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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 ..... eserve to be quashed as such. 1.1 That the learned Commissioner of Income Tax (Appeals) having admitted that there is no order under section 120(4)(b) of the Act as required under section 2(7A) of the Act was wholly incorrect in law and on fact to uphold the assessment on the basis of an order under section 120(2) passed by the CIT-II, Delhi based on Notification No. 267 of the Board and principle of substance over procedure. 1.2 That the finding of the learned Commissioner of Income Tax (Appeals) that since the appellant had participated 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 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts is concluding that the assessee has failed to establish that, securities transaction tax which was leviable on the transfer of such shares was not paid. The finding is factually incorrect and, contrary to material on record. 3.6 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, mere alleged violation of the provisions of SEBI could not be sufficient to disentitle the assessee, in treating the asset held as equity shares as long term capital asset, particularly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act 29.12.2008 is without jurisdiction since the learned Additional Commissioner of Income-tax, who framed the impugned assessment was not empowered or authorized or directed under the provisions of sec. 120(4)(b) read with section 2(7A) of the Act to exercise the powers or perform the functions of Assessing Officer and as such, order of assessment is illegal, invalid and, be quashed as such. 2. Without prejudice to the above, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal taken before us in the second round of litigation. Learned CIT(Appeals) need not to comment on any other issue. It is needless to say that the observations made by us will not impair or injure the case of the Assessing Officer and will not cause any prejudice to the defence/explanation of the assessee. Learned First Appellate Authority shall adjudicate the alleged grounds of appeal." 3.2 The learned CIT(A) thereafter, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y jurisdiction is not accepted. As far as, specific directions of the Hon'ble ITAT is concerned there is no procedural lapse adversely affecting the appellant in the impugned order. Hence, I find no error in passing the assessment order by the Ld. Addl. CIT. Hence, this ground of appeal is dismissed." 4.1 So far as the latter contention is concerned, the same too, was negated by the Learned CIT(Appeals) by concluding 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) work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o vest the Additional CIT the power to exercise and perform the functions of the Assessing Officer, the assessment framed is legally unsustainable. He referred to the provisions contained in sections 120, 121 and also section 124 along with 2(7A) of the Act to support his contention. It was contended that order dated 1.8.2007 in an order u/s 120(2) and not u/s 120(4)(b) of the Act. It was submitted that in 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 termin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;" 5.2 A plain reading of the aforesaid provision would show that it is in two parts. The first part provides that Assessing Officer means the "Assistant Commissioner" or "Deputy Commissioner" or "Assistant Director" or "Deputy Director" or "Income Tax Officer" who is vested with 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or a Joint Director by whom, the powers and functions are to be exercised or performed under such order and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. 5.4 The position which emerges thus is that an Additional Commissioner of Income Tax ipso facto cannot exercise the powers 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self, read with the provisions of the General Clauses Act, the Addl. Director does not get any statutory power to issue authorization to issue warrant. Therefore, the Addl. Director (Investigation) cannot be said to have any power to issue any authorization or warrant to Joint Director. Consequently, notification dt. 6th Sep. 1989 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onding entries in column (6) of the such Schedule-I, in respect of such persons or classes of persons specified in the corresponding entries in column (5) of the such Schedule-I in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-I. This order shall take 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised 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 powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of assessment framed is without jurisdiction. 8. The learned CIT(A) has relied on the judgment in the case of CIT vs. British India Corporation Ltd. 337 ITR 64 (All) to hold that question of jurisdiction of the assessing authority cannot 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment order was submitted to the Inspecting Assistant Commissioner. Subsequent change in the jurisdiction if any unless brought to the notice of the authority concerned, will not in any manner vitiate the assessment order 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 havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate 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 pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.8.2002 transferring jurisdiction over the assessee's case from the Income-tax Officer, Range 6(2), Kanpur to the Addl. CIT, Range-6,Kanpur and therefore, the assessment framed by the Addl.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 assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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