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TMI Blog2005 (3) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. It is evident from the said section that after the machinery of s. 144A is placed in motion, either at the initiative of the Jt. CIT or on a reference being made by the AO or on an application made by the assessee, such Addl. CIT/Jt. CIT has been left only with two options, either he may take a view that no instructions need be given for the guidance of the AO, or instructions need be given. In the later case, if he is of the opinion that instruction adverse to the assessee need be given then be again owes a statutory duly to give the assessee an opportunity of being heard. Nowhere it is envisaged, even by implication, that the Jt. CIT can adopt a third course and intimate the assessee that he himself would be stepping into the authority of the AO and finalize the regular assessment order under his own signatures, as has been done here. This will be an act of transgression of authority which cannot be permitted. Therefore, we hold that after the proceedings u/s 144A get initiated under any of the three situations as discussed, the Jt. CIT himself cannot act as AO and pass an assessment order under his own signatures. Naturally, such a situation, presupposes existence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asst. yr. 2000-01, on a number of grounds which fall in two categories, one relating to the very validity of the assessment on the ground of jurisdiction of the Addl. CIT to act as AO and pass the assessment order dt. 10th Feb., 2003, and the other relating to the merits of additions/variations as stand comprised in the said assessment order. As the legal grounds go to the very root of the assessment, we take up first of all the same for our adjudication; such grounds are reproduced hereunder: 1.1 Because the learned CIT(A) has erred in holding that (a) there is no irregularity if the Addl. CIT becomes the AO ; (b) the Addl. CIT, along with the Dy. CITs/ACITs and ITOs stood vested with the concurrent jurisdiction over the assessee, in terms of the order No. Chief CIT/KNP/S P/32/2110-02 dt. 31st July, 2001, as passed by the Hon ble Chief CIT Kanpur; (c) in the present case the Addl. CIT vide his order sheet entries dt. 22nd Jan., 2003, had specifically conveyed his intention to act as an AO and, therefore, the Addl. CIT had rightly acted as an AO and had validly passed the assessment order dt. 10th Feb., 2003, even after a petition under s. 144A (as moved by the appellant) had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A and such a direction having not been issued (undisputedly) the income shown by the appellant and the manner in which such income had been shown, was deemed to have been accepted and the entire variation between the returned income and the assessed income is wholly illegal. 2. The facts, in brief, are that the appellant-company came into existence on 6th April, 1992 and was being regularly assessed to tax since then. So far as the year under appeal is concerned, it had filed a return under s. 139(1) showing business income at NIL and capital gain at Rs. 1,44,00,569. In response to the query made by the AO, it was stated that capital gain had arisen on transfer of shares which was held as Investment . Prior to 1st April, 1998, it had been maintaining a consolidated account of all its share holdings. On 1st April, 1998, it had segregated its share holdings into investment and stock-in-trade separately at Rs. 6,97,966 and Rs. 5,79,485 respectively. Thereafter, in the preceding year itself, the assessee-company made further acquisition of shares under the head Investment and at the end of the relevant financial year, i.e., 31st March, 1999, the position of this account was as under: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by us in para 1 above. It is also worthy of mention here that after receipt of the said order, the assessee brought to the notice of the first appellate authority through a petition dt. 21st May, 2004 that some of its arguments had not been considered. The said petition too was disposed off by the learned CIT(A) vide his separate order dt. 27th July, 2004. 5. The learned counsel for the appellant referred to the definition of AO as contained in s. 2(7A) and also to various other related provisions of the Act and contended that only such an income-tax authority can perform the functions and exercise the powers of an AO who has been conferred with such an authority as per the provisions contained in sub-ss. (1), (2) and 4(b) of s. 120 of the IT Act, 1961. In support of this contention, he extensively referred to the passages of the synopsis filed by him which are reproduced hereunder: Validity of assessment order 6.1 Vide grounds Nos. 1.1, 1.2, 1.3 and 1.4 the appellant has disputed the jurisdiction of the learned Addl. CIT to pass the regular assessment order dt. 10th Feb., 2003. The appellant s contention, in short, has been that (a) the ACIT, Range-6, Kanpur who had even issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction of all the cases falling in that range. However, Addl. CIT/Jt. CIT will himself not make assessments but will closely monitor and supervise the same (copy appearing at pp. 65 to 68 of the compilation). (iv) 21.1.2002 Instructions issued by CBDT as have been referred to by the learned CIT(A) in his order dt. 27th July, 2004 passed under s. 154 of the IT Act, 1961 being Instruction No. 1 of 2002, reads as under : However, the Board has subsequently issued another Instruction No. 1/2002, dt. 21st Jan., 2002. Following extract from the said instruction will clarify the issue : It has also been brought to the notice of the Board that AC/DC in some of the Ranges finding it difficult to cope up either with the number of cases with them or the type and nature of cases required to be handled. It has accordingly been decided that cases may be allocated to Addl. CIT/Jt. CIT range or to ITO depending on the nature and type of cases, with the approval of Chief CIT. (v) 7.02.2002 Notification issued by CBDT, captioned as Power of assessment to Jt. CIT/Jt. Director of IT . Para 4 of the said instructions reads as under: 4. It is hereby clarified that Board s Notification S.O. No. 889(E), d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l). 6. Elaborating his arguments, the learned counsel for the appellant further submitted that, in addition to ITO/ACIT and Dy. CIT, the jurisdiction of the AO can be exercised only by such Jt. CIT or Jt. Director who is specifically directed under cl. (b) of sub-s. (4) of s. 120 to exercise and perform all or any of the powers and functions conferred on or assigned to an AO under this Act. In the present case, firstly, there is no authority given to Jt. CIT to act as an AO in the case of the appellant and in any case the Addl. CIT who is a separate authority under s. 116(cc) of the Act has absolutely no power to act as an AO and to pass an assessment order, as he does not even fall within the definition of an AO under s. 2(7A) of the Act. 7. It was further contended by the learned counsel for the appellant that in this particular case, where the assessee had moved a petition under s. 144A so as to implore the Addl. CIT to issue such direction as he thinks fit for the guidance of the AO to enable him to complete the assessment , the Addl. CIT himself could not have acted as an AO, entrusted with an authority to make an assessment. An analysis of s. 144A clearly goes to show that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to s. 2(7A) and submitted that on a conjoint reading of sub-ss. (1), (2) and (4) of s. 120 of the Act, the Asstt. CIT, Asstt. Director, Dy. CIT, Dy. Director, as also the Jt. CIT and Jt. Director can exercise and perform all the powers and functions of an AO side by side. He further submitted that as per the notification dt. 31st July, 2001, issued by the Chief CIT (hereinafter referred to as Chief CIT ), Kanpur under sub-s. (2) of s. 120 copy appearing at pp. 56 to 59 of the assessee s paper book), the Dy. CITs/ ACITs and ITOs were given concurrent jurisdiction over the territories / persons falling in the specified categories, along with Jt. CIT of each Range. By virtue of inclusive definition of the term Jt. CIT the Addl. CIT, Range 6, Kanpur, who was undisputedly the in charge of this Range, became ipso facto the AO in this Range concurrently with the ACIT. It signifies that there is no segregation of duties and functions of all these authorities, as far as their respective Ranges are concerned. According to him, in a nut shell, in a particular assessment range, the functions and duties of an AO can be performed by any of these authorities, namely Dy. CITs, ACITs and ITOs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has also been brought to the notice of the Board that AC/DC in some of the Ranges finding it difficult to cope up either with the number of cases with them or the type and nature of cases required to be handled. It has accordingly been decided that cases may be allocated to Addl. CIT/Jt. CIT range or to ITO depending on the nature and type of cases, with the approval of Chief CIT. 11. The learned CIT/senior Departmental Representative further submitted that the CBDT (hereinafter referred to as Board ) itself is the authority to issue directions conferring jurisdiction on the IT authorities subordinate to it and in terms of the instruction dt. 21st Jan., 2002, it has specifically directed that Addl. CIT of a Range can also act as an AO . 12. At this stage and after a perusal of the above referred passage of the later order dt. 27th July, 2004 of learned CIT(A), we enquired from the learned, CIT senior Departmental Representative as to whether, subsequent to instruction dt. 17th Sept., 2001, issued by the Board under s. 120(4)(b) of the Act, the Chief CIT or CIT Kanpur had passed any order assigning the jurisdiction of the AO on Addl. CIT/Jt. CIT either in this case specifically o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation of all the relevant notifications dt. 31st July, 2001, issued by Chief CIT, Kanpur, Notification dt. 17th Sept., 2001, issued by the Board under s. 120(4)(b), Instruction No. 1/2002, dt. 21st Jan., 2002, and finally the Notification dt. 7th Feb., 2002, issued by the Board . The later three instructions/notifications themselves go to supplement the notification dt. 31st July, 2001, issued by the Chief CIT, Kanpur and it was wholly unnecessary for the Chief CIT, Kanpur to pass any further order/notification conferring jurisdiction on the Jt. CIT Range 6, Kanpur to act as an AO in this case and pass the assessment order in that capacity. It is not in dispute that the assessee s case fell in Range 6 which is headed by Addl. CIT who has been defined in the inclusive definition of Jt. CIT as given in s. 2(28C) of the Act, Consequently, the assessment order dt. 10th Feb., 2003, passed by the Addl. CIT, Range 6 Kanpur as AO was well within his jurisdiction as AO and the said assessment order cannot be assailed on the ground of lack of jurisdiction. 15. As regards the appellant s contention that self-assumption of the role of an AO, by the Addl. CIT, and that too during the pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or . As per sub-s. (21) of s. 2 of the Act, such authorities include an Addl. Director, Jt. Director. Dy. Director and Asstt. Director also. But it does not mean that such authorities in general can assume the authority of Director General or Director, for all purposes, say for the purposes of issuing warrant of authorization to conduct search under s. 132(1) or to make requisition under s. 132A of the Act. Such an inclusive definition is only meant to serve a specific purpose and it cannot be stretched to mean and confer jurisdiction of the Director General or Director, on other authorities as are found mentioned in the definition given in s. 2(21) of the Act. In support of this contention, he referred to and relied upon the decision of the Hon ble Delhi High Court in the case of Dr. Nalini Mahajan vs. Director of IT (Inv) Ors. (2002) 176 CTR (Del) 1 : (2002) 257 ITR 123 (Del), wherein it has been held that search and seizure action as authorised by the Addl. Director of IT was not valid. The same analogy is applicable here also. Even if the inclusive definition of Jt. CIT includes Addl. CIT also, it will not mean that the Addl. CIT has become vested with the Authority to pass an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he argument did not proceed further as we had observed in the open Court that first of all legal controversy shall be decided. 19. We have carefully considered the rival submissions as also the material on record as has been placed before us in the form of paper book and synopsis (filed on behalf of the assessee) copies of notifications submitted by the learned CIT/senior Departmental Representative. Before proceeding further, we would like to mention that on the last date of hearing, the learned CIT/senior Departmental Representative had placed before us copies of notification dt. 17th Sept., 2001, notification dt. 7th Feb., 2002, issued by CBDT and also the order issued by the Chief CIT, Kanpur, dt. 31st July, 2001, allocating the jurisdiction to the IT authorities of Ranges 1 to 6 as were situated within the administrative control of CIT-I and II, Kanpur. No other circular/notification issued by Chief CIT/CIT, Kanpur after 21st Jan., 2002 or 7th Feb., 2002, was placed before us. At the close of the hearing, we had permitted him to file subsequent instruction, notification, communication, if any, issued by CBDT/Chief CIT Kanpur after 21st Jan., 2002 or 7th Feb., 2002, conferring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the CIT or Chief CIT, Kanpur to issue any notification/direction conferring jurisdiction on the Jt. CIT to exercise the powers and perform the functions of an AO But the questions that remain to be considered are: (i) whether there exists any such direction/notification issued by the Board which can be said to be giving the Jt. CIT, Range 6, Kanpur, the jurisdiction and the authority to act as AO and pass assessment order in his Range in general or in the case of the present assessee in particular? and (ii) if the answer is in affirmative, whether the Addl. CIT can be said to be covered by the inclusive definition of Jt. CIT as contained in s. 2(28C) of the Act? 21. Under the heading jurisdiction of the IT authorities, it has been provided by sub-s. (1) of s. 120 that all the IT authorities shall perform all or any of the functions conferred on or assigned to such authorities under this Act, in accordance with the directions that may be given by the CBDT As per sub-s. (2) of s. 120, the CBDT can delegate its authority in this respect, to any other IT authority (ies). As per cl. (b) of sub-s. (4) of s. 120, the CBDT may further empower the Director General or Chief CIT or CIT to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is not relevant here. 23. In the present case, the Chief CIT, Kanpur issued an order dt. 31st July, 2001 by exercising the powers conferred on him under sub-s. (2) of s. 120, whereby jurisdiction of the six ranges at Kanpur (which were situated within the administrative control of CIT-I and CIT-II), was allocated. In terms of the said order, the jurisdiction of an AO falling within the territorial limits of Range-6 was conferred only on Dy. CITs/ACITs and ITOs . It has been further laid down in the said order, that these very authorities, namely Dy. CITs/ACITs and ITOs shall be having concurrent jurisdiction over the assessees/persons falling in the overall jurisdiction of the Addl. CIT, Range-6, Kanpur. It is very significant to mention here that in terms of the said notification dt. 31st July, 2000, the Jt. CIT was not given the authority to exercise the powers and perform the functions of the AO. After issuing this order dt. 31st July, 2001, undisputedly the learned Chief CIT, Kanpur or even CIT Kanpur did not issue any further order in the matter of allocation of the jurisdiction of AO , in any of the six assessment ranges (as are situated within the administrative control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition moved by the assessee under s. 154). The said instruction reads It has also been brought to the notice of the Board that AC/DC in some of the Ranges are finding it difficult to cope up either with the number of cases with them or the type and nature of cases required to be handled. It has accordingly been decided that cases may be allocated to Addl. CIT/Jt. CIT range or to ITO depending on the nature and type of cases, with the approval of Chief CIT (d) Instruction dt. 7th Feb., 2002 issued by the CBDT wherein after referring to their earlier instruction dt. 20th Sept., 2001; it laid down that the same be treated to have been superseded by the notification dt. 17th Sept., 2001 (that has been reproduced by us at serial No. (a) above), relevant portion of which reads as follows : 4. It is hereby clarified that Board s Notification S.O. No. 889(E), dt. 17th Sept., 2001, will supersede the scrutiny guidelines issued vide Board s Instruction No. 5/2001, dt. 20th Sept., 2001 on the issue of the power of assessment to be exercised by the Jt. CIT/Jt. Director of IT, i.e., the Jt. CITs of IT/ Jt. Directors of IT shall exercise the powers and functions of the AOs and they will have th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 120(4)(b) of the Act. The notification dt. 17th Sept., 2001, issued by CBDT under s. 120(4)(b), (as has been reproduced by us at Sl. No. (a) of para 24 above) is of no avail to the Revenue to support its contention that, by virtue of the said notification alone, the Jt. CIT stood authorized to exercise the powers and perform the functions of an AO . A plain reading of the said notification, goes to show that, only such Jt. CIT can act as an AO who have been authorised to do so by the CIT. It means that in the absence of a specific authorization having been issued by the CIT in favour of a Jt. CIT he cannot act as AO and pass assessment order under his signatures. Neither before this notification dt. 17th Sept., 2001, (issued by CBDT) nor afterwards, any notification was issued by CIT (or even by Chief CIT) authorizing the Jt. CIT to exercise the powers and perform the function of AO in any of the six ranges at Kanpur. This is the position fairly admitted by the learned CIT/senior Departmental Representative, although he had vehemently contended that, it was not necessary in view of various notifications/instructions issued by CBDT viz., 17th Sept., 2001, 21st Jan., 2002 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus the Revenue cannot derive any support even from the said instruction dt. 7th Feb., 2002. 31. There is one more feature also of the instruction dt. 7th Feb., 2002. It should be read as an amendment to the instruction dt. 20th Sept., 2001 [reproduced in para 24(b)] to the effect that the embargo placed on the powers of Jt. CIT to make an assessment has been lifted, However, it cannot be meant to read that Addl. CIT too had become eligible to act as an AO. In fact as per the letter of law, the Addl. CIT has not been given the jurisdiction of the AO at all and accordingly the embargo placed on the power of Addl. CIT, to perform the function of an AO, is in furtherance of s. 2(7A) itself. Therefore, the said restriction continues to be operative. 32. We may mention that s. 116 gives details of the IT authorities. Clause (cc) of this section includes Addl. CITs. This clause was inserted w.e.f. 1st June, 1994. Sec. 2(7A) of the Act defines the word AO . As per this definition, the AO includes Jt. CIT. But again, Addl. CIT was not included in the definition of AO though the post of Addl. CIT existed in the Department. Again, the perusal of s. 2(28C) will indicate that the authority J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 120(4)(b) of the Act. As per this instruction, authorization by the CIT is needed. Admittedly, even as per the learned CIT/senior Departmental Representative that no such authorisation has been issued in favour of Jt. CIT. As per Instruction No. 1/2002, dt. 21st Jan., 2002, no doubt, the Addl. CIT/Jt. CIT can work as AO, but there too, the cases are to be allocated to them, obviously by higher ones in hierarchy. Here again there is a striking failure at the part of the Chief CIT or CIT to allocate the case of the present assessee to Jt. CIT or Addl. CIT. 35. Coming to the question No. (ii) as appearing in para 20 above, we hold that Addl. CIT as has been referred to in Instruction No. 1/2002, dt. 21st Jan., 2002 is not an authority who can act as an AO within the meaning of s. 2(7A) of the Act. Had the intention of the legislature been to cover Addl. CIT/Director in the inclusive definition of Jt. CIT , for the purposes of s. 2(7A) of the Act, nothing prevented it (the legislature) to do so by making suitable insertion. To the contrary, the Board has specifically laid down vide Instruction No. 5/2001, dt. 20th Sept., 2001 that Addl. CIT will himself not make assessment. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the assessee. It is evident from the said section that after the machinery of s. 144A is placed in motion, either at the initiative of the Jt. CIT or on a reference being made by the AO or on an application made by the assessee, such Addl. CIT/Jt. CIT has been left only with two options, either he may take a view that no instructions need be given for the guidance of the AO, or instructions need be given. In the later case, if he is of the opinion that instruction adverse to the assessee need be given then be again owes a statutory duly to give the assessee an opportunity of being heard. Nowhere it is envisaged, even by implication, that the Jt. CIT can adopt a third course and intimate the assessee that he himself would be stepping into the authority of the AO and finalize the regular assessment order under his own signatures, as has been done here. This will be an act of transgression of authority which cannot be permitted. Therefore, we hold that after the proceedings under s. 144A get initiated under any of the three situations as discussed above, the Jt. CIT himself cannot act as AO and pass an assessment order under his own signatures. Naturally, such a situati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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