11) TMI 303 - AT - Income Tax

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in cases involving search operations.
2. Validity of the assessment order dated 25th March 1991 by Asstt. CIT, Inv. Circle-2, Udaipur.
3. Validity of the earlier assessment order dated 2nd March 1989 by ITO, Ward-2, Udaipur.
4. Procedural and jurisdictional requirements for the transfer of cases under the Income Tax Act.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) in Cases Involving Search Operations:
The primary issue revolves around the jurisdiction of the AO in cases where a search has been conducted. According to the Revenue, the jurisdiction for cases involving searches conducted on or after 1st September 1979 was vested in the Asstt. CIT, Inv. Circle, Udaipur, as per a notification issued on 5th May 1988. This notification was later corrected by a corrigendum on 30th May 1988. Another notification on 29th August 1990 created two circles, assigning cases based on the date of the search. The case in question fell within the jurisdiction of Asstt. CIT, Inv. Circle-2, Udaipur, as the search occurred before 31st March 1989.

2. Validity of the Assessment Order Dated 25th March 1991 by Asstt. CIT, Inv. Circle-2, Udaipur:
The Revenue argued that the assessment made by Asstt. CIT, Inv. Circle-2, Udaipur, was valid as per the jurisdictional notifications. However, the Tribunal noted that the search took place in 1987, which should place the case within the jurisdiction of Asstt. CIT, Inv. Circle-1, Udaipur, not Circle-2. Consequently, the assessment dated 25th March 1991 by Asstt. CIT, Inv. Circle-2, Udaipur, was deemed without jurisdiction and thus invalid.

3. Validity of the Earlier Assessment Order Dated 2nd March 1989 by ITO, Ward-2, Udaipur:
The Tribunal observed that the ITO, Ward-2, Udaipur, had inherent jurisdiction to make the assessment in the normal course. The transfer of jurisdiction to Asstt. CIT, Inv. Circle, was an administrative arrangement that did not divest the ITO of his inherent jurisdiction. The Tribunal cited several legal precedents to support the view that even if the jurisdiction was defective, the assessment order remains effective until it is set aside by a competent authority. As the earlier assessment order dated 2nd March 1989 had not been vacated or annulled by any authority, it persisted under law.

4. Procedural and Jurisdictional Requirements for the Transfer of Cases under the Income Tax Act:
The Tribunal clarified that the transfer of jurisdiction under the notification falls within Section 120 of the Income Tax Act, not Section 127. Therefore, the contentions regarding the procedural requirements for transfer under Section 127 were not relevant. The Tribunal emphasized that the ITO, Ward-2, Udaipur, had the inherent jurisdiction to assess the case, and the administrative transfer did not nullify this jurisdiction.

Conclusion:
The Tribunal concluded that the assessment order dated 25th March 1991 by Asstt. CIT, Inv. Circle-2, Udaipur, was invalid due to lack of proper jurisdiction. The earlier assessment order dated 2nd March 1989 by ITO, Ward-2, Udaipur, remained effective as it had not been vacated or annulled. The Tribunal found no basis to interfere with the order of the Dy. CIT(A) quashing the assessment dated 25th March 1991. Consequently, the appeal by the Revenue was dismissed.

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