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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini: The captioned appeal filed by theRevenue,pertaining to Assessment Year 2012-13, is directed against an order passed by the Ld. Commissioner of Income Tax (Appeals)-18, Kolkata, in Appeal No.649/CIT(A)-18/16-17/Cir-7(1)/Kol dated 25.11.2016, which in turn arises out of an order passed by the ld. Assessing Officeru/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 27.02.2015.
2.The appeal filed for Assessment Year 2012-13, is barred by limitation by 41 days. The assessee has moved a petition requesting the Bench to condone the delay. We heard the party on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing.
ITA No.581/Kol/2017 M/s. Ganesh Realty & Mall Development Pvt. Ltd Assessment Year: 2012-13
The grievances raised by the Revenueare as follows:
“1. “Whether on the facts and circumstances of this case and in law, the ld. CIT(A) erred in quashing the complete assessment passed by the Addl. CIT as the A.O considering it to be extra-jurisdictional and hence not valid. 2. Whether on the facts and circumstances of this case and in law, the ld. CIT(A) erred in disregarding the order u/s 120(4) passed by the Pr. CIT assigning the case to the Addl. CIT for assessment due to erroneous interpretation of the order restructuring passed by the CBDT vide S.O. 2752(E) dt. 22.10.2014. 3. That the assessee craves leave to add, amend or modify any or all grounds of appeal at or before the time of hearing of the appeal.”
The brief facts qua the issue are that assessee company filed its return of Income disclosing loss to the tune of Rs.(-)8,47,55,799/-. During assessment proceedings assessee filed revised computation of income reducing its loss to the tune ofRs.(-) 1,93,15,404/-. Subsequently, this loss was again scaled down to Rs.(- ) 1,51,66,719/-. Assessee is running a mall and earning income mostly from rent. Initially rental income was offered as business income. However, in the revised computation, rental income was offered for taxation under the head income from ‘house property’. Consequently, depreciation claims and many other claims of expenses were withdrawn and deduction u/s 24(a) was claimed. This resulted in scaling down of the loss claimed by the assessee. In assessment proceedings the Assessing Officer considered rental income of Rs.3,67,94,120/- under the head income from house property, but the utility charges of Rs.7,59,59,588/- received by the assessee from shop and office owners/tenants was taken as income from other sources.The Assessee had also taken various unsecured loans. During assessment proceedings,the assessee had submitted before the AO, the PAN of said creditors, copies of loan confirmations, extract of bank statement, copies of acknowledgement of returns filed by the creditors in respect of the loans taken. All these loans were taken through cheques or RTGS. However, A.O. insisted that assessee to produce these parties for verification. Assessee submitted that Department has the power to enforce attendance of the creditors u/s 131 and it was suggested that the A.O. may exercise these powers for necessary verification. However, A.O. was not convinced and except for the loans taken from RKBK
ITA No.581/Kol/2017 M/s. Ganesh Realty & Mall Development Pvt. Ltd Assessment Year: 2012-13
Fiscal Services Pvt. Ltd., he held that all other loans were not genuine and made an addition of Rs.17,56,50,000/- u/s 68 of the I.T. Act.
Assessment order has been passed by Addl. CIT, Range-7. Assessee filed appeal against the assessment order and thereafter filed a writ petition in the Calcutta High Court for early hearing of appeal. Hon’ble Calcutta High Court passed the order dated 17.09.2015 directing the department for disposal of appeal in a given time frame.
Before the ld CIT(A), the assessee`s main objections was against validity of assessment order. Main objection in this regard were as under: a) With effect from 15.11.2014, Addl. CIT, Range-7 could not have performed the functions of an A.O. b) On 10.11.2014 there was a video conference and it was decided by CBDT that during the remaining part of that F.Y. no cases would be assigned to the newly created offices of Special Ranges and henceforth there would be no concurrent assessment jurisdiction to range heads. c) Board had not passed order u/s 120(4) authorizing Pr. CCIT / CCIT / CIT to pass any order u/s 120(4)(b), empowering Addl. CIT /Jt. CIT, Range heads to perform the functions of the A.O.s. d) Under no circumstances Range Heads could have performed the function of the A.O., in absence of valid order u/s 120(4)(b). In support of its proposition assessee had relied on the Delhi, ITAT's decision in the case of Mega Corporation Ltd. -vs- Addl.CIT, 62 Taxman.com 351.
On the issue of jurisdiction, report of the A.O. was called. In report dated 17.11.2Ol5, Jt.CIT, Range-7 submitted that notice u/s 143(2) was issued by DCIT, Circle-7, but the case was subsequently assigned u/s 120(4) to Jt./Addl. CIT, Range-7, by CIT-3 vide order no. 2/2014-15 dated 29.05.2014. In a subsequent report dated 15.01.2016, Jt. CIT, Range-7 submitted as under:
ITA No.581/Kol/2017 M/s. Ganesh Realty & Mall Development Pvt. Ltd Assessment Year: 2012-13
a) Pre restructuring jurisdiction vested with Addl.CIT, Range-7. Hence post restructuring jurisdiction was also with Addl. CIT, Range-7.
b) Restructuring was an administrative exercise. There were changes only in the nomenclature of the IT authorities. Hence order u/s 120(4) passed prior to 14.11.2014 was valid with all force in post restructuring period as well.
c) Exercise of restructuring has not affected the power of the Commissioner with regard to jurisdiction.
d) Post 15.11.2014 no supporting order for assigning case from one A.O. to another was communicated to the office of the Jt./Add1. CIT, Range-7.
In another report dated 15.01.2016 Jt. CIT, Range-7 has submitted as under:
A) Jurisdiction issue was not raised by the assessee before the A.O. B) CIT(Appeal) cannot entertain jurisdiction issue in view of the judgment of Hon’ble Punjab & Haryana High Court in the case of Smt. Jaswinder Kaur Kooner 291 ITR 80. If assessee was aggrieved about jurisdiction, it could have challenged it independently either before higher authorities or by way of a writ petition before the High Court. If no such challenge is made at the initial stage, this issue cannot be raised in appeal against assessment order.
Assessee filed rejoinder to A.O.'s reports. Salient issues raised in the rejoinder is as under: a) A.O. is defined in section 2(7A) as under: “Assessing Officer" means the Assistant Commissioner or the Income- tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub- section (1) or sub- section (2) of section 120 or any other provision of this Act, and the Deputy Commissioner who is directed under clause (b) of sub-
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section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;]
ACIT, DCIT, ADIT, DDIT & ITO are vested with relevant jurisdiction by sub section (1) or (2) of section 120 and the Addl. CIT is vested with assessment jurisdiction by clause (b) of sub section (a) of section 120.
a) Before the Addl./Jt. CIT exercises the powers of an A.O., conditions of section 120(4)(b) are to be fulfilled. b) Assessee is not barred by Principle of estoppels from questioning jurisdiction of the Addl.CIT, Range-7 only because assessee had participated in assessment proceedings. An illegal act committed by an authority can be challenged by an aggrieved party at any stage of the proceedings till they attain finality. Assessee relied on the following judgments / decisions in support of its proposition.
i) P V Doshi -vs- ClT, 113 ITR 22 (Gujrat) High Court. ii) Dasamuni Reddy -vs- Apparao [AIR 1974 SC 2089 at 2092 ] (SC) iii) Derendra Nath Gorai -vs- Sudhi Chandra Ghose [AIR 1964 SC 1300] iv) Kiran Singh -vs- Chaman Paswan [AIR 1954 SC 340 ] v) Mega Corporation Ltd. -vs- Addl.CIT, 62 Taxman.com 351 Delhi, ITAT.
c) Assessee had complied with the directions of Addl. CIT, Range-7 in good faith, not knowing at that time whether necessary powers were vested with Addl.CIT, Range-7, regarding jurisdiction over the case.
d) Notification number 64 dated 30.11.2014 issued by CBDT is in force since 15.11.2014. As per this notification, after 14.11.2014 an Addl. CIT, Range was permitted to perform A.O.s function only if Pr. CCIT or Pr. CIT authorized him to perform such functions. Permission u/s 120(4) having received on 15.11.2014, Pr. CCIT, WB & Sikkim or Pr. CIT-3, Kolkata should have passed a new order authorizing Addl. CIT, Range-7 to perform such functions.
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e) With effect from 15.11 .2074 jurisdiction of A.O.s was determined as per the new jurisdiction order. f) Order u/s 120(4) was passed by CBDT on 13.11.2014 in supersession of earlier order. g) Pr. CCIT, WB & Sikkim did not pass any order u/s 120(4)(b) enabling Pr, CIT to empower Range Heads to function as A.O.
After getting the reply from the assessee during the appellate proceedings, the ld CIT(A), in order to decide the jurisdiction of the officer, who has passed the assessment order has referred the notification dated 22.10.2014 issued by CBDT, vide which new jurisdiction came into effect on 15.11.2014. This notification no.50 of 2014, was issued vide S.O 2752(E) and read as under:
MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION (Income-tax) New Delhi, the 22nd October, 2014
S.O. 2752(E).—In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income Tax Act, 1961 (43 of 1961), and in supersession of Government of India, Central Board of Direct Taxes, notification number S.O. 732(E) dated the 31st July, 2001, published in the Gazette of India, Extra- Ordinary, Part-II, Section 3, Sub-section (ii), dated the 31st July, 2001 except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes, hereby,-
(a) directs that the Principal Commissioners of Income-tax or Commissioners of Income-tax specified in column (2) of the Schedule-I annexed hereto, having their headquarters at the places specified in the corresponding entries in column (3) of the said Schedule-I, shall exercise the powers and perform the functions in respect of such cases or classes of cases specified in the corresponding entries in column (6) of the said Schedule-I, of such persons or classes of persons being residents or not ordinarily residents in India as per section 6 of the Income-tax Act, 1961 and as specified in the corresponding entries in column (5) of the said Schedule-I, in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-I, in respect of all incomes or classes of income thereof; Page | 6
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(b) directs that the Principal Commissioners of Income-tax or Commissioners of Income-tax specified in column (2) of the Schedule-II annexed hereto, having their headquarters at the places specified in the corresponding entries in column (3) of the said Schedule-II, shall exercise the powers and perform the functions in respect of any cases or classes of cases, of any persons or classes of persons in respect of all incomes or classes of income, in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-II;
(c) authorizes the Principal Commissioners of Income-tax or Commissioners of Income-tax specified in column (2) of the said Schedule-I to issue orders in writing for exercise of the powers and performance of the functions by the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax, who are subordinate to them, in respect of such cases or classes of cases specified in the corresponding entries in column (6) of the said Schedule-I, of such persons or classes of persons specified in the corresponding entries in column (5) of the said Schedule-I, in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-I, in respect of all incomes or classes of income thereof;
(d) authorizes the Principal Commissioners of Income-tax or Commissioners of Income-tax specified in column (2) of the said Schedule-II to issue orders in writing for exercise of the powers and performance of the functions by the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax, who are subordinate to them, in respect of any cases or classes of cases, of any persons or classes of persons in respect of all incomes or classes of income, in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-II;
(e) authorizes the Additional Commissioners of Income-tax or Joint Commissioners of Income-tax referred to in clauses (c) and (d) of this notification, to issue orders in writing for exercise of the powers and performance of the functions by the Assessing Officers, who are subordinate to them, in respect of such specified area or persons or classes of persons or incomes or classes of incomes or cases or classes of cases, in respect of which such Additional Commissioners of Income-tax or Joint Commissioners of Income-tax are authorized by the Principal Commissioners of Income-tax or Commissioners of Income-tax referred to in clause (c) and (d) of this notification.
Explanation :-
For the purposes of this notification,-
(i) “residing” means,-
(a) in the case of an individual, place of residence, unless otherwise provided in this notification; Page | 7
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(b) in the case of an Hindu undivided family, place of residence of the Karta; and
(c) in the case of a firm or an association of persons or a body of individuals or a local authority and all other artificial juridical persons other than companies, the place where the head office is located.
(ii) in cases of companies whose names begin with any of the numerical (hereinafter “numeric companies”), the Principal Commissioners of Income-tax or Commissioners of Income-tax who exercise the powers and perform the functions in respect of companies whose names begin with the alphabet which is same as that of the first alphabet of the name of the numeric companies in words, shall exercise the powers and perform the functions in respect of those numeric companies.
(iii) column (2) of the schedule specifies the designation of Income-tax authorities as “Principal Commissioner/ Commissioner of Income-tax”. The designation is to be understood as Principal Commissioner of Income-tax or Commissioner of Income-tax. For example, “Principal Commissioner/ Commissioner of Income- tax, Ahmedabad-1” refers to an income tax authority, which could either be Principal Commissioner of Income-tax, Ahmedabad-1, or Commissioner of Income-tax, Ahmedabad-1.
Note: The Income-tax authorities referred to in column (2) of the schedule annexed to this notification shall not exercise powers and perform functions, which have specifically been assigned through separate notification(s), to an Income-tax authority having designation other than those mentioned in column (2) below. 2. This notification shall come into force with effect from 15th day of November, 2014.
Having gone through the notification, the ld CIT(A) noted thatas per the above mentioned notification, S.O. 732(E) dated 31.07.2001 was superseded. Till 14.11.2014, the I.T. Authorities exercised jurisdiction as per S.O. 732(E). However, on restructuring, with effect from 15.11.2014, income tax authorities [assessment charges] exercised jurisdiction as per S.O. 2752(E).In sub clause (b) & (c) of notification dated 22.10.2014, Pr. CIT or CIT were authorized to pass orders in writing for the exercise of the powers and functions by the Addl.CIT or Jt. CIT, who were subordinate to them. Consequently Pr. CIT passed suitable orders but Addl. CIT / Jt. CIT who were supervising a Range, were not given the powers of A.O. Post of Special Ranges were created and only the Addl. CIT / Jt. Page | 8
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CIT who was holding the post of Special Range was authorized to act as A.O., in respect of cases assigned to them through order u/s 127 in future. As pointed out by the AR, A.O. is defined in section 2(7A) of the Act and it says that ACIT / DCIT, ADIT / DDIT or the ITO would be considered as A.O. who are vested with the relevant jurisdiction by order u/s 120(1) or 120(2) but the Addl. CIT / JT.CIT, Addt.DIT / Jt. DIT would act as A.O. if they are empowered u/s 120(4)(b) of the Act in writing. As is apparent from the facts narrated above, and also admitted by the Jt. CIT, Range-7 in remand report, no order was passed after 15.11.2014 authorising the Addl.CIT, Range-7 to discharge the function of an A.O. In fact with notification dated 22.10.2014, Addl.CIT, Range-7 was divested of jurisdiction as A.O. over this case as on 15.11.2014. In remand report Jt. CIT, Range-7 has mentioned at one place that this case was assigned to Addl.CIT, Rage-7 through order u/s 127, although in the subsequent report it is mentioned that case was assigned u/s 120(4). Now let us examine whether assignment of the case even u/ s 127 would make any difference. To take care of the cases assessed in the central charges, CBDT had issued another notification no.70 of 2014 dated 13.11.2014. It read as follows:
SECTION 120(1) AND (2) OF THE INCOME-TAX ACT, 1961 - INCOME- TAX AUTHORITIES - JURISDICTION OF - SUPERSESSION OF NOTIFICATION NO. SO 822(E), DATED 23-8-2001 NOTIFICATION NO. 70/2014 [F. NO. 187/37/2014 (ITA-I)]/SO 2915(E), DATED 13-11-2014 In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India, Central Board of Direct Taxes number S.O.822(E), dated the 23rd August, 2001 published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), dated the 23rd August, 2001, except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes hereby,—
(a) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the Schedule -1 or II annexed to this notification, as the case may be (hereinafter referred to as the "said Schedules") or the Principal Commissioner/Commissioner of Income-tax Page | 9
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specified in column (4) of the said Schedules or Joint Commissioners of Income-tax or Assessing Officers, shall continue to exercise powers and perform the functions as stipulated in the said Act, in respect of such persons or classes of persons or such incomes or classes of incomes or such cases or classes of cases in which the said Income-tax authorities have been exercising powers and performing the functions on the basis of jurisdiction assigned by any order passed under the said Act on the date of publication of this notification, till such jurisdiction is revoked;
(b) directs that the Director General of Income-tax or the Chief Commissioner of Income-tax specified in column (2) of the said Schedules or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules or Joint Commissioners of Income-tax subordinate to them, shall exercise powers and perform the functions as stipulated in the said Act in respect of such cases or classes of cases or such persons or classes of persons, assigned to Assessing Officers subordinate to them, under section 127 of the said Act, from the date of publication of this notification;
(c) authorises the Director General of Income-tax or the Chief Commissioner of Income-tax specified in the said Schedules, or the Principal Commissioner/Commissioner of Income-tax specified in column (4) of the said Schedules, to issue orders in writing, vesting jurisdiction to exercise powers and perform functions of an Assessing Officer as defined under clause (7A) of section 2 of the said Act, to the Deputy Commissioner of Income-tax or Assistant Commissioner of Income-tax or Income-tax Officer who are subordinate to them.
This notification shall come into force with effect from the 15th day of November, 2014.
The Ld CIT(A) noted that on perusal of clauses (a) & (b) shows that central charges continued exercising jurisdiction over the case assigned u/s 137. But his privilege were granted only to the central charges and not within normal assessment charges. This was also clarified in the notes to notification dated 22/10/2014 which says that Pr. CCIT/Pr. CIT would not exercise any jurisdiction over cases specifically assigned to other I.T. authorities through separate notifications. Hence even if the case was assigned to Addl. CIT, Range-7 through order u/s 127, he was no longer an A.O for this case w.e.f. 15.11.2014. In remand report Jt. CIT, Range-7mentioned that nobody directed Addl.CIT, Range-7 to transfer back the case to DCIT /ACIT, Circle-7 after 15.11.2014. In Page | 10
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this regardld CIT(A) noted that Addl.CIT, Range-7 was involved in passing jurisdiction order for ACIT /DCIT and ITOs under him. As he was involved in the restructuring process and passing of jurisdiction order, he should have known the correct implication of restructuring effective from 15.11.2014. No one else can be faulted for not informing him about the implication of restructuring.
In remand report Jt. CIT, Range-7 has mentioned that restructuring was an administrative exercise and order u/s 120(4) passed by CIT was valid even after 15/11/2014. However, this is not correct. Till 14/11/2014, CIT derived powers From S.O. 732(E) dated31/07/2001. However, w.e.f. 15/11/2014, this notification was superseded by S.O. 2752 (E). More importantly, Addl. CIT/Jt. CIT Range was not empowered to act as A.O. w.e.f.15/11/2014.
In remand report Jt. CIT, Range-7 has relied on the judgment of Hon’ble Punjab & Hariyana High Court in Smt. Jaswinder Karu Kooner vs- CIT(A), Jalandhar 291 ITR 80 wherein it has been held that an assessee aggrieved by transfer of jurisdiction u/s 127 should challenge the same in an independent proceeding either before higher administrative authorities as per act or by way of writ petition. If no such challenge is made at initial stage, issue cannot be raised in an appeal against assessment order. On the other hand,assessee has relied on the decision of Delhi, ITAT in Mega Corporation Ltd. -vs- Addl.CIT, 62 Taxmann.com 351, wherein issue regarding jurisdiction of Addl.CIT was taken up for the first time before the ITAT and Hon’ble ITAT, Delhi admitted the additional ground and held that Additional CIT did not have jurisdiction to perform the powers of A.O. as no valid order u/s 120(4)(b) or u/s 127 as passed. Assessee has also submitted that they were not aware that Addl. CIT, Range-7 no longer could exercise the powers of an A.O after 15.11.2014 and they continued attending the proceedings in good faith.
We have heard both the parties and perused the material available on record, we note that the judgment cited by the Jt. CIT, Range in remand report relates to
ITA No.581/Kol/2017 M/s. Ganesh Realty & Mall Development Pvt. Ltd Assessment Year: 2012-13
irregular jurisdiction exercised by the A.O. There was dispute regarding the correct A.O. who would exercised jurisdiction over the case. But there was no confusion regarding officer passing the assessment order having the powers to act as an A,O., whereas in assessee's case Addl.CIT, Range-7 was divested of the powers of A.O. with effect from 15.11.2014. Therefore, the order u/s 143(3) passed by Addl.CIT, Range-7 on 27.02.2015 is illegal and not sustainable in law.That being so, we decline to interfere with the order of Id. C.I T.(A), His order on this jurisdictional issue is, therefore, upheld.That is, the conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Order is pronounced in the open court on 23.01.2019.
Sd/- Sd/- (S. S. GODARA) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; �दनांक/ Date: 23/01/2019 (RS, Sr.PS) आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to :
अपीलाथ�/The Assessee- DCIT, Cir-7(1), Kolkata 2. ��यथ�/ The Respondent- M/s. Ganesh Realty & Mall Development Pvt. Ltd. 3. आयकरआयु�त(अपील) / The CIT(A), 4. आयकरआयु�त/ CIT 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, कोलकाता/ DR, ITAT, Kolkata 6. गाड�फाईल / Guard file. स�या�पत��त