2005 (7) TMI 52 - HC - Income Tax

Reassessment - Whether Tribunal was legally right in confirming the order of the learned Commissioner of Income-tax (Appeals) who held that the Assessing Officer was not having jurisdiction to make an assessment on AOP of two members? - The AOP is an independent identity. One person can form more than one association of persons with a different person to carry on the business to earn profit and each such association is an independent identity for the purposes of the assessment under the Act. In the circumstances, in the absence of notice under section 148 of the Act to the present assessee, the Tribunal has rightly held the assessment order passed under section 147 read with section 148 of the Act invalid. Question referred to us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
Jurisdiction of the Assessing Officer to make an assessment on an Association of Persons (AOP) of two members based on a notice issued to an AOP of three members.

Analysis:
The case involved a question of jurisdiction under the Income-tax Act, 1961, for the assessment year 1986-87. The Assessing Officer issued a notice under section 148 to an AOP comprising three members but completed the assessment on an AOP of only two members. The Commissioner of Income-tax (Appeals) found the assessment invalid due to lack of jurisdiction, as the notice was not served on the AOP in whose name the assessment was made. The Tribunal upheld this decision. The key issue was whether the notice under section 148 was a jurisdictional requirement for a valid assessment.

The learned standing counsel for the Revenue argued that the assessment order was valid as one of the AOP members participated in the proceedings. However, the counsel for the assessee contended that a valid notice under section 148 was essential for jurisdiction, citing various legal precedents. The High Court held that the notice under section 148 is a jurisdictional notice, and without it, the assessing authority cannot assume jurisdiction to pass an assessment order. The court emphasized that the notice is not a mere procedural formality but a condition precedent for a valid assessment.

Referring to legal precedents, the court reiterated that the correct status of the assessee must be mentioned in the notice, and any defect in the notice renders the assessment invalid. The court highlighted the importance of serving a proper notice to the correct entity for a valid assessment. It was established that the notice under section 148 is crucial for the authority to assume jurisdiction and pass a lawful assessment order.

In conclusion, the court found that the assessment made on the AOP of two members without a valid notice under section 148 served to the correct entity was invalid. The court rejected the Revenue's arguments and ruled in favor of the assessee, emphasizing the significance of a proper jurisdictional notice for a valid assessment. The judgment clarified the legal principles regarding jurisdictional notices under the Income-tax Act, affirming the necessity of adherence to procedural requirements for lawful assessments.