GK BUSINESS CENTRE (P) LTD,NEW DELHI vs. ITO WARD - 10(4), NEW DELHI

1. That under the facts and circumstances the proceedings u/s.147 / 148 initiated and completed on the basis of reasons recorded by the A.O. Ward-lO(l) who was not having the jurisdiction and no fresh reasons being recorded by the jurisdictional A.O. of Ward-10(4). the whole proceedings are without jurisdiction, illegal and unsustainable in law.

The brief facts qua the legal issue that proceedings u/s.147/148 have been initiated and completed on the basis of ‘reasons recorded’ by the Non-Jurisdictional Assessing Officer and that the assessee has been filing its return of income with ITO, Ward-10(4) wherein as per the PAN and also otherwise the correct jurisdiction lies before the ITO Ward- 10(4) only. The assessee has filed its return of income on 27.09.2010 before the ITO, Ward-10(4) which was duly processed also u/s. 143(1). Thereafter, notice u/s.148 has been issued on 31.03.2016 which has been assigned and issued by ITO, Ward-10(1), New Delhi who apparently did not had jurisdiction upon the assessee. The copy of ‘reasons recorded’ as incorporated in the assessment order reads as hereunder: “The assessee filed return of income for the A.Y. 2010-11 on 27.09.2010 declaring income of Rs.5,690/-. The return was processed u/s 143(1). Information was forwarded to this office through the Addl.CIT, Range-10, New Delhi that search & seizure action was conducted by Inv. Wing at the office of Sh. Pradeep Kumar Jindal where various incriminating documents/materials were seized during the course of search. During the post search investigation and perusal of seized documents it was observed that Sh. Pradeep Kumar Jindal was engaged in the business of providing accommodation entries by providing cheques/PO/DD in lieu of cash to a large number of beneficiary companies thorough various paper and dummy companies floated and controlled by them. It was also evidently established by the Investigation Wing that Sh Pradeep Kumar Jindal is known entry providers and is the actual controller of various companies/proprietary firms/partnership firms. They control these entities through various persons by appointing them as directors/ partners /proprietors apart from nominating them as authorized

Ld. Counsel for the assessee submitted that notice u/s 148 has been issued by ITO, Ward-10(4) who is jurisdictional Assessing Officer, but the reasons have been recorded by the different Assessing Officer. He pointed out that while seeking approval in terms of Section 151, the format clearly shows that the approval has been sought on the reasons recorded by ITO, Ward-10(1) who did not had jurisdiction. Thereafter, the notice u/s.148 has been issued on 31.03.2017 by ITO, Ward- 10(4), New Delhi. Even the assessment order u/s.147/143 (3) has been passed by ITO, Ward-10(4) on 30.12.2017. Thus, proceedings u/s.147 have been initiated by non Jurisdictional Assessing Officer, i.e., ITO, Ward-10(1) and even the approval u/s.151 from the higher authorities have also been granted on the reasons recorded by the non Jurisdictional Assessing Officer, i.e., ITO, Ward-10(1). It is a well settled law that the reasons should be recorded only by the Jurisdictional Assessing Officer and not by different Assessing Officer. In support of his contention, he strongly relied upon the judgment of Hon’ble Gujarat High court in the case of Pankaj Bhai Jayshuklal Shah vs. CIT, reported in (2020) 425 ITR 70; and decision of ITAT Delhi Bench in the case of Manoj Kumar vs. ACIT reported in 79 ITR (Tribunal) 158 Delhi.

During the course of hearing, we had directed the ld. DR to obtain a report from the Assessing Officer, as to whether any reasons have been recorded by ITO, Ward-10(4), i.e., jurisdictional Assessing Officer and whether any approval has been given u/s.151 on such reasons recorded. After obtaining the information from the Assessing Officer, the ld. DR informed in the open court that the reasons as incorporated in the assessment order are the only reason which has been recorded and signed by the ITO, Ward-10(4). However, he submitted that, this will not making any difference, because reasons have been duly recorded based on tangible material and information on the basis of which proceedings have been initiated u/s.147 and assessment has been framed, therefore, there is no illegality in such proceedings.

We have heard the rival submissions and also perused the relevant finding given in the impugned order as well as the material placed on record on the issue raised in ground no.1 by the assessee. It is an admitted fact that the correct jurisdiction of the assessee lies with ITO, Ward-10(4) and prior to the issuance of notice u/s 148, the income tax returns, for Assessment Year 2015-16 and 2016-17 were filed before ITO, Ward-10(4). This information was already there on the record and even the PAN jurisdiction mentioned the jurisdiction of the assessee is before ITO, Ward-10(4). However, the reasons as incorporated in the assessment order have been recorded by ITO, Ward-10(1), New Delhi and the approval u/s.151 has been sought from PCIT on the ‘reasons recorded’ by ITO, Ward-10(1) on 30.03.2017, thereafter the notice u/s.148 issued by ITO, Ward-10(4) on 31.03.2017 and the assessment has been framed by the same officer on 30.12.17. Following chronology of event from the records placed in the paper-book makes it very clear:

Thus, it is an undisputed fact that the proceedings have been initiated u/s.147 by recording the reasons by non Jurisdictional Assessing Officer and therefore, notice u/s.148 and consequent assessment order has been framed by the jurisdictional Assessing Officer. It is a trite law that the notice u/s.148 is a jurisdictional notice and the Assessing Officer can validly acquire jurisdiction u/s.147 after recording the reasons and thereafter issuing and serving a notice u/s 148 in accordance with law. The reasons have to be recorded by the jurisdictional Assessing Officer for reopening the assessment as contemplated u/s. 148(2) and the same officer, i.e., jurisdictional Assessing Officer has to issue a notice u/s.148(1). Being the matter of jurisdiction, it cannot be envisaged that a non jurisdictional Assessing Officer records the reasons and seeks approval from the higher authorities and then jurisdictional Assessing Officer takes over the proceedings and passed the assessment order. Such an action has been held to be illegal, in the case of Pankajbhai Jaisukh vs. ACIT (supra) wherein the issue involved was that, the reason for reopening the assessment was recorded by the jurisdictional Assessing Officer. However the notice u/s.148 was issued by non jurisdictional Assessing Officer. On these facts their Lordships held that such proceedings are bad in law. The relevant observations are as under: Held, allowing the petition, that while the reasons for reopening the assessment had been recorded by the jurisdictional Assessing Officer, viz., the Deputy Commissioner, Circle 2, the notice under section 148(1) had been issued by the Income-tax Officer, Ward 2(2), who had no jurisdiction over the assessee, and hence, such a notice was bad on the count of having been issued by an Officer who had no authority to issue such notice. It was the Officer recording the reasons who had to issue the notice under section 148(1) whereas the reasons had been recorded by the jurisdictional Assessing Officer and the notice had been issued by an Officer who did not have jurisdiction over the assessee. The notice under section 148 being a jurisdictional notice, any inherent defect therein could not be cured under section 292B. It was not possible for the jurisdictional Assessing Officer, viz., the Deputy Commissioner to issue the notice under section 148 on or before March 31, 2018 as migration of the permanent account number was not possible within that short period and therefore, the Income-tax Officer had issued the notice instead of the jurisdictional Assessing Officer. Thus there was an admission on the part of the Department that the Deputy Commissioner, Circle 2, who had jurisdiction over the assessee had not issued the notice under section 148 but it was the Income Tax Officer, Ward 2(2) who did not have any jurisdiction over the assessee who has issued such notice. No proceedings could have been taken under section 147 in pursuance of such invalid notice. The notice under section 148(1) and all the proceedings taken pursuant thereto could not be sustained.

Here in this case, though situation is reversed that reasons have been recorded by non jurisdictional Assessing Officer but notice was issued by jurisdictional Assessing Officer. Here in this case, jurisdictional Assessing Officer has not recorded the reasons as mandated in Section 148 (2). Thus, it can be clearly inferred that the notice u/s. 148(1) has been issued without recording the reasons, because reason recorded by non jurisdictional Assessing Officer cannot give jurisdiction to the present Assessing Officer. The same principle of the Hon’ble High Court will apply in the present case also. Hence, on this ground alone, we hold that the proceeding u/s.147/148 is void ab initio and without jurisdiction and same is quashed.

The other issued raised are purely academic have been rendered infructuous.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 2nd February, 2021