2013 (3) TMI 70 - HC - Income Tax

Jurisdiction to issue notice u/s 147/148 - when the question of jurisdiction can be raised? - held that - (i) a question relating to jurisdiction which goes to the root of the matter can always be raised at any stage, be in appeal or revision, (ii) initiation of proceedings under section 147 of the Act and/or service of notice are all questions relating to assumption of jurisdiction to assess escaped income, (iii) if an issue has not been decided in appeal and the matter has simply been remanded, the same can be raised again notwithstanding with the fact that no further appeal has been preferred, (iv) in the reassessment proceedings, relief in respect of item which was not originally claimed cannot be claimed again as the reassessment proceedings are for the benefit of the Revenue and (v) relief can only be claimed in respect of the escaped income. The approach of the Commissioner of Income Tax (Appeals) is erroneous in law for the reason that in the grounds of appeal filed against the order dated 21.03.1997, a specific ground relating to validity of proceedings initiated under section 148 of the Act had been taken which was not gone into by the Commissioner of Income Tax (Appeals) while setting aside the assessment. The principles laid down by the Apex Court in the case of Sun Engineering Works P. Ltd. (1992 (9) TMI 1 - SUPREME COURT) would not apply as the appellant is not claiming any deduction or relief on the taxibility of any item in the reopened assessment proceedings which had not been claimed in the original assessment. The Tribunal had also erred in law in holding that as no appeal had been filed by the appellant against the order 05.02.1998 passed by the Commissioner of Income Tax (Appeals), the same had become final and the appellant cannot be permitted to raise any ground relating to the validity of the proceedings under section 148 of the Act in the remand proceedings. Tribunal has erred in law in so far as it refused to permit the appellant to raise the ground Nos. 1 to 4 and, therefore, the same cannot be sustained. - matter remanded to ITAT - Decided in favor of assessee.

Summary

Issues Involved:
1. Validity of the proceedings initiated under section 148 of the Income Tax Act.
2. Jurisdictional challenge in set-aside proceedings.

Issue 1: Validity of the Proceedings Initiated Under Section 148 of the Income Tax Act

The appellant challenged the validity of the proceedings initiated under section 148 of the Act in the appeal before the Commissioner of Income Tax (Appeals) against the order dated 21.03.1997. The Commissioner of Income Tax (Appeals) set aside the assessment for fresh proceedings without addressing the validity of the section 148 proceedings. The appellant raised this issue again in the appeal against the order dated 04.10.1999, but the Commissioner of Income Tax (Appeals) held that the action under section 148 had been validly initiated and that the appellant could not raise this issue in reopened assessment proceedings, citing the Supreme Court decision in Commissioner of Income Tax Versus Sun Engineering Works (P) Ltd.

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision, stating that since no grounds were raised against the original assessment order regarding the issue of notice under section 148, the appellant could not raise this ground in the second appeal. The High Court, however, held that the validity of the proceedings under section 148 goes to the root of the matter and can be raised at any stage. The High Court found that the Tribunal erred in law by not allowing the appellant to challenge the validity of the section 148 proceedings.

Issue 2: Jurisdictional Challenge in Set-Aside Proceedings

The appellant contended that the jurisdictional issue could be raised at any stage, as it goes to the root of the matter. The Tribunal did not admit the additional grounds of appeal challenging the jurisdiction, stating that the assessment order dated 21.03.1997 had become final as no appeal was filed against the Commissioner of Income Tax (Appeals) order dated 05.02.1998. The High Court disagreed, stating that the jurisdictional challenge can be raised at any time, and the Commissioner of Income Tax (Appeals) should have adjudicated upon the grounds taken before him. The High Court cited various precedents supporting the view that a jurisdictional issue can be raised at any stage, including in appeal or revision.

The High Court concluded that the Tribunal erred in law by refusing to permit the appellant to raise the jurisdictional grounds and directed the Tribunal to decide the appeal afresh in accordance with the directions provided.

Conclusion:

The High Court allowed the appeal, holding that the Tribunal erred in law by not permitting the appellant to raise the grounds challenging the validity of the proceedings under section 148 and the jurisdictional issue. The Tribunal was directed to decide the appeal afresh, considering the grounds raised by the appellant.