2023 (6) TMI 278 - AT - Income Tax

Validity of assessment order passed u/s 143(3) - status of assessee - AO had issued notice as a Local Authority and the assessment has been framed in the name of Artificial Juridical person - HELD THAT - The assessee has filed various written submissions. The submissions of the assessee are that the assessee is a local authority. The case of the assessee was picked up for scrutiny assessment. The objections of the assessee are that as per the provisions of U.P. Sugar Cane (Regulation of Supply Purchase) Act, 1953, the assessee is neither authorized to do any business/profession or any other activity with profit motive, nor it is doing any such activity as contemplated u/s 28 of the I.T. Act. The assessee had filed its return of income as a Local Authority . Assessment was framed in the status of Artificial Juridical person . The assessee has placed reliance on the judgment of M/s N.S. Committee 2012 (3) TMI 713 - ITAT DELHI wherein the Tribunal had cancelled the assessment on the basis that the AO had framed assessment in a different status. It is the case of the assessee that in the present case also the AO had issued notice as a Local Authority and the assessment has been framed in the name of Artificial Juridical person . The AO could not have changed the status from Local Authority to Artificial Juridical person and therefore the assessment framed by the AO is liable to be cancelled. There is no denying the fact that for the assessment year in question the assessee filed its return of income in the status of Local Authority and the Assessing Officer framed the assessment in the status of Artificial Juridical person . Assessee appeal allowed. From the order of the AO it is clear that it had issued notice u/s 143(2) of the Act to the assessee in the status of Local Authority as the notice is addressed to the President/Secretary of the assessee. Therefore, we hereby annul the impugned assessment order being bad in law.

Summary

Issues Involved:
The issues involved in this case are:
1. Jurisdiction of the Assessing Officer in changing the status of the appellant in the assessment order.
2. Validity of assessment order passed under section 143(3) without complying with mandatory procedures.
3. Taxability of 'Sentage' receipts as income under the Income Tax Act.

Jurisdictional Issue:
The appellant challenged the assessment order, arguing that the Assessing Officer (AO) changed the status from 'Local Authority' to 'Artificial Juridical Person' without authority. The appellant contended that the assessment was invalid due to this change. The Tribunal found that the AO issued the notice to the appellant as a 'Local Authority,' but framed the assessment in the status of an 'Artificial Juridical Person.' Relying on a previous decision, the Tribunal annulled the assessment order as it was against the law.

Compliance with Procedures Issue:
The appellant raised concerns about the assessment order under section 143(3) being passed without following the mandatory procedure laid down in section 124(4) of the Income Tax Act. The appellant argued that the jurisdiction of the Joint Commissioner issuing the notice under section 143(2) was questioned by the appellant under section 124(3). However, the Tribunal did not provide a detailed analysis or ruling on this issue in the judgment.

Taxability of 'Sentage' Receipts Issue:
The appellant contested the addition of Rs 13,50,000 made on account of 'Sentage' receipts, claiming that it should not be treated as income falling within the definition of 'income' under section 2(24) of the Income Tax Act. The AO considered the 'Sentage' charges as taxable income due to the nature of the receipts and their utilization for road construction. The CIT(A) upheld the addition, which was further challenged by the appellant. The Tribunal did not delve into the specifics of the taxability issue but focused on the jurisdictional matter, ultimately allowing the appeal based on the jurisdictional error.

This summary outlines the key issues raised by the appellant, the arguments presented, and the Tribunal's decision primarily based on the jurisdictional aspect of the case.