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TMI Blog2023 (11) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... not necessary an order u/s. 127 should be passed. Thus, does not mean that the Assessing Officer whether the return of income were earlier filed seized to have jurisdiction, provided the assessee has residence in his area place of business, class, income etc. residence can mean permanent residence as well as current or temporary residence of some permanence , such explanations by the Ld. AO itself proves that no order u/s. 127 was issued by Ld. Principal Commissioner of Income Tax (PCIT). In a case where the assessment proceedings are initiated by an Assessing Officer and the same are later on transferred to another AO then according to section 127(4) an order u/s. 127(1) (2), irrespective of with or without concurrent jurisdiction, has to be issued at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officers from whom the case is transferred. Identical issue as been dealt in the case of Shri Bangalore Narayan [ 2023 (3) TMI 1403 - ITAT BANGALORE ] as decided the issue of validity of assessment u/s. 143(3) by change in incumbent but without issuance of order u/s. 127, following the guiding principle of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of trading of land and therefore the provisions of section 40A (3) is clearly attracted? 2. Whether on the facts and circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs. 1,42,85,000/- by way of disallowance u/s. 40A(3) of the IT Act on account of amount paid towards purchase of land which is stock-in trade of the assessee and claimed as expenditure since the Id. CIT(A) has completely ignored the fact that no exemption provision is applicable as envisaged in Rule 6DD and the same has not challenged by the assessee or in the order of the Ld. CIT(A)? 3. Whether on the facts and circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs. 1,42,85,000/- by way of disallowance u/s. 40A (3) of the IT Act on account of amount paid towards purchase of land which is stock-in trade of the assessee and claimed as expenditure as the assessee had not brought anything before the Assessing officer which showed that the cash payments were made out of business expediency? 4. Whether on the facts and circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs. Rs. 1,66,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the assessee are culled out as under: 1.1 The assessee-firm wants to raise additional ground of appeal, which is given as under, may kindly be admitted taken on record for your kind consideration adjudication on the matter: Additional Gr.No.1: 1. On the facts and circumstances of the case and in law, return has filed u/s. 139(1) with ITO-1(4); notice u/s. 143(2) issued by ITO-1(1) who was not having authority of law to issue such notice u/s. 143(2) as per sec2(7A), sec124(1) rws.120(2) (3); no notice u/s. 143(2) issued by ITO-1(4) who passed order u/s. 143(3); in absence of a valid notice issued u/s. 143(2) by ITO-1(4) who was the 'Assessing Officer' as per sec2(7A), sec124(1) rws.120(2) (3), assessment made u/s. 143(3) by ITO-I (4) would be invalid as without assuming valid jurisdiction for making assessment u/s. 143(3), is liable to be quashed. Additional Gr.No.2: 2. On the facts and circumstances of the case and in law, return has filed u/s. 139(1) with ITO-1(4) who was the 'Assessing Officer' as per sec2(7A), 124(1) rws.120(2) (3); there is violation of sec143(2) as notice u/s. 143(2) can only be issued by the &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;limited scrutiny' selection; in absence of prior approval of PCIT as per CBDT Instruction No. 7/2014 No.20/2015; without assuming valid jurisdiction by the Id AO, impugned addition is unjustified and is liable to be deleted. Additional Gr.No.6: 6. On the facts and circumstances of the case and in law, Id AO has erred in making addition of Rs. 18,05,000, on credits in undisclosed bank account, when it was not the issue of 'limited scrutiny' assessment under CASS; it is in violation of CBDT Instruction No.7/2014; No.20/2015; No.5 of 2016; Id AO cannot go beyond the issues mentioned in the reasons for selection of 'limited scrutiny' assessment under CASS; Id AO is barred from looking into unconnected/ independent issue(s) other than those mentioned in the reasons for 'limited scrutiny' selection; in absence of prior approval of PCIT as per CBDT Instruction No.7/2014 No.20/2015; without assuming valid jurisdiction by the Id AO, impugned addition is unjustified and is liable to be deleted. The above 'additional grounds' of appeal are legal in nature raised before your Honor's Bench first time which goes to the root of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom ITO ward -1(1) to ITO ward-1(4). In absence of an order u/s. 127, the assumption of jurisdiction by the Assessing Officer, i.e., ITO, ward 1(4), who has framed the assessment, is as good as no jurisdiction, thus the order passed by such an officer who is bereft of valid jurisdiction, is equal to an Illegal order, invalid in the eyes of law, consequently, the same is liable to be quashed. 7. On the issue of change of incumbent which is evident from the assessment order also that the case was first taken up by ITO ward -1(1), Raipur, who has issued the first notice u/s. 143(2) on 30.07.2016 copy of the same is extracted as under: 8. The aforesaid notice has been placed before us by the Ld. AR which in turn has been confronted to the Ld. CIT DR, representing the case on behalf of the department, with a request to verify the same from the case records and confirm that, whether an order u/s. 127 was issued by the Ld. PCIT in the present case or not to effect the change of incumbent. In response Ld. CIT DR furnished before us the assessment records, as well as a report dated 28.06.2023 by the ITO ward -1(1), on perusal of the said report of ITO, it is apparent that no n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of from the date of service of notice dated 30.07.2016, therefore, the assessee is not entitled to raise objection over the jurisdiction of the AO as per provision of section 124(3) of the Act. For sake of convenience, the said section is reproduced below: - Section: 124(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return under sub- section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 142 or subsection (2) of section 143 or after the completion of the assessment, whichever is earlier In view of the above fact, the assessee has no right to call in question on the jurisdiction of the AO passing the assessment order. 5. In case of any change in the jurisdiction of AO or for desired change in AO's jurisdiction, he has to request jurisdictional Pr. CIT an application under section 127 for transfer from one assessing officer to other in view of his convenience. Merely change in PAN data base or filling of ITR other than the jurisdictional Assessing Officer is not sufficient to justify his claim of self-assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceeding u/ s 143(3) was completed as on 29.12.2017. The assessee had neither challenged the jurisdiction before AO during the assessment proceeding nor before Id. CIT(A) during appellate proceedings. Thus, it is evident that the assessee has challenged the jurisdiction only in order to escape from tax liability arising from assessment proceeding. Further, the provisions of Section 124(3) are very clear. Where the appellant is of the view that the jurisdiction is not justifiable, the appellant is free to challenge the same before the AO or under writ or seek any further legal remedy. But where the appellant does not exercise such an option, it cannot be questioned later on. The same observation was made by the Hon'ble High Court of Delhi in the case of Abhishek Jain vs Income Tax Officer, Ward - 55(1), New Delhi (WRIT PETITION (CIVIL) No. 11844/2016) that As far as territorial or pecuniary jurisdictions are concerned, objection should be taken at the earliest possible opportunity and / or before the settlement of issues and not at the subsequent stage. Jurisdiction as to the subject matter is distinct and stands on a different footing. Thus, the ground of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction by the Assessing Officer. 9.3 In Mantoo Sarkar v. Oriental Insurance Co. Ltd. [20091 2 SCC 244, the apex court in relation to the question of jurisdiction of the Tribunal under the Motor Vehicles Act has made the observation that A distinction, however, must be made between a jurisdiction with regard to the subject-matter of the suit and that of territorial and pecuniary jurisdiction. Whereas in the case falling within the former category the judgment would be a nullity, in the latter it would not be. 9.4 In the case of Kiran Singh v. Chaman Paswan, AIR 1954 SC 340, wherein a distinction has been drawn between a jurisdiction with regard to the subject matter of the suit and that of territorial and pecuniary jurisdiction. It has been held that a decree or judgment passed by a court having no territorial or pecuniary jurisdiction is not a nullity but at the most it is an irregularity, and such a judgment and decree cannot be set aside by higher court while exercising appellate or revisional jurisdiction unless a prejudice which has been caused to the appellant is established. 9.5 In the case of CIT vs. All India Children Care Educational Development Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing has to be examined each year with reference to provisions of section 124. Section 124 provides flexibility and postulates multiple and concurrent jurisdiction including filing of return and where the assessee has permanent or current residence or where he has sole/ only source of income. (v) An assessment order passed without making reference to Commissioner/ Commissioners under section 124 is not a nullity for want of jurisdiction but it results in irregularity which can be rectified by order of remit and directing the Assessing Officer to continue with the proceedings from the stage where the error had occurred. 10. In the present case, the assessee has not challenged the issue of jurisdiction before the AO and before Id. CIT(A). Even the assessee was having sufficient opportunity during assessment proceeding as well as during the appellate proceeding. Thus, it clearly indicates that the assessee had not come with clean hands for raising an additional issue of challenging jurisdiction before the Hon'ble ITAT. Even through, if the jurisdiction over the assessee does not lies of the AO passing the assessment order, the same should be disclosed before the AO before c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO ward 1(4) was very much in compliance of the provisions of the Act and, therefore, the ITO, W-1(4) cannot be treated as non-jurisdictional AO, leading to qualify the assessment framed u/s. 143(3) as invalid. 10. We have considered the rival contentions, perused the material available on record and case laws relied upon by the parties. Admittedly, in the present case a notice u/s. 143(2) were issued by ITO ward 1(1) who is not having a valid jurisdiction in the case of assessee, however, subsequently the case was transferred to ITO ward 1(4), who is the jurisdictional AO for the assessee. It is further noticed that for change of incumbent no order u/s. 127 was issued by the Ld. PCIT having jurisdiction over such officers and the assessee s case. From the report of the ITO ward 1(1) regarding issuance of order u/s. 127, mentioning that it is not necessary an order u/s. 127 should be passed. Thus, does not mean that the Assessing Officer whether the return of income were earlier filed seized to have jurisdiction, provided the assessee has residence in his area place of business, class, income etc. residence can mean permanent residence as well as current or temporary resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality, or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings and shall not render necessary the reissue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. 12. According to aforesaid provisions of section 127, it is explicitly clear that in a case where the assessment proceedings are initiated by an Assessing Officer and the same are later on transferred to another Assessing Officer then according to section 127(4) an order u/s. 127(1) (2), irrespective of with or without concurrent jurisdiction, has to be issued at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officers from whom the case is transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in the present case has been dealt with by the ITAT, B bench, Bangalore in the case of Shri Bangalore Narayan in IT(IT)A Nos. 120 121/Bangalore/2022 vide order dated 17.09.2023, wherein IT, Bangalore has decided the issue of validity of assessment u/s. 143(3) by change in incumbent but without issuance of order u/s. 127, following the guiding principle of law laid down by Hon ble Apex Court in the case of CIT vs Hotel Blue Moon reported in (2010) 321 ITR 362 (S.C) wherein it is held that, issue of a legally valid notice u/s. . 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. . 143(3) of the Act and absence of a valid notice u/s. 143(2) is not a curable defect. The view taken in the case of Hotel Blue Moon (supra) was reiterated by Hon'ble Supreme Court in another case of CIT vs Laxman Das Khandelwal in (2019) 108 taxmann.com, the observations of the tribunal are extracted as under: 7.6. Admittedly, there was no notice issued by the ITO Ward 1(1) International taxation, had jurisdiction over the assessee and who completed the assessment. We have carefully considered the rival submissions. Section 127 of the Act reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re- issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.--In section 120 and this section, the word case , in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year. 7.7. It can be seen from the provisions of Sec.127(4) of the Act that the necessity of re-issuing notice under section 143(2), by the transferee AO is not necessary, but on the date on which the notice under section 143(2) is issued by the transferor AO, he must have held a valid jurisdiction over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether on the facts and in circumstances of the case the issuance of notice under Section 143(3) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside? 4. In said appeal arising from the decision of the Income Tax Appellate Tribunal ('the Tribunal', for short), the issue that arose before the High Court was the effect of absence of notice under Section 143(2) of the Income Tax Act, 1961 ('the Act', for short). The Respondent-Assessee relied upon the decision of this Court in Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113/321 ITR 362 (SC). On the other hand, reliance was placed by the Appellant on the provisions of Section 292BB of the Act to submit that the Respondent having participated in the proceedings, the defect, if any, stood completely cured. 5. At the outset, it must be stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not see any reason to restrict the scope and meaning of the expression so far as may be, apply . In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub- sections (2) and (3) of Section 143. 6. The question, however, remains whether Section 292BB which came into effect on and from 01.04.2008 has effected any change. Said Section 292BB is to the following effect: -- 292BB. Notice deemed to be valid in certain circumstances.-- Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner: Provided that nothing contained in this section sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew in the matter. 7.10. In the present case, admittedly no notice u/s. . 143(2) was issued by the AO who had jurisdiction over the assessee at all material point of time. The assessee filed return of income on 31/03/2018, under section 139(4). A notice u/s. . 143(2) of the Act, dated 24/09/2018 was issued by the ITO Ward 1(2)(1), who never had jurisdiction over the assessee. Thereafter, another notice u/s. . 143(2) dated 28/09/2018 was issued ITO Ward- 4(3)(4), who also did not have jurisdiction over the assessee. The case was transferred by ITO Ward 4(3)(4) on 24/06/2019 to ITO Ward-1(1), International Taxation who had jurisdiction over the assessee. The ITO Ward-1(1), International Taxation passed the assessment order dated 28/12/2019 was passed u/s. . 144 r.w. 147 of the Act. 7.11. In such circumstances, the decision of the of Hon'ble Supreme Court in case of CIT vs. Hotel Blow Moon (Supra), and CIT vs Laxman Das Khandelwal will be clearly applicable to the facts of the present case. We also find that Hon'ble Supreme Court in a recent decision in case of CIT vs. S.K. Industries reported in (2022) 141 Taxmann.com 569 took identical view that, where an assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to file any return, the question of availing section 124(3)(a) of the Act did not arise. 8. Be that as it may, in the considered view of the Court, the AO having jurisdiction i.e., Respondent No. I ought to have issue a notice under section 143(2)(a) of the Act within the prescribed time limit i.e., 30th. September 2014 in order to proceed with the assessment. Considering that a similar mistake of an AO not having jurisdiction over the Assessee issuing a notice to it had been committed earlier, there was no occasion for the Revenue to continue to repeat the same mistake and expect that it will be condoned. 9. The impugned assessment order dated 31st March 2016 is unsustainable in law since it has been passed without the AO having jurisdiction over the Assessee issuing notice to it under section 143(2)(a) within the prescribed time limit i.e., on or before 30th September 2014. The impugned assessment order dated 31st March 2016 is hereby set aside. 16. As substantiated by the Ld AR, the contention that the assessment proceedings in absence of an order u/s. 127 for change of incumbent embedded with no notice issued u/s. 143(2) by jurisdictional AO, cannot be validated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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