2024 (7) TMI 1180 - AT - Income Tax

Validity of reassessment proceedings - proper jurisdiction to issue notice - assessment order has not been passed by the person issuing the notice u/s 148 - curable defect u/s 292BB or not? - HELD THAT - As we find that as on the date of issue of notice u/s 148, the Assistant Commissioner of Income Tax did not have the pecuniary jurisdiction. It is very clear that the jurisdiction as on the date of seeking approval was not with the ACIT because returns of non-corporate assessee upto Rs. 20,00,000/- was with Income Tax Officer. The total income for assessment year 2017-18 as per the income tax return acknowledgement was Rs. 4,40,070/-. Therefore, the proper jurisdiction was with the ITO Ward 4(1), Nagpur. Thus, it is clear that the notice was issued by a non-jurisdictional officer and the assessment being conducted pursuant thereto cannot be held to be valid. Subsequent transfer of assessment records by ACIT Circle, Nagpur to ITO Ward 4(1) Nagpur is also illegal, since transfer of case can only be done u/s 127 of the IT Act, 1961. The defect is incurable and is not amenable to be corrected under Section 292BB also. Accordingly, we find no merit to interfere with the cogent order passed by the CIT(A). In fact, upon perusal of the judgment of Ashok Devichand Jain v. Union of India Ors 2022 (3) TMI 1466 - BOMBAY HIGH COURT we find that it is in favour of the assessee. Thusnotice issued u/s 148 is clearly without jurisdiction and consequent assessment order has no legal legs to stand upon. Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 148.
2. Validity of reassessment proceedings based on the jurisdiction of the AO.
3. Compliance with Section 127 for transfer of cases.
4. Genuineness and creditworthiness of transactions under Section 68.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 148:

The primary issue raised by the department was whether the Assistant Commissioner of Income Tax (ACIT) had the jurisdiction to issue the notice under Section 148. The judgment emphasized that the notice must be issued by the jurisdictional AO. The ACIT issued the notice, but the assessment was conducted by the Income Tax Officer (ITO), who did not issue the notice.

The judgment cited several cases to establish that the jurisdiction to reopen an assessment depends on the issuance of a valid notice by the jurisdictional AO. The cases cited included:
- ACIT v. Resham Petrotech Ltd. (2012) 136 ITD 185 (Ahd.)(Trib.)
- Smriti Kedia (Smt.) v. UOI [2011] 339 ITR 37 (Cal.)(HC)
- ITO v. Rajender Prasad Gupta (2010) 48 DTR 489/135 TTJ 9 (Jodhpur)(Trib.)
- Gaurav Joshi v. ITO (2019) 174 DTR 353 / 197 TTJ 946 (Asr.) (Trib.)

2. Validity of reassessment proceedings based on the jurisdiction of the AO:

The reassessment proceedings were challenged on the grounds that the ACIT, who issued the notice, did not have the pecuniary jurisdiction at the time of issuance. The judgment highlighted that the jurisdictional transfer was not valid as it was not done under Section 127 of the Income Tax Act, which mandates a formal order for transfer of cases.

The judgment referenced:
- Ashok Devichand Jain v. Union of India & Ors (2023) 452 ITR 43
- Sarita Jain v. ITO Ward-4(1), Raipur ITA No. 260/RPR/2023
- Kusum Goyal Vs. ITO and Ors. (2010) 329 ITR 283 (Cal.)

3. Compliance with Section 127 for transfer of cases:

The judgment found that the transfer of the case from ACIT to ITO was not compliant with Section 127, which requires a formal order and recording of reasons for the transfer. The transfer was done through a letter, which is not sufficient under the law.

The judgment cited:
- Ajanta Industries Vs. Central Board of Direct Tax (1976) 102 ITR 281 (SC)
- Roop Das Vs. ITO, Ward-2(1), Bhilai ITA Nos.310 & 311/RPR/2023
- D. Craft Entertainment P. Ltd. Vs. ITO ITA No.1461/Kol/2017

4. Genuineness and creditworthiness of transactions under Section 68:

The department challenged the genuineness and creditworthiness of the loan transactions with Priority Exports Pvt. Ltd., labeling it a shell company. The judgment upheld the CIT(A)'s decision that the assessee had discharged the burden of proof by providing necessary documentation, including bank statements, financial statements, and confirmations from the lender.

The judgment referenced:
- CIT v. Lovely Exports (P) Ltd. 2009 TaxPub (DT) 0261 (SC)
- CIT v. Gagandeep Infrastructure (P) Ltd. 2017 TaxPub(DT) 1238 (Bom-HC)
- CIT v. Veedhata Tower (P) Ltd. 2018 TaxPub(DT) 2030 (Bom-HC)

Conclusion:

The judgment concluded that the notice issued under Section 148 was without jurisdiction and the subsequent assessment order was invalid. The transfer of the case was not compliant with Section 127, making the reassessment proceedings void. The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld. The judgment emphasized the importance of jurisdictional compliance and proper procedural adherence in reassessment proceedings.

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