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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. A. D. JAIN & SHRI T. S. KAPOOR
PER A.D. JAIN, V.P.:
This is assessee’s appeal against the order of the ld. CIT(A)-II, Kanpur, dated 14.7.2017 for Assessment Year 2010-11, raising the following grounds of appeal:
Because the assessment order passed u/s. 143(3) of the Act, 1961 is without jurisdiction bad in law and be quashed for the reason that the notice u/s 143(2) has been issued by the DCIT-Range-6, Kanpur and the assessment order has been passed by the ACIT-6, Kanpur, there being no order transferring the jurisdiction from DCIT-6 to ACIT-6, Kanpur, the order is illegal and without jurisdiction, the same be quashed. 2. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs.4,21,16,794/- claimed as business loss in respect of transactions taken place is respect of the subsidiary the Sarl Safetix France.
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Because the CIT(A) has failed to appreciate the nature of the transaction entered upon by the assessee with Sarl Safetix France and has arbitrarily held, that the loss on investment of Rs.4,21,16,794/- is not a business loss, but a capital, which finding of the CIT(A) is bad in law the disallowance made be deleted. 4. Because on a proper appraisal of the facts and circumstances of the case, it would be found that the loss of Rs.4,21,16,794/- arising on account of sale shares of Sarl Safetix France a 100% subsidiary of the assessee company incorporated for the purposes of better business, is a business loss and is allowable u/s 37 of the Act, 1961. 5. Because on a proper consideration of facts and circumstances of the case, the entire loss of Rs.4,21,16,794/- having taken place during the course and duration of business activities being part of the business activities, the CIT(A) has erred on facts and in law in not allowing the same as an allowable business loss. 6. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs.1,16,69,219/- claimed as deduction under section 801B, which disallowance is contrary to facts, bad in law and be deleted. 7. Because on a proper consideration of facts and circumstances of the case, even after the decision of the Apex Court in the case of Liberty India Vs. CIT, the facts of the case materially differ, the CIT(A) has erred on facts and in law in not allowing deduction of Rs.1,16,69,219/- under section 80IB of the Act. 8. Because the CIT(A) has erred on facts and in law in upholding the disallowance of Rs.11,36.696/- under section 14A of the Act, which disallowance is contrary to facts, bad in law and be deleted.
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Because there being no satisfaction recorded as contemplated in Section 14A read with Rule 8D by the Assessing Officer, the CIT(A) has erred on facts and in law in upholding the disallowance of Rs.11,36,696/-, the disallowance be deleted. 10. Because the CIT(A) has failed to appreciate the facts and circumstances of the case, in as much as, the investment with Sarl Safetix France which has been claimed as business loss, the same cannot be treated as an investment made for the purpose of earning tax free income and be made basis for invoking the provisions of section 14A of the Act, the disallowance made by the Assessing Officer and upheld by the CIT(A) is in contradiction to the facts and circumstances of the case, the same be deleted. 11. Because the CIT(A) has failed to appreciate the facts and circumstances of the case and has erred in upholding the disallowance of Rs.4,25,633/- made by the Assessing Officer under the head repairs and maintenance, which being adhoc disallowance and no specific infirmity being pointed out in the details furnished, the account being tax audited, the disallowance made is totally misplaced, arbitrary, without any basis and be deleted. 12. Because the CIT(A) has failed to appreciate that no expenditure on repairs and maintenance has been incurred for the purpose other than business and that not being the finding of the Assessing Officer nor of the CIT(A) the disallowance of Rs.4,25,633/- be deleted. 13. Because the CIT(A) has failed to appreciate the fact and has wrongly mentioned that the expenditure of Rs.4,25,633/- incurred on Magarwara Stadium is not an allowable business expenditure, overlooking the fact, that the said expenditure having been incurred for the purpose of welfare of the employees is an expenditure incurred for the purpose of business and is allowable under section 37 of the Act, 1961.
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Because the CIT(A) has erred on. facts and in law, in disallowing a sum of Rs.5,00,000/- paid to Registrar of Companies for increase in authorized capital of company, treating it to be a capital expenditure without appreciating that the said amount of Rs.5,00,000/- paid as fees was for the purposes of working capital requirements and as such, is a revenue expenditure and not capital in nature as held, the disallowance is totally misplaced and be deleted. 15. Because the CIT(A) has failed to appreciate that not all and every expenditure incurred for the purpose of increase in authorized capital is capital in nature, the CIT(A) has failed to appreciate the contents of the judgments relied upon by him and referred to in the order, wherein the Apex Court itself has held the expenditure incurred for the purpose of increase in authorized capital, in incurred for the purpose of working capital requirements the same would be a revenue expenditure, the disallowance made by the Assessing Officer and upheld by the CIT(A) be deleted.
The assessee has also raised the following additional grounds: 1. Because the CIT(A) has erred on facts and in law in holding that the revised return filed within time, under section 139(5) of the Act is not a valid return, in as much as there was neither any omission nor any error, in the return initially filed, the finding of the CIT(A) is contrary to facts and bad in law2, the order passed in this respect be quashed. 2. Because there being no objection by the AD to the revised return filed and the revised return having being processed u/s. 143(1), and there being no ground of appeal with respect to the same, the CIT(A) was not justified in holding that the revised return is not a valid return and has thereby erred in law. The order passed by CIT(A) be set aside and the addition upheld be deleted.
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These Additional Grounds raise a legal issue going to the root of the matter, not requiring any fresh material to be gone into. Accordingly, they were admitted. 4. Ground no.1, which has been argued first, states that the assessment order passed under section 143(3) of the Income Tax Act, 1961 is without jurisdiction, since notice dated 30.8.11 (copy at APB:2) issued under section 143(2) of the I.T. Act was issued by the DCIT-Range-6, Kanpur, whereas the assessment order dated 7.3.14 was passed by the ACIT-6, Kanpur (junior in rank to the DCIT), although there was no order transferring jurisdiction from the DCIT-6, Kanpur to the ACIT – 6, Kanpur. 5. The assessment record of this matter was requisitioned through the ld. D.R. In response, the Ld. D.R. has submitted that the record is untraceable. Letter dated 28.2.22 addressed to the ld. CIT (DR) by Shri. K.K Mishra, JCIT (OSD)2(1)(1), Kanpur has been filed. For ready reference, this letter is reproduced hereunder:
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The sum and substance of the letter of the JCIT (OSD)2(1)(1), Kanpur is that firstly, assessment of the case for the year under consideration, i.e., assessment year 2010 – 11 is not traceable. It has further been submitted that the Assessing Officers in the office of any Circle may be an ACIT or DCIT or JCIT (OSD); that when the case was selected under scrutiny, the DCIT was posted and it was the DCIT who issued notice under section 143(2) of the I.T. Act; that in the meanwhile, an ACIT was posted in the same Circle, consequent to which, the assessment order was passed by the ACIT; and that as such, the assessee’s objection that an ACIT cannot pass the assessment order when the notice under section 143(2) of the I.T. Act has been issued by the DCIT, is not maintainable. For the sake of ready reference, the notice dated 30.8.2021 issued by the DCIT is reproduced hereunder:
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Before us, the Ld. D.R. has reiterated the contents of the aforesaid letter dated 28.2.22 by the JCIT (OSD)2(1)(1), Kanpur to the CIT (DR) and it has been contended that there is nothing irregular, much less illegal in the passing of the assessment order at the hands of the ACIT, when the notice under section 143(2) of the I.T. Act was issued by the DCIT, since the Circle consist of ACIT, DCIT and JCIT (OSD) and in the case at hand, it was the DCIT who was having jurisdiction, due to which, it was the DCIT who issued notice under section 143(2) of the I.T. Act, whereas later on, by virtue of valid posting orders issued by the higher authorities of the Income Tax Department, an ACIT was posted and it was the ACIT who passed the assessment order. 8. We have heard both the parties and have perused the material placed on record. The issue is as to whether where notice under section 143(2) of the I.T. Act was issued by the DCIT (superior authority) and the assessment order was passed by the
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ACIT (authority junior in rank), such assessment order is sustainable in the eye of law. 9. The matter, it is seen, is similar to that dealt with and decided by the Lucknow Bench of the Tribunal in the case of ‘Allahadad Tannery, Kanpur vs. Jt. CIT-I, Kanpur’ in ITA No.336/LKW/2012 for Assessment Year 2008-09, following the decision of the Tribunal in that assessee’s own case for Assessment Year 2005-06, (therein, it was, inter alia, held that where the proceedings are initiated by the authority higher in rank, and the rest of the assessment is completed by the Assessing Officer who is junior to the Officer who had initiated the process of assessment, such assessment is null and void; that this was so, since the higher authority had started applying his mind to the issue in dispute and hence, the subordinate authority could not proceed with the matter and that if it were not so done, there would be chaos in the administration of justice), the assessment order was quashed. In that case, for Assessment Year 2005-06, the DCIT had issued intimation under section 143 (1) of the I.T. Act and the Jt. CIT had passed the assessment order, which action was upheld. For Assessment Year 2008-09, the Jt. CIT had initiated proceedings, whereas the ACIT had passed assessment order, which was quashed. Meaning thereby, that going by the hierarchy of Income Tax Officers, as provided for in the Statute, the assessment in Assessment Year 2008-09 in ‘Allahadad Tannery’ (supra), was completed by the Officer junior in rank to that initiating them, which was not sustained. In the case at hand too, the position is similar to the latter. Herein, it was the DCIT who had issued notice under section 143 (2) of the I.T. Act and the assessment order came to be passed at the hands of the ACIT.
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In ‘Valvoline Cummins Ltd. vs. DCIT’, 307 ITR 103 (Del), considering ‘Berger Paints Ltd. vs. ACIT’ 246 ITR 133 (Cal), it was held as follows (relevant portion):
“28. On the issue of 'concurrent' jurisdiction between the Additional Commissioner and the Deputy Commissioner, learned Counsel for the assessed relied upon a decision of the Calcutta High Court in Berger Paints India Limited and Ors. v. Assistant Commissioner of Income Tax and Ors. . The Calcutta High Court had explained the meaning of the expression 'concurrent' to mean two authorities having equal powers to deal with a situation but the same work cannot be divided between them. This is what the Calcutta High Court had to say: Concurrent jurisdiction means a sub-ordinate authority can deal with the matter equally with any superior authority in its entirety so that either one of such jurisdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer. 29. It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a
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part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an application for anticipatory bail it must deal with it and similarly if the Sessions Judge is seized of an anticipatory bail, he must deal with it. There can be no joint exercise of power both by the High Court as well as by the Sessions Judge in respect of the same application for anticipatory bail.
In sum, then, as per ‘Berger Paints’ (supra) and ‘Valvoline’ (supra), there can be no joint exercise of concurrent jurisdiction qua one and the same assessment proceedings. The expression ‘concurrent’ is itself indicative of the existence of two distinct jurisdictions. Now, for seamless administration of justice, it is but apt that a single assessment needs must be dealt with as a whole under one of the concurrent jurisdictions. ‘Concurrent’, as such is not synonymous with ‘joint’. Lest the decision be rendered chaotic, invocation of one single jurisdiction is the sine qua non for the valid conclusion of an assessment. 12. No decision contrary to either ‘Berger Paints Ltd. vs. ACIT’ (supra) or ‘Valvoline Cummins Ltd. vs. DCIT’ (supra) or ‘Allahadad Tannery’ (supra) has been cited before us. ‘Allahadad Tannery’ (supra) has not been shown to have been reversed or even stayed on appeal. As such, finding the facts herein to be in para-materia with those before the Tribunal in ‘Allahadad Tannery’ (supra) and in consonance with ‘Berger Paints Ltd. vs. ACIT’ (supra) and ‘Valvoline Cummins Ltd. vs. DCIT’ (supra), we hold that the assessment proceedings initiated by the DCIT by issuing notice under section 143(2) of the I.T. Act and completed by the ACIT by passing assessment order, is unsustainable in law and cannot be upheld. Since it was the higher authority who
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applied his mind and it was the lower authority, who completed the assessment proceedings, we quash the assessment order and all proceedings consequent thereupon. 13. In view of the above, nothing further survives for decision and the rest of the grounds are rejected as infructuous. 14. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 10/03/2022.
Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT
DATED:10/03/2022 JJ: