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TMI Blog2015 (10) TMI 2365X X X X Extracts X X X X X X X X Extracts X X X X ..... o frame the impugned assessment under section 143(3) of the Act. This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs the Additional Commissioner to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. As regards the notification no. 267/2001 dated 17.9.2001 we notice that such notification by CBDT u/s 120(4)(b) of the Act directs that Joint Commissioner of Income Tax or Joint Director shall exercise the power and function of an Assessing Officer in respect of specified cases in respect of which such Joint Commissioner or authorized by Commissioner of Income Tax vide CBDT notification dated 14.9.2001 and 31.7.2001. It is thus apparent that the said notification is applicable in respect of Joint Commissioner authorized by Commissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi. We thus find merit in the claim of the appellant that in abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the proceeding before the Assessing Officer, therefore, the appellant has accepted the jurisdiction of the Assessing Officer, is contrary to the well settled position of law that the participation cannot be foundation for an assessment without jurisdiction and in any case, the said finding is in breach of the directions of the Hon ble Tribunal in order dated 16.01.2013, which has acquired finality and has not been challenged by the revenue. 2 That the learned Commissioner of Income Tax (Appeals) has otherwise too failed to appreciate that the order of assessment was without jurisdiction in absence of an order transferring jurisdiction u/s 127 of the Act from the learned DCIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi. 3 That the learned Commissioner of Income Tax (Appeals) - IX New Delhi has also grossly erred both in law and on facts in upholding the action of the learned Assessing Officer to treat the long term capital gain on shares of ₹ 6,10,92,870/- as business income of the appellant company and, disallowance of claim of exemption of ₹ 6,10,92,870/- u/s 10(38) of the Act. 3.1 That the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticularly when transactions of identical nature were accepted in the immediately preceding assessment year and as such, finding recorded are based on subjective, whimsical and, arbitrary considerations and, therefore not sustainable. 3.7 That the finding of the learned Commissioner of Income Tax (Appeals) in order dated 6.12.2010 that, no payment for purchase of shares was made in the immediately preceding assessment year is factually incorrect and, contrary to material on record. Infact, he has overlooked the fact that, investment was made in the shares out of the sale and was shown and accepted as short term capital gain on purchase and, sale of shares in the immediately preceding assessment year, which has been offered and, assessed to tax. 3.8 That the learned Commissioner of Income Tax (Appeals) has further erred in recording contradictory and vague findings in order dated 6.12.2010. The findings recorded in the impugned order are totally contrary to the material placed on record and is nothing but is based on figment of an imagination including the finding that no STT was paid on such transactions and is not established from the contract notes issued by the broker, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, even if it is assumed (not admitted) for the same of an argument that the learned Additional Commissioner of Income-tax was empowered under section 124)4)(b) read with section 2(7A) of the Act, then too, order of assessment is without jurisdiction in absence of an order transferring jurisdiction u/s. 127 of the Act from the learned DCIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi . 3.1 The ITAT in an order dated 16.1.2013 admitted the additional grounds and thereafter, set aside two issues raised in the additional ground to the file of learned CIT(A) for adjudication on merits. It was held as under: 7. We have duly considered the rival contentions and gone through the record carefully. As far as the admission of additional grounds of appeal are concerned, we are of the view that both these grounds are directly challenging the validity of the assessment which would ultimately effect the taxability of the assessee. If the assessment order has been passed by an authority who has no jurisdiction over the assessee in that case, the assessment order would not be sustainable. Hon ble Supreme Court in the case of NTPC has observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter, called for the comments from the Assessing Officer and dismissed the appeal of the assessee and as such, this appeal has been preferred by the assessee. 4. Ground Nos. 1 and 2 raised by the assessee challenge the assumption of jurisdiction by the Additional CIT to frame the impugned order of assessment dated 29.12.2008 under section 143(3) of the Act. The relevant facts are that appellant company furnished a return of income on 30.11.2006 which was accepted in an intimation dated 23.3.2008 under section 143(1) of the Act. It is further not disputed that notice u/s 143(2) of the Act dated 15.10.2007 was issued by DCIT, Circle 6, New Delhi for framing assessment under section 143(3) of the Act. Thereafter, on 25.8.2008, notice was issued by Additional CIT, Range 6, New Delhi under section 142(1) of the Act and pursuant thereto, assessment has been framed under section 143(3) of the Act on 29.12.2008 by the Additional CIT, Range 6, New Delhi. The contention of the assessee is that the aforesaid assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as under: 15.3 The appellant objected that even if concurrent jurisdiction is given to the Addl. CIT, an order u/s 127 of the Act is required to be passed to give Addl. CIT the power to complete a particular assessment as it is done in the cases of transfer of cases to another AO after issue of notice u/s 143(2) of the Act by another AO. On this account, the issue raised is whether after notice u/s 143(2) is issued by the DCIT, Circle-6(1), assessment order can be passed by the Addl. CIT of Range-6 having concurrent jurisdiction. This issue involves the interpretation of concurrent jurisdiction which is beyond the scope of this appeal within the restricted direction of the Hon ble ITAT. In my considered opinion, since both Addl. CIT Range-6 and DCIT Circle-6(1) works as subordinate officer to the same CIT, and the CIT having entire territorial jurisdiction, the passing of assessment order by the Addl. CIT after issue of notice u/s 143(2) by the DCIT Circle-6(1) does not affect the taxability of the appellant or appellant is not adversely affected by the order. 4.2 Apart from the above, another additional basis adopted by the learned CIT(A) to reject the claim of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case, even assuming that the said order is a valid order conferring jurisdiction on Additional Commissioner of Income Tax then too impugned assessment is invalid since notice u/s 143(2) was issued on 15.10.2007 by DCIT, who then did not have jurisdiction to validly initiate proceedings for assessment u/s 143(3) of the Act. Thus in his submission, on either of the basis, the assessment framed is an invalid assessment. It was also submitted that there is no order under section 127 of the Act for transfer of jurisdiction from DCIT to Additional CIT. It has been contended that when a power is conferred upon two authorities concurrently one of them can exercise that power and once a decision is taken to exercise the power either by the two authorities, that exercise must be terminated by the either authority. In support of above, the learned counsel also relied upon the following decisions: a) M/s. Prachi Leathers Pvt. Ltd. vs. Additional CIT in 744 /Lucknow/04 dated 29.3.2010; b) M/s. City Garden vs. ITO 21 taxmann.com 373 (Jodhpur) c) Microfin vs. CIT 94 TTJ 677 (Lucknow) 4.4 The learned counsel further contended that mere acquiescence or participation in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the relevant jurisdiction by virtue of directions or orders issued under section 120(1) or 120(2) or any other provision of this Act. The second part provides that Assessing Officer means the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under this Act. In other words, it is manifest that Assessing Officer inter-alia means Additional Commissioner who is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. In other words, an Additional Commissioner can only be directed u/s 120(4)(b) of the Act to Assistant Commissioner or Deputy Commissioner or Assistant Director or deputy Director or Income Tax Officer under the Act. This interpretation also derives strength from the provisions contained in section 120(4)(b) of the Act which reads as under: 120. Jurisdiction of income-tax authorities (4) Without prejudice to the provisions of sub-sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs or perform the functions of an Assessing Officer under the Act. He can perform the functions and, exercise the powers of an Assessing Officer only if he is specifically directed under section 120(4)(b) of the Act. In fact, the above conclusion is also supported by the decision of the Tribunal in the case of Prachi Leathers Pvt. Ltd. (supra) wherein it has been held in para 16.2 of the decision as under: 16.2 From the contents of the aforesaid provisions, it is quite clear that so far as Addl. Commissioner is concerned, firstly he has been included in the definition of Assessing Officer given under section 2(7A) of the Act with effect from 1.6.1994 as a result of retrospective amendment made by the Finance ACt, 2007 but at the same time, it is also clear that the Addl. Commissioner will be Assessing Officer as envisaged in section 2(7A) so amended only if he is directed under clause (b)of sub-section (4) of section 120 to exercise or perform all or any of the powers and functions concerned on or assigned to an Assessing Officer; meaning thereby that the Addl. CIT can function or can exercise the powers and perform the functions of an Assessing Officer if he is empowered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 is not valid in law to the said extent. 18.2 So far as the present case is concerned, though we are concerned with the powers of Additional CIT but the proposition of law laid down by the Hon ble High Court which was, though in relation to powers of Additional Director (Investigation), is fully applicable to the present case. 18.3 In view of the aforesaid facts, circumstances and the discussion and following the law laid down by the Hon ble Delhi High Court in the case of Dr.Nalini Mahajan (supra), first of all we are of the opinion that the Addl.CIT, Range-6, Kanpur having not been empowered to exercise or perform the powers or functions of an Assessing Officer, the assessment framed by him was illegal and void ab initio. 5.5 Similar view has also been expressed in the case of City Garden vs. ITO (supra) whereby it was held as under: The Revenue s which has also placed its written submissions on record, stand that the Jt. CIT, Sri Ganganagar, had jurisdiction to assess the assessee u/s 120 of the Act, thus, cannot be accepted i.e., in the absence of a specific order issued in pursuance to section 120(4)(b) specifically authorizing him to exercise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 01.08.2007. 6.1 It has been noted by learned CIT(A) that in Schedule I of the above mentioned order, the jurisdiction of the Additional CIT, Range 6, New Delhi is stated clearly as in the case of companies registered under the Companies Act, 1956 with the name beginning with the any of the expressions M dot, MA to MN alphabets. The perusal of the above order dated 1.8.2007 would show that it refers to notification No. 267/2001 dated 17.9.2001 which reads as under: Section 120 of the Income-tax Act, 1961 Jurisdiction of Income-tax authorities Notification No. 267/2001 [F.No. 187/5/2001-ITAT-I] dated 17-9-2001 In exercise of the powers conferred by clause (b) of sub-section (4) of section 120 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby directs that the Joint Commissioners of Income-tax or the Joint Directors of Income-tax, shall exercise the powers and functions of the Assessing Officer, in respect of territorial area or persons or classes of persons or incomes or classes of income or cases, or classes of cases, in respect of which such Joint Commissioner of Income-tax are authorised by the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by it may have regard to any one or more of the following criteria, namely :- (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. 6.4 Section 120(1) provides that income tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. Thus section 120(1) stipulates that powers and functions of an income tax authority shall be confined and restricted to the powers and functions conferred or assigned by Board under the Act. Further section 120(2) enables the Board u/s 120(1) to even authorize an income tax authority to issue an order in writing for exercise of powers and function by subordinate income tax authorities. In other words, section 120(2) does not in any manner provide that CIT can authorize an Additional Commissioner of Income Tax to perform the functions and, exercise the powers of an Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be disputed after the completion of the assessment proceedings. The facts in the case were that assessee filed its return of income for the assessment year 1974-75 which was processed by the Assessing Officer, namely, Income Tax Officer, Central Circle-I, Kanpur who completed the assessment under section 143(3)/144B of the Act on September 7, 1977 after making certain additions and disallowances to the returned income. On appeal assessee contended that the assessing authority had no jurisdiction to pass the assessment order in as much as the assessment file stood transferred from Income Tax Officer, Central Circle-I, Kanpur to the Inspecting Assistant Commissioner Range-D, Kanpur by the order dated July 1, 1977 and thus the assessment order by the Income Tax Officer was void-ab-initio. The Tribunal allowed the appeal on the ground that the Income Tax Officer, Central Circle-I had no jurisdiction in view of the transfer order dated July 1, 1977 transferring the case to the Inspecting Assistant Commissioner. The Hon ble High Court in light of the above facts held as under: 18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the absence of any objection with regard to lack of jurisdiction by the assessee. It is a case where both the Assessing Officer and the assessee proceeded as if there is no transfer order transferring jurisdiction. 8.3 The above proposition if applied specifically support the plea of assessee i.e. in absence of jurisdiction order made by Additional Commissioner of Income Tax is a nullity. 8.4 The learned CIT(A) has also referred to the judgment in the case of Mukti Properties (P) Ltd. vs. CIT 344 ITR 177 (Cal). In the said judgment their Lordships have held once an issue has not been raised before the first Appellate Authority then the appellant is stopped from raising the said issue at the later stage. The said judgment is also not applicable as this issue from raised by the appellant before the Tribunal and the Tribunal had then directed the CIT(A) to adjudicate the said issue on merits. The said order of Tribunal has became final and therefore having regard to the above the said judgment does not support the case of the revenue. 8.5 Further more reliance on provisions contained in section 124 of the Act is of no help to the revenue in as much as here is a case wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate officer. . . . (p. 141) 29. It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an application for anticipatory bail it must deal with it and similarly if the Sessions Judge is seized of an anticipatory bail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT, Range-6,Kanpur irrespective of the fact as to whether he was authorized to perform the functions of an AO or not, is illegal and void ab initio for want of jurisdiction. Consequently, we are of the opinion that the assessment order in the present case dated 31.3.2003 passed by the Addl.CIT, Range (6), Kanpur was illegal and void ab initio for want of jurisdiction. Consequently, the assessment order is quashed. 9.2 Consequently on this count also, the assessment made on 29.12.2008 by the Additional Commissioner is illegal and bad in law for want of jurisdiction. 10. For the reasons aforesaid we hold that the order of assessment dated 29.12.2008 was without jurisdiction and therefore is quashed as such. In result, ground Nos. 1 and 2 are allowed. 11. Ground No(s) 3 and 4 of Grounds of Appeal are regarding treatment of long-term capital gain and, short-term capital gain declared by the appellant company as business income of the appellant company. However since we have quashed the assessment order itself, the issues raised by the assessee by way of other grounds of appeal do not survive, and, therefore, do not require any adjudication. Ground No. 5 of Ground of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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