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TMI Blog2016 (7) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to the claim of deduction in relation to DEPB receipts. Admittedly, no incriminating material during the search action was found in relation to any of the issue and no additions were made. Under the circumstances, the learned CIT invoked his revision jurisdiction u/s 263 of the Act and directed the AO to consider the issues which were pending in the reassessment proceedings regarding the allowance of deduction of DEPB receipts. Clearly, independent of the reassessment proceedings under section 147, the AO could not have considered the issue of the claim of section 80IB on DEPB receipts in the section 153A proceedings as no incriminating material was found in the search on this issue. The very validity of reopening of the assessment proceedings strikes to the very base of such addition, the learned CIT(A) was supposed to decide the same. Admittedly, the AO had rejected the objections of the assessee regarding the validity of the reassessment proceedings u/s 147 of the Act during the fresh assessment proceedings u/s 153A of the Act. The assessee has raised this ground before the learned CIT (A), who has dismissed the said ground holding that the same cannot be taken by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search; there was no abetment of assessment order originally passed u/s 143(2) dtd. 28.2.05; hence order passed u/s. 153A r. w. sec. 143(3) dtd. 22.12.09 is without jurisdiction. Hence, order passed by Ld. CIT u/s. 263 dtd.2.11.10 is without jurisdiction. The consequential order passed u/s. 1433) r. w. Sec. 263 dtd. 30.12.11 is bad in law and void. 2. Appellant pray that order passed u/s. 143(3) r. w. Sec. 263 dtd. 30.12.11 be cancelled. 3. The brief facts of the case as derived from the order of the learned CIT (A) are as under:- The appellant filed its return of income on 31-10-2002 declaring income of ₹ 85,30,400/- after claiming deduction under the following sections:- (i) 80 HHC - Rs.1,90,61,155/- (ii) 80 IB - Rs.1,18,24,950/- Assessment order u/s 143(3) was passed by the Assessing Officer on 28-02-2005. In this assessment order, claim of deduction under section 80IB was allowed without any variation. However, deduction u/s. 80 HHC was modified and recomputed by excluding from business income deduction claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider these issues in the order passed u/s. 153A of the I. T. Act, 1961. For this reason, the ld. CIT was of the opinion that the order passed by the Assessing Officer u/s. 153A of the I. T. Act, 1961 was erroneous and prejudicial to the interest of the Revenue. After considering the submissions of the assessee, Ld. CIT observed as follows in para 3 of his order u/s. 263 of the Act dated 02-11-2010:- I have considered the facts of the case. From the perusal of the facts it is seen that Assessing Officer has issued notice under Section 148 of the Income-tax Act to the assessee on 11-10-2007. From the reasons recorded by the Assessing Officer at the time of issue of notice, it is noticed that reassessment proceedings were initiated for withdrawing excess deduction allowed u/s. 80IB of the Income-tax Act as according to Assessing Officer DEPB receipts are not profits derived from the eligible undertaking and deduction u/s. 80IB is to be worked out after excluding DEPB receipts amounting to ₹ 2,19,47,989/- from the business income. The Assessing Officer has also issued questionnaire dated 06.07.2007 in the course of reassessment proceedings requiring assessee to explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, is to be treated as non-est, therefore the original assessment proceedings will be deemed to be completed and not pending on the date of search. He therefore, pleaded that his objections as to the validity of the reopening of the assessment be considered and decided. The assessing officer, however dismissed the objections of the assessee and passed the fresh assessment order dated 30.12.2011 recomputing the deduction u/s. 80IB at ₹ 31,10,554/- excluding the deduction earlier allowed on the DEPB receipts. 6. Being aggrieved by the said order of the AO, the assessee preferred appeal before the learned CIT(A) and reiterated its submissions as were made before the AO and requested for consideration of the objections regarding the validity of the reopening of the assessment u/s 147 of the Act. The learned CIT (A), however, after considering the submissions of the assessee dismissed the appeal of the assessee by observing as under:- I have considered the facts of the case and the submissions made by the assessee. It is an undisputed fact that the order appealed against is an order passed by the Assessing Officer giving effect to the order u/s. 263 of ld. CIT. As per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening of the assessment proceedings u/s 147 of the Act. The submission of the assessee was that it was not the original assessment proceedings which were abated but only the reopened assessment proceedings. If, the AO had to consider and make the additions which were the subject matter of consideration in the reopened assessment proceedings, the AO was also legally duty bound to consider the objections of the assessee in relation to the very validity of the initiation of such reassessment proceedings u/s 147 of the Act. In case, the said reopened assessment proceedings were held to be invalid, then the AO was precluded from going into the merits and in such circumstances, such proceedings being void and ab initio could not be considered to be pending or abated for the purpose of assessment proceedings u/s 153A of the Act. Thus, the original assessment proceedings would be deemed to be completed and not abated as on the date of search operation. The assessee also further pleaded that the notice issued u/s 148 of the Act in those proceedings was hit by the proviso to Section 147 of the Act. The assessee had duly disclosed all the material facts relevant for completing the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration had thus, already attained finality. He has further submitted that even otherwise in the first round of the assessment proceedings carried out u/s 153A of the Act, the AO had not considered any issue relating to the allowance or disallowance of deduction u/s 80IB and hence, there was no reason for the assessee to agitate the validity of the abated proceedings u/s 147 of the Act. However, since the learned CIT had directed while passing revision order u/s 263 of the Act to consider the assessment relating to the proceedings u/s 147 of the Act, under circumstances the assessee was also entitled to raise the question of the very validity of initiation of such proceedings u/s 147 of the Act and that the AO was duty bound to consider the objections of the assessee in this regard. If, the very validity of the proceedings u/s 147 of the Act is held to be illegal, then there was no question of making any addition relating to the issue under consideration during the proceedings u/s 147 of the Act. He has further submitted that the AO could not have made the addition relating to the issue of deduction of DEPB license u/s 80 IB of the Act because that issue had already been close ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the learned CIT passed u/s 263 of the Act vide which he directed the AO to consider the issues involved in reassessment proceedings which stood abated and pass fresh order u/s 153A. 3. If the initiation of the reopening of the assessment u/s 147 is held to be illegal or nullity in the eyes of law, then, whether the AO still could take into consideration the information relating to the issues which were the subject matter such proceedings u/s 147 and make additions in that respect during the fresh assessment proceedings u/s 153A of the Act in the absence of any incriminating material found in the search action. 4. Whether the AO was justified in making the addition in respect of DEPB receipts in pursuance to the direction of the learned CIT vide order passed u/s 263 of the Act, when there was no incriminating material found during the search action. So far as the issue as to whether the assessee could raise the plea before the AO during the fresh assessment proceedings u/s 153A of the Act pursuant to the direction of the learned CIT given in the revision order passed u/s 263 of the Act regarding the validity of initiation of the reopening proceedings u/s 147 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that this fact was brought to the knowledge of the Assessing Officer; despite that, the Assessing Officer framed the assessment upon a non-existing entity. It was submitted by him that framing of an assessment upon a company which has already been amalgamated by way of an order of the High Court is nullity in the eyes of law and in support of his arguments he placed reliance upon the following judgments: 1. Judgment of Delhi High Court in the case of Spice Infotainment Ltd. Vs. Commissioner of Service Tax in ITA 475 476 of 2011, dated 03.08.2011 2. CIT v. Dimension Apparels P. Ltd. [370 ITR 288 (Del)] 3. I. K. Agencies P. Ltd. v CIT [347 ITR 664 (Cal)] 4. CIT v Express Newspapers Ltd. [40 ITR 38 (Mad)] 5. Judgment of Delhi High Court in the case of CIT v Micra India P. Ltd. (2015) 57 Taxmann.com 163 (Del) 6. Order of the Tribunal Mumbai Bench, in the case of Instant Holdings Ltd. ACIT in ITA no. 4593, 4748/Mum/2011 order dated 09.03.2016. 7. Order of the Tribunal Kolkata Bench, in the case of Emerald Company Ltd in ITA no. 428/Ko1/2015 order dated 13.01.2016 8. Judgment of Karnataka High Court in the case of CIT v Intel Techno India P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at ₹ 2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation under Section 11. The value of the appeal was fixed at ₹ 9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res ludicata can confer the Court jurisdiction where non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate reassessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal. 8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly. The Tribunal further in para 10 11 of the order has observed as under: 10. If the impugned assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iced by us that similar view has been taken by Chandigarh Bench of the Tribunal in the case of Steel Strips Ltd (supra). 11. Thus, after taking into account all the facts and circumstances of the case, we find that in this case, the original assessment order passed u/s 143(3) dt 24-10-2013 was null void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s 263 by the Ld.CIT is also nullity in the eyes of law and therefore the same is hereby quashed. 12. A perusal of the above order reveals that various Courts of Law including the Hon ble Supreme Court has held that a defect of jurisdiction whether its pecuniary or territorial or whether it is a subject- matter of the action, strikes at the very validity of the Court to pass any decree and such a defect cannot be cured even by consent of the parties. That a decree passed by a Court without jurisdiction is a nullity and that its invalidity can be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment in the appeal against levy of penalty. The Hon ble Bombay High Court in the case of investors Industrial Corporation (supra) has held that the assessee was entitled to challenge the jurisdiction of the AO to initiate reopening of assessment proceedings before the CIT (A) in the second round of proceedings even though it has not raised the same before earlier proceedings before the AO or in the earlier appeal. 13. In the light of various case laws as cited above, the proposition that is coming out is that the jurisdiction or the legality of the proceedings can be agitated in a subsequent proceedings or even in a collateral proceedings or an execution proceedings also. If, the original order is illegal or without jurisdiction, the subsequent or collateral proceedings arisen out of such orders or proceedings, cannot be held to be valid. 14. Coming to the facts of the present case, the original assessment proceedings u/s 143(3) of the Act had already been completed and attained finality. At the time of search, the reopened assessment proceedings u/s 147 of the Act were pending. So, what were abated due to the search action were the reassessment proceedings u/s 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact unearthed during the course of 153A proceedings. Reliance can be placed in this respect on the decision of the Hon ble Bombay High Court in the case of All Cargo Global Logistics (supra) and Continental Warehousing Corporation (supra). Identical view has been taken by the jurisdictional Hon ble Bombay High Court in the case of CIT Vs. Murli Agro Products Ltd. ITA No.36 of 2009 decided vide order dated 29-10-2010. 15. Now, coming to the facts of the case, we find that the AO could have made the addition in the proceedings u/s 147 of the Act in relation to the DEPB receipts if the said reassessment proceedings u/s 147 of the Act were held to be valid. If, the said proceedings were held to be invalid, illegal or without jurisdiction, then the AO could not have made any addition in relation to DEPB receipts. However, as observed, the said reopened assessment proceedings abated without decision on the question of the validity of initiation of reopening of the said assessment proceedings u/s 147 of the Act. The learned CIT under his revision jurisdiction u/s 263 of the Act has directed the AO to consider the addition in respect of DEPB receipts, the issue which was under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue as he has not filed any appeal against the order of the CIT passed u/s 263 of the Act. As discussed above, such finding of the learned CIT (A) is not sustainable in the eyes of law. Hence, we direct the learned CIT (A) to consider the issue of the validity of the jurisdiction u/s 147 of the Act raised by the assessee and decide the same afresh. Needless to say that since it is a legal issue the assessee will be at liberty to challenge all aspects regarding validity and legality of the proceedings u/s 147 of the Act. The learned CIT (A) will consider the same and decide the said issue as per law. If, the very validity of the reassessment proceedings u/s 147 of the Act is held to be without jurisdiction, then the original assessment proceedings will be deemed to be concluded and attained finality. The subsequent reassessment proceedings u/s 147 of the Act thus, if, being held as non-est or void abinitio , the AO will have no jurisdiction in the fresh assessment proceedings u/s 153A to make any addition in respect of issues already concluded in original assessment in the absence of any incriminating material found during the course of action. With the above observation t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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