2018 (8) TMI 439 - AT - Income Tax

Reopening of assessment - order passed u/s 127 transferring the jurisdiction over the assessee to ITO, Ward-4, Bharatpur on or before the issuance of notice u/s 148 to them - Held that - Revenue has not disputed the said fact and has not brought on record any order passed u/s 127 transferring the jurisdiction over the assessee to ITO, Ward-4, Bharatpur on or before the issuance of notice u/s 148 to them. Where the ITO Ward 4, Bharatpur was ceased of the information of the impunged property being disposed off, the correct course of action would have been to pass on the said information to the jurisdiction Assessing officer having jurisdiction over the respective assessee and it is for the jurisdictional Assessing officer to issue notice u/s 148 to the respective assessee and bringing the capital gains to tax in their individual hands to the extent of respective share in the property. Alternatively, all the cases could have been centralized by the Revenue by passing an order u/s 127. In the instant case, none of this has happened. It is therefore a case where the ITO Ward 4, Bharatpur has proceeded ahead and issued notice u/s 148 of the Act to the respective assessee when the jurisdiction over the respective assessees doesn t lie with him and lies with other Assessing officers at Delhi and Allahabad, a fact not disputed by the Revenue. In absence of valid jurisdiction, the issuance of notice u/s 148 by ITO Ward 4, Bharatpur is bad in law and the consequent proceedings u/s 147 are vitiated and are liable to be quashed - notice issued u/s 148 by the ITO Ward 4, Bharatpur was without jurisdiction and the consequent assessment order passed u/s 147 r/w 144 is bad in law - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer.
3. Enhancement of income by the Commissioner of Income Tax (Appeals) [CIT(A)].
4. Issuance of specific show cause notice before enhancement.
5. Taxability of unrealized rent.
6. Taxability of income below the taxable limit.
7. Initiation of proceedings under section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of reassessment proceedings under section 147 of the Income Tax Act:
The assessee contended that the initiation of reassessment proceedings was without satisfying the statutory preconditions under section 147 of the Act. The Tribunal found that the Assessing Officer (AO) at Bharatpur did not have valid jurisdiction over the assessees, which rendered the reassessment proceedings invalid.

2. Jurisdiction of the Assessing Officer:
The primary issue was whether the ITO, Ward-4, Bharatpur had jurisdiction over the assessees. The Tribunal noted that the property in question was located in Dholpur, Rajasthan, but the respective assessees were under the jurisdiction of different AOs in Delhi and Allahabad. The Revenue did not provide any order under section 127 transferring jurisdiction to the ITO, Bharatpur. The Tribunal concluded that the notices issued under section 148 by the ITO, Bharatpur were without valid jurisdiction, making the reassessment proceedings void.

3. Enhancement of income by the Commissioner of Income Tax (Appeals) [CIT(A)]:
The assessee argued that the CIT(A) erred in enhancing the income by ?3,50,000/- under sections 25AA and 25B, as the computation of income from house property was not an issue before the AO. The Tribunal did not delve into this matter as the jurisdictional issue was decided in favor of the assessee, making other grounds infructuous.

4. Issuance of specific show cause notice before enhancement:
The assessee claimed that the CIT(A) enhanced the income without issuing a specific show cause notice. The Tribunal did not address this issue separately due to the resolution of the jurisdictional matter.

5. Taxability of unrealized rent:
The assessee contended that the sum of ?5,00,000/- related to rent which could not be collected as the owners resided outside Dhaulpur, and it was neither unrealized rent nor arrears of rent. This issue was not separately analyzed by the Tribunal owing to the primary issue of jurisdiction.

6. Taxability of income below the taxable limit:
The assessee argued that the income from house property was below the taxable limit each year, and hence no return was filed. The Tribunal did not address this issue separately due to the jurisdictional decision.

7. Initiation of proceedings under section 271(1)(c) of the Income Tax Act:
The assessee challenged the initiation of proceedings under section 271(1)(c) for concealment of income. The Tribunal did not analyze this issue separately as the reassessment proceedings were quashed due to lack of jurisdiction.

Conclusion:
The Tribunal quashed the reassessment proceedings initiated by the ITO, Ward-4, Bharatpur, due to lack of valid jurisdiction. Consequently, all other grounds of appeal became infructuous. The appeals of the respective assessees were allowed. The order was pronounced in the open court on 03/08/2018.