2003 (3) TMI 301 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the order passed u/s 263 of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer at Rajkot.
3. Non-initiation of penalty proceedings u/s 271(1)(c).

Summary:

1. Validity of the order passed u/s 263:
The common grievance of the three assessees was that the order passed u/s 263 was bad in law. The CIT initiated proceedings u/s 263, holding that the assessment orders passed by the ITO, Rajkot were erroneous and prejudicial to the interests of the revenue. The CIT directed the transfer of records to the ITO at Kolhapur for further necessary action as per law.

2. Jurisdiction of the Assessing Officer at Rajkot:
The CIT found that the ITO, Rajkot had no jurisdiction over the assessees, who were actually residing and conducting business in Kolhapur. The returns filed at Rajkot were not bona fide as the assessees never lived at the Rajkot address. The ITO, Kolhapur had issued valid notices u/s 148 based on information from the CBI regarding fabricated evidence of foreign gifts. The Rajkot ITO's acceptance of the returned income without due enquiry was deemed erroneous and prejudicial to the revenue. The Tribunal upheld the CIT's finding that the ITO, Rajkot lacked jurisdiction, causing prejudice to the revenue.

3. Non-initiation of penalty proceedings u/s 271(1)(c):
The CIT held that the Rajkot ITO should have initiated penalty proceedings u/s 271(1)(c) as the returns filed at Rajkot constituted evidence of admission of concealment of income. However, the Tribunal agreed with the assessees' counsel that non-initiation of penalty proceedings cannot be a ground for invoking jurisdiction u/s 263.

Conclusion:
The Tribunal upheld the CIT's order u/s 263, confirming that the assessments made at Rajkot were erroneous and prejudicial to the interests of the revenue due to lack of jurisdiction. The appeals of the three assessees were dismissed.