2005 (3) TMI 418 - AT - Income Tax

Validity of the assessment - Jurisdiction of Income-tax authorities - petition u/s 144A - Whether there exists any such direction/notification issued by the Board which can be said to be giving the Jt. CIT, Range 6, Kanpur, the jurisdiction and the authority to act as AO and pass assessment order in his Range in general or in the case of the present assessee in particular ? - Addl. CIT can be said to be covered by the inclusive definition of Jt. CIT as contained in s. 2(28C) of the Act? - HELD THAT - The appellant s case that the regular assessment order dt. 10th Feb., 2003, as passed by the Addl. CIT, Range 6, Kanpur is without jurisdiction also gets full support from the scheme as envisaged in s. 144A, which had been specifically invoked by it (the appellant) to seek instructions for the ACIT, Range 6, Kanpur who had been conducting the assessment proceedings in this case although and who had even issued a draft assessment order. It is evident from the said section that after the machinery of s. 144A is placed in motion, either at the initiative of the Jt. CIT or on a reference being made by the AO or on an application made by the assessee, such Addl. CIT/Jt. CIT has been left only with two options, either he may take a view that no instructions need be given for the guidance of the AO, or instructions need be given. In the later case, if he is of the opinion that instruction adverse to the assessee need be given then be again owes a statutory duly to give the assessee an opportunity of being heard. Nowhere it is envisaged, even by implication, that the Jt. CIT can adopt a third course and intimate the assessee that he himself would be stepping into the authority of the AO and finalize the regular assessment order under his own signatures, as has been done here. This will be an act of transgression of authority which cannot be permitted. Therefore, we hold that after the proceedings u/s 144A get initiated under any of the three situations as discussed, the Jt. CIT himself cannot act as AO and pass an assessment order under his own signatures. Naturally, such a situation, presupposes existence of two separate and distinct authorities , one who gives instructions and two, who receives the directions and implements the same strictly as such directions are of binding nature. Interestingly enough, s. 144A as has been reproduced by us above, gives an example, where the term Jt. CIT shall include Addl. CIT also. As it is, the authority designated for the purposes of proceedings u/s 144A is Jt. CIT which has been designated as an IT authority by virtue of insertion of cl. (cca) in s. 116 of the Act w.e.f. 1st Oct., 1998, only. Can it mean that after the date, recourse to s. 144A will not be permissible in such ranges where the same are in the charge of the authority designated as Addl. CIT . The answer would be in the negation as no such discrimination has been made in the statute. Therefore, to make the provisions of s. 144A effective and workable one can fall back to the interpretation clause of s. 2(28C) where it has been mentioned that Jt. CIT includes Addl. CIT also . We hasten to add that such an interpretation clause shall not be applicable, in the context of s. 2(7A) where the term is qualified as such Jt. CIT........ This is an additional reason which is available in support of our conclusion that the Addl. CIT, Range 6, Kanpur did not have the authority to exercise the powers and perform the functions of an AO and the assessment order dt. 10th Feb., 2003, as passed by him in this case, is bad-in-law. Accordingly, we hold that the assessment order dt. 10th Feb., 2003, passed by the Addl. CIT Range-6, Kanpur in the present case is wholly without jurisdiction and consequently such assessment order is not enforceable in law. The assessment order is, therefore, quashed, as being without jurisdiction. Since the primary issue about the very validity of the assessment order has been decided in favour of the assessee, we do not consider it necessary to deal with other issues which relate to the merits of the addition made in the assessment. In the result, the appeal directed by the assessee is allowed.

Summary

Issues Involved:
1. Jurisdiction of the Additional Commissioner of Income Tax (Addl. CIT) to act as the Assessing Officer (AO) and pass the assessment order.
2. Validity of the assessment order dated 10th February 2003.
3. Merits of additions/variations in the assessment order.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Addl. CIT to Act as AO:
The assessee challenged the jurisdiction of the Addl. CIT to act as the AO and pass the assessment order. The contention was that the Addl. CIT did not have the authority to act as an AO, particularly after the assessee had moved a petition under Section 144A. The assessee argued that only the ACIT, who had initiated the regular assessment proceedings, had the jurisdiction to act as the AO. The Addl. CIT, having entertained the petition under Section 144A, was in the role of a "judge" and could not become the adjudicator. The assessee also cited various instructions and notifications, including Instruction No. 5/2001 dated 20th September 2001, which stated that the Addl. CIT would not make assessments but would closely monitor and supervise the same.

2. Validity of the Assessment Order Dated 10th February 2003:
The Tribunal examined the relevant sections and notifications governing the jurisdiction of the AO. Section 2(7A) defines an AO and includes the Jt. CIT or Jt. Director who is directed under Section 120(4)(b) to exercise the powers of an AO. The Tribunal noted that the Chief CIT, Kanpur, had issued an order on 31st July 2001, allocating the jurisdiction of the AO to the Dy. CITs, ACITs, and ITOs, but not to the Jt. CIT. The Tribunal also considered various notifications and instructions issued by the CBDT, including the notification dated 17th September 2001, which required the CIT's authorization for the Jt. CIT to act as an AO. The Tribunal concluded that no such authorization was given to the Jt. CIT or Addl. CIT in this case.

3. Merits of Additions/Variations in the Assessment Order:
The Tribunal did not delve into the merits of the additions and variations made in the assessment order, as the primary issue of jurisdiction was decided in favor of the assessee. The Tribunal quashed the assessment order dated 10th February 2003, holding it to be without jurisdiction and consequently not enforceable in law.

Conclusion:
The Tribunal allowed the appeal directed by the assessee, quashing the assessment order dated 10th February 2003, passed by the Addl. CIT, Range-6, Kanpur, as being without jurisdiction. The Tribunal held that the Addl. CIT did not have the authority to act as an AO and pass the assessment order, especially after the assessee had moved a petition under Section 144A. The Tribunal's decision was based on a detailed analysis of the relevant sections, notifications, and instructions governing the jurisdiction of the AO.