2013 (1) TMI 293 - AT - Income Tax

Reopening of assessment - assessee contested against jurisdiction of AO - Held that - The expression Assessing Officer used in the section 148 means the Assessing Officer vested with the jurisdiction over the assessee as stipulated in the definition u/s 2(7A) by virtue of the directions / orders passed u/s 120, sub-section (1) & (2) . Thus, the notice u/s 148 is required to be issued by the AO who is vested with the jurisdiction over the assessee on the basis of the criteria of territorial area, a person or classes of persons, income or classes of incomes and cases or classes of cases as enumerated in sub-section 3 of section 120 of Income Tax Act. It is not the case of the Revenue that the Assessing Officer who has issued the notice u/s 148 was vested with the jurisdiction by virtue of any direction or orders issued under sub-section (1) or (2) of section 120 of the Income Tax Act. Thus, there is no dispute about the jurisdiction vested with the Assessing Officer - ITO, Ward-9(2)-1 over the assessee when the notice u/s 148 was issued by the ITO, Ward-10(3)-4. When it is apparent that the notice u/s 148 was issued by the AO who was not vested with the jurisdiction over the assessee then, the same is patently illegal and void liable to be set aside - in favour of assessee.

Summary

Issues:
Validity of notice u/s 148 based on jurisdiction, Reopening of assessment proceedings beyond the statutory period, Reopening based on change of opinion between Assessing Officers, Allowance of set off of earlier losses under section 79 of the IT Act.

Analysis:

Validity of Notice u/s 148 based on jurisdiction:
The Appellate Tribunal considered the challenge raised by the assessee regarding the validity of the notice u/s 148 on the grounds of jurisdiction. The original assessment was conducted by a different Assessing Officer than the one who issued the notice u/s 148. The Tribunal noted that the Assessing Officer who issued the notice did not have jurisdiction over the assessee at the time of issuance. Despite the objection raised by the assessee, both the Assessing Officer and CIT (A) rejected the jurisdictional challenge. However, the Tribunal held that the notice issued by an Assessing Officer lacking jurisdiction renders the reassessment proceedings and resulting order void ab initio. Consequently, the reassessment based on an illegal notice u/s 148 was deemed unsustainable and set aside.

Reopening of assessment proceedings beyond the statutory period:
The Tribunal also addressed the issue of reopening the assessment beyond the statutory period of four years. The assessee contended that since the Assessing Officer who issued the notice lacked jurisdiction, the reopening was barred. The Tribunal found that the notice u/s 148 was indeed invalid due to jurisdictional issues, rendering the reopening beyond the statutory period irrelevant. The Tribunal emphasized that the legality of the notice was paramount, and the reassessment based on an illegal notice could not be upheld.

Reopening based on change of opinion between Assessing Officers:
Another issue raised was the reopening of assessment proceedings based on a change of opinion between two Assessing Officers. The Tribunal noted that the objection to the reopening was primarily centered on jurisdictional grounds. As the notice u/s 148 was deemed invalid due to jurisdictional issues, the Tribunal did not delve into the aspect of a change of opinion between Assessing Officers.

Allowance of set off of earlier losses under section 79 of the IT Act:
The Revenue's appeal contested the allowance of set off of earlier losses by the CIT (A) without applying section 79 of the IT Act. The Tribunal did not delve into the merits of this issue due to the invalidity of the reassessment based on the notice u/s 148. Consequently, the Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, as the reassessment was deemed invalid and set aside.

In conclusion, the Appellate Tribunal ruled in favor of the assessee, holding the reassessment invalid due to the notice u/s 148 being issued by an Assessing Officer lacking jurisdiction. This rendered the reassessment proceedings and resulting order void ab initio, leading to the allowance of the assessee's appeal and the dismissal of the Revenue's appeal.