THE ITO-2(2), BHOPAL vs. SHRI SANDEEP KUMAR DUBEY, BHOPAL

आदेश /O R D E R

PER SHRI C.M. GARG, JM

This appeal has been filed by the Revenue against the order of

the learned CIT(A)-I, Bhopal, dated 30.3.2015 in First Appeal

No.CIT(A)/BPL/IT-268/13-14 for the assessment year 2005-06.

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 2. The only ground raised by the Revenue–appellant reads as

follows :-

“On the facts and in the circumstances of the case, ld. CIT(A)-I has erred in –

“Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in the view that the assessment order for the A.Y. 2005-06 is not a legally valid issued by a non-jurisdictional Assessing Officer and hence annulled.”

return of income u/s 139 of the Act (in short ‘the Act’) for the

assessment year 2005-06. The ITO, Ward-2, Sagar, received

information that the assessee had made investment of

Rs.71,50,000/- in Kisan Vikas Patra on 31.3.2005 with the Post

Office, Sagar Cantt., Sagar, and received an amount of

Rs.1,10,34,595/- on 9.5.2011 on maturity of these Kisan Vikas

Patras and the amount was deposited in his bank account with

Union Bank of India, Garhkota, Sagar. The ITO, Ward-2, Sagar

initiated reassessment proceedings u/s 147 of the Act for the

assessment year 2005-06 by issuing notice u/s 148 of the Act on

17.2.2012 after recording reasons on 1.2.2012 and obtaining

satisfaction of the JCIT, Sagar Range, Sagar. In response to the

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 notice u/s 148 of the Act, the assessee furnished return of income

before the ITO, Ward-2, Sagar, on 2.7.2012 declaring nil taxable

income and agricultural income of Rs. 28,22,000/- under protest.

The assessee requested the ITO, Sagar, that he was residing at

Bhopal and his jurisdiction vested with ITO 1(1), Bhopal.

Thereafter, the ITO, Ward 2, Sagar, transferred the records vide

letter dated 5.9.2012 to ITO 1(1) Bhopal. The ITO 1(1), Bhopal

continued with the assessment proceedings and issued notice u/s

143(2) of the Act on 4.10.2012. Subsequently, the ITO, Bhopal,

also issued notice u/s 142(1) of the Act with detailed questionnaires

and after considering the submissions of the assessee and making

inquiries, completed the assessment u/s 147 of the Act read with

section 143(3) of the Act on 5.3.2013 determining taxable income at

Rs.71,50,000/- and agricultural income at Rs. 50,000/-.

learned CIT(A)-I, Bhopal. The learned CIT(A), after careful

consideration of the submissions of the assessee in the wake of the

facts of the case, allowed the appeal of the assessee.

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 5. Since the learned CIT(A) has granted relief to the assessee and

annulled the assessment order on legal ground, therefore, the

aggrieved revenue has filed this appeal challenging the conclusion

recorded by the learned CIT(A) on the ground as reproduced

hereinabove.

Representative (in short ‘learned DR’) is that when initiation of

reassessment proceedings u/s 147 of the Act was made by the ITO,

Sagar, by issuing notice u/s 148 of the Act and these proceedings

were also continued by the ITO, Bhopal, by issuing subsequent

notices u/s 143(3) and 142(1) of the Act at the request of the

assessee himself then the assessee cannot challenge the validity of

assumption of jurisdiction by the ITO, Bhopal. Per contra, the

contention of the learned counsel for the assessee is that when the

ITO, Sagar, has initiated reassessment proceedings by issuing

notice u/s 148 of the Act in pursuance with the direction and

approval of the JCIT, Sagar, then without an order transferring the

jurisdiction to ITO, Bhopal, the ITO, Bhopal cannot assume valid

jurisdiction for framing the reassessment order and in such a case

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 the reassessment order has to be treated as passed without having

valid jurisdiction.

the view that the reassessment order u/s 147 read with section

143(3) of the Act dated 5.3.2013 for the assessment year 2005-06

has been passed by the ITO, Bhopal, in continuation to the

reassessment proceedings initiated by the ITO, Sagar, on transfer of

assessment record at the request of the assessee vide letter dated

5.9.2012. From the relevant operative part of the impugned order

i.e. para 3.15 to 3.24, we observe that the learned CIT(A) has relied

upon various judicial pronouncements of the orders of the Hon'ble

Supreme Court, Hon'ble High Courts and ITAT including the

decision of ITAT, Delhi, in the case of ITO vs. M/s Indus Valley

Investment & Finance P. Ltd. dated 6.7.2012 in ITA No.

4239/Del/2011 for the assessment year 2002-03 wherein the

Tribunal, upholding the findings of the learned CIT(A) quashing the

reassessment order, has dismissed the appeal of the revenue with

the following observations :-

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 “5. We have heard both the parties and gone through the facts of the case. The issue before us is as to whether the reassessment framed by the AO i.e ITO Ward-11(4),New Delhi, in pursuance to a notice dated 31.03.2008 u/s 148 of the Act, issued by Income-tax Officer, Ward-2, Gurgaon, who did not have jurisdiction over the case of the assessee, is valid one. A mere glance at the relevant provisions reveals that section 147 authorizes and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income for assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose that income has escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The reason to believe must be that of the concerned AO ,having jurisdiction over the case, who has relevant returns and other material in his possession. Section 148(1) of the Act envisages that before making the assessment, reassessment or recomputation u/s 147, the AO shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is 9 ITA no.4239/Del./2011 assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Sub section (2) provides that the AO shall, before issuing any notice under this section, record his reasons for doing so. It is the assessing officer ,who has jurisdiction over the assessee and records reasons, who can issue notice u/s 148 of the Act. It is well settled that consent cannot confer jurisdiction upon the AO nor waiver by the assessee[CIT v. Ramsukh Motilal [1955] 27 ITR 54( Bom.) 5.1 In the instant case, indisputably ITO Ward-11(4),New Delhi had jurisdiction over the assessee company and the assessee is filing return in that ward regularly. The ITO Ward-2,Gurgaon,who did not have jurisdiction over the assessee, issued a notice u/s 148 of the Act on the basis of information from DIT(Investigation) that the assessee 6

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 was in receipt of accommodation entries. As soon as the assessee informed him that jurisdiction over his case was vested with ITO Ward-11(4),New Delhi, records were transferred to New Delhi. Thereafter, the said ITO proceeded to complete the assessment without even recording reasons to believe stipulated in section 147 or issuing any notice u/s 148 of the Act. As mentioned by the AO in his remand report, the ITO Ward 11(4),New Delhi never issued any notice u/s 148 of the Act .Thus ,he did not assume jurisdiction to reassess the income of the assessee even when original return declaring income of ``37,440/- was filed on 22.10.2002 by the assessee in his ward. Apparently, the ITO Ward 11(4),New Delhi committed an irregularity by not issuing notice u/s. 148 of the Act again and instead continued the proceedings u/s. 148 of the Act, initiated on 31.3.2008 by the ITO Ward- 2,Gurgaon. This was objected to by the assessee vide letter dated 3-12-2008. Apparently, the jurisdictional AO i.e. ITO, Ward-11(4),New Delhi never acquired jurisdiction to re-assess the income of the assessee under section 147 of the Act nor ever recorded the reasons in writing as stipulated in the said section. The 10 ITA no.4239/Del./2011 reasons for reopening of any assessment have to be recorded by jurisdictional AO alone because he maintains the relevant and primary records. The basic requirement u/s 147 of the Act is that the AO has reason to believe that any income chargeable to tax has escaped assessment. Such belief can be of jurisdictional AO alone and not of any other AO or authority. Reassessment proceedings initiated on the directions given by the CIT were held to be invalid in CIT v. T. R. Rajkumari [1973] 96 ITR 78 (Mad.) & Sheo Narain Jaswal & Ors. v. ITO & Ors. [1989] 176 ITR 352 (Pat.). Hon'ble Apex Court in CIT v. A. Raman & Co., [1968] 67 ITR 1 (SC) observed that whether on the information in his possession he should commence a proceeding for assessment or reassessment must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act; if he has information from which it may be said, prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court, exercising powers under article 226 of the Constitution, to set aside or vacate the notice for reassessment on a reappraisal of the

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 evidence. The ITO referred to herein is ,ITO having jurisdiction over the assessee and not any other ITO. It is well-settled that if a notice under section 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down . In view of the foregoing, we have no hesitation in upholding the findings of the ld. CIT(A), quashing the reassessment order. Consequently, ground no1 in the appeal is dismissed In view of the above, it is a very well settled legal position that if a

notice u/s 148 of the Act has been issued by one Assessing Officer

and when the assessee informed that the jurisdiction over his case

was vested with another ITO and records were transferred to that

another ITO and thereafter the said ITO proceeded to complete the

reassessment proceedings without even recording reasons to

believe, as required u/s 147 of the Act, or issue any notice u/s 148

of the Act then it has to be held that the subsequent Assessing

Officer did not assume valid jurisdiction to reassess the income of

the assessee u/s 147 read with section 143(3) of the Act. The basic

requirement of section 148 of the Act is that the Assessing Officer

has reason to believe that any income chargeable to tax has

escaped assessment. Such belief can be only of the jurisdictional

Assessing Officer and not of any other Assessing Officer or authority

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 who initiated reassessment proceedings and issued notice u/s 148

of the Act.

the consent of the assessee cannot confer valid jurisdiction upon

the Assessing Officer nor waiver of right of the assessee to object

confer valid jurisdiction to frame reassessment order. Hence, we are

inclined to hold that the conclusion recorded by the learned CIT(A)

on this first legal issue is quite correct and justified as per the

scheme of the relevant provisions of the Act and we hold that the

first appellate authority was right in annulling the reassessment

order as having been made by the Assessing Officer without

jurisdiction.

learned CIT(A) has grossly erred in annulling the assessment on the

ground that the ITO, Bhopal, has initiated reassessment

proceedings u/s 147 of the Act in pursuance with the direction

issued by the learned CIT and reassessment in such a case has to

be treated as without jurisdiction. The learned DR further

submitted that the learned CIT(A) has granted relief to the assessee

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 on the second legal ground by picking up last line of the reasons

recorded and he has ignored the detailed reasons recorded by the

ITO, Sagar, for initiation of reassessment proceedings. Therefore,

the conclusion arrived at by the learned CIT(A) deserves to be

dismissed.

placing reliance on various judicial pronouncements including the

decision of the Hon'ble Madhya Pradesh High Court in the case of

Chunnilal Onkarmal Pvt. Ltd.; 139 ITR 380 (MP), submitted that

the issuance of notice u/s 148 of the Act under the direction of the

CIT to reassess the partner in the status of AOP or body of

individuals is not valid. The learned counsel for the assessee

vehemently contended that from the last line of reasons recorded, it

is clear that the ITO, Sagar, has recorded reasons on the directions

of the JCIT, Sagar, which is not permissible under the law.

Therefore, the learned CIT(A) was also justified in annulling the

reassessment order on this count.

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 11. On careful consideration of the above rival submissions, we

observe that the learned CIT(A) has granted relief to the assessee on

this legal issue with the following findings :-

“The power to take action in respect of escaped income

u/s 147 of the Act vests exclusively with the Assessing

Officer. The Assessing Officer has to initiate the

proceedings if the conditions us 147 of the Act exists. The

Hon'ble Madras High Court in the case of T.R. Rajakumari

(1974) 96 ITR 78 (Mad.) held that initiation by the

Assessing Officer for reassessment proceedings u/s 147 of

the Act at the direction of the Commissioner is invalid.

Similarly in the case of Sheo NarayanJaiswal vs. ITO

(1989) 176 ITR 352 (Patna) it was held that where the

Assessing Officer exercised jurisdiction u/s 147

assessment the behest of any superior authority, it must

be held that the assessment of jurisdiction was bad in

law. The Hon'ble M.P. High Court in the case of Chunnilal

Onkarmal (P) Ltd. vs. ITO (1983) 139 ITR 389 (M.P.) also

observed that discretion or judgment to be exercised u/s

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 147 must be exercised by the A.O. Where ITO initiated

assessment proceedings u/s 147 of the Act pursuance of

direction issued by Commissioner, the reassessment in

such a case had to be treated as without jurisdiction and

could not, therefore, be sustained. Therefore, on this

account also, the reasons recorded u/s 148 of the Act by

ITO, Ward-2, Sagar, were also invalid.”

learned DR that the Assessing Officer initiated reassessment

proceedings at his own by application of mind to the facts and

material came to his notice, as when we analyze the reasons

recorded by the ITO, Sagar, in totality then it is clearly discernible

that the ITO, Sagar, after mentioning the facts of the case, noted in

the last of the reasons recorded that the JCIT, Sagar, vide

communication dated 2.1.2012 has directed him to send proposal

for initiation of reassessment proceedings.Therefore, in our

considered opinion, where the Assessing Officer exercised the

jurisdiction available to him u/s 147 of the Act on the directions of

any superior authority then the reassessment proceedings u/s 147

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015 of the Act, notice u/s 148 of the Act and the reassessment order

passed u/s 143(3) read with section 147 of the Act in pursuance

thereto, are bad in law and void ab initio. Our conclusion also gets

strong support from the ratio of the decision of the Hon'ble

jurisdictional High Court in the Chunnilal Onkarmal Pvt. Ltd.,

(supra).

interfere with the order of the learned CIT(A) on this count and thus

we uphold the same. Accordingly, the sole ground of revenue, being

de void of merit, is dismissed.

the counts.

The order has been pronounced in open Court on 20th March,

2017.

Sd/- sd/-

लेखा सद�य �या�यक सद�य (O.P.Meena) (C.M. Garg) Accountant Member Judicial Member March 20th , 2017. Dn/

ITO vs. Sandeep Kumar Dubey ITA No. 391/Ind/2015