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Before: SHRI N. K. SAINI & SMT BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER:
The present appeal has been filed by the Revenue, against the order dated 30/11/2009, passed by the Ld. CIT(A) VIII, New Delhi for assessment year 2004-05, on the following grounds:- “1. The order of the Ld. CIT(A) is erroneous and contrary to the facts and law.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in annulling the assessment order
passed by the A.O u/s 147/143(3) of the I.T Act, without going into the merits of the case.
2.1 Ld. CIT(Appeals) ignored the findings recorded by the A.O and the fact that the assessee is not raised any objection regarding the validity of satisfaction recorded by the A.O during assessment proceedings as needed in accordance with the provisions of Section 292 BB of the I.T Act.”
Brief facts of the case as recorded by the Ld. CIT(A) are as under:-
The assessee filed its return of income on 30/4/2004 declaring total income of Rs.1,86,100/- on the basis of information received from the DIT Investigation. The Ld. Assessing Officer, being ITO Ward-3, Gurgaon issued notice u/s 148 of the Income Tax Act on 11/3/2008.
The assessee company was incorporated on 20/6/2003having principle place of business at New Delhi, and F.Y 2003-04 was the first year of its operation. The notice u/s 148 dated 11/3/2008 was issued by the ITO Ward-3, Gurgaon without providing any reasons for reopening the reasons recorded by the ITO Ward-3, Gurgaon for issue of notice under section 148 of the Income Tax Act. It was intimated by the assessee on receipt of the notice u/s 148 that, the jurisdiction in the case of the assessee for the relevant assessment year was Delhi. Subsequently, the A O transfers the case to Delhi. Notice u 143(2) dated 3/7/2008, notice under 143(3) dated 12/11/2008 was issued by ITO Ward-5(3), New Delhi and also provided with the reasons recorded for reopening the assessment on 08.12.2008. The jurisdictional A.O proceeded to complete the assessment u/s 147 read with 143(3) of the Income Tax Act vide his order dated 30/12/2008. In the assessment proceedings, the Ld. A.O also made certain additions u/s 69 of the Income Tax Act amounting to Rs.90 lacs.
Aggrieved by the order of the Ld. A.O, the assessee preferred an appeal before the Ld. CIT(A) VIII, on two grounds being the legality and the jurisdiction of issuance of one notice u/s 148 by the A.O at Gurgaon, and, the addition made by the jurisdictional A.O at the time of assessment proceedings. The Ld. CIT(A) dealt with the legal issues relating to the jurisdiction of ITO Ward-3, Gurgaon to issue notice u/s.148 of the act,. On going through the submissions and judgments relied upon by the assessee, the ld.CIT(A) held that the notice u/s 148, issued by the ITO Ward-3, Gurgaon was without jurisdiction. The Ld. CIT(A), quashed the assessment proceedings and held the subsequent actions including issuance of Section 143(2) and passing of the order u/s 147 read with 143 (3) as void ab initio.
The Ld. CIT(A) held that Section 292 BB of the Act cannot be applied to the facts of the assessee’s case on two grounds. • Firstly, the provision of Section 292 BB have been applied w.e.f 1/4/2008, and not retrospectively, as held by Hon’ble Special Bench of ITAT, Delhi in the case of Cuber Tobacco Products Pvt. Ltd Vs. DSCIT reported in 117 ITD 273. • Secondly, the Ld. CIT(A) held that, the assessee’s case is not a question of issue of notice u/s 148 without any jurisdiction; rather the main question is to decide whether the A.O could have exercised correct jurisdiction and form requisite belief/satisfaction to examine whether the Assessing Officer irrespective of jurisdiction is competent to record satisfaction as to the escarpment of income in terms of Section 147 and complete the assessment on the basis of a consent given by the assessee company. 6. The Ld. CIT(A) in Para 3.6 obsers as under:-
3.6 There is one more aspect which merits discussion at this stage. a stated earlier, even before receiving assessee’s reply on 5/12/2008 wherein, as per the A.O, the appellant company had given its no objection for continuing the assessment proceedings, the ITO Ward-5 (3), New Delhi, had issued a notice u/s 143(2) on 3/7/2008. Now the question is whether the ITO 5(3) was competent to issue such notice u/s 143(2) without obtaining return even in response to the notice u/s 148 of the IT Act issued by the ITO, Ward-3 Gurgaon. I have already narrated above that the first response from the assessee’s side after the issue of notice u/s 148 by the ITO, Gurgaon, was by way of its letter dated 5/12/2008. In these circumstances, I fail to understand as to how the Ld. A.O could issue a notice u/s 143(2) without there being a return filed in response to notice u/s 148 or even without getting return of income filed suo moto on 30/4/2004, regularized.
The Ld. CIT(A), therefore, annulled the assessment made in terms of 147 read with 143(3) of the Act.
Aggrieved by the order of the Ld. CIT(A) the Revenue is in appeal before us.
The Ld. DR supports the orders of the Ld.CIT(A) A.O. He submitted that the notice issued u/s 148 by the ITO Ward-3, Gurgaon was received by the assessee, and thereafter, the assessment has been transferred to the jurisdictional ITO at Delhi. The assessee has not objected to the action of the A.O and has himself opted for continuation of the re-assessment proceedings.
The DR submitted that Section 292 BB preclude such cases where the assessee has no objection to the continuation of assessment of re-assessment proceedings.
We have perused the records produced before us, the orders passed by the authorities below, the submissions made by both the parties and the judgments relied upon by them.
The undisputed position in the present case is that, while the return of income was filed by the appellant company with the jurisdiction of DCIT Circle-5(1), New Delhi, the notice u/s. 148 read with Section 147 of the Act was issued by the ITO Ward-3, Gurgaon on 13/3/2008. Further, the assessment has been completed by yet another officer, being ITO-5 (3), New Delhi on 30/12/2008.
The only issue before us is as to whether, the ITO Ward-3, Gurgaon was competent to exercises the jurisdiction over the case of the assessee company, and had powers to issue notice u/s. 147 & 148 of the Act ,on 13/3/2008.
At this stage, it may be beneficial to make a reference to the provisions of Sections 147 and 124 dealing with the re-assessment and the jurisdiction of Assessing Officer ’s respectively.
Section 147 of the IT Act reads as under:-
“ If the Assessing Officer has reason to believe that any income, subject to the provisions of Section 148 to 153, assesses or reassesses such income………………”
Similarly, Section 124 of the IT Act defines the jurisdiction of the AOs in the following manner:-
“ Jurisdiction of Assessing Officer
Whereby virtue of any direction or order issued under sub-section (1) or sub-section (2) of Section 120, the Assessing Officer has been vested with jurisdiction over any area, within limits of such area, he shall have jurisdiction-
(a) In respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his profession or business is situate within the area, and (b) In respect of any other person residing within the area. (2) Where a question arises under this Section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner of the Commissioner where the question is one relating to areas within the jurisdiction of different Director Generals or Chief Commissioners or Commissioner concerned or , if they are not in agreement, by the Board or by such Director
General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify.
(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 115WD or] 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 [subs section(2) of section 115 WE or] sub-Section(2) of Section 143 or after the completion of the assessment, whichever is earlier.
(b) Where he has made no such return, after the expiry of the time allowed by the notice under [sub section (2) of the Section 115WD or sub-Section (1) of Section 142 or under Sub-Section 115WH or under 148 or under Section 148 for the making of the return or by the notice under the first proviso to Section 115WF of under the first proviso Section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer , whichever is earlier.”
From the discussion, it may be seen that the words used in Section 147 of the Act are “ the Assessing Officer “ and which clearly means a particular officer who has the jurisdiction, over the case of a particular assessee. It is not the case that the statute has mandated every Assessing Officer to exercise jurisdiction, as per his own sweet will. As per the mechanism provided u/s 124 of the Act, the jurisdiction over the case of the appellant assessee could have been exercised either by the DCIT, Circle 5(1), Delhi, with whom the return of income for the A.Y under consideration was filed or by the A.O Ward 5(3) New Delhi who had been assigned with the jurisdiction over company assessee. Since, this is a case where the assessee had actually filed a return of income with the DCIT, Circle 5(1), New Delhi, on 30/4/2004, the Income Tax Officer, Ward 3, Gurgaon, could not have exercises jurisdiction over this case of the assessee, on the basis of his territorial jurisdiction. It is also not a case where the ld.Assessing Officer questions the principal place of business declared by the assessee company. Therefore, in the light of expressed provisions of Section 124 and Section 147 of the IT Act, the only officer who could have exercised jurisdiction over the case of the assesse, even for the purposes of issue of notice should be the jurisdictional ITO who is at New Delhi.”
We, therefore, are of the considered opinion that the assessee was correct in holding that the notice issued by the ITO Ward-3, Gurgaon on 13/3/2008 was without jurisdiction. Hence, Ground No. 1 of the Revenue is dismissed.
Ground no. 2: Issue of 292BB
The provision of Section 292BB will not be applicable in the present case as it is not a case of a service/defective service, etc. Provisions of section 292BB reads as under:
“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 shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.]
On going through the above it is to noted that this provision is regarding service of the notice. In the case of reassessment u/s 148 the AO having jurisdiction has to record reasons and also issue notice u/s 148. Thus both the conditions of recording reasons and issue of notice are to be satisfied. In the section 292BB there is no reference regarding recording of reasons. Thus in the absence of reasons being recorded by AO having jurisdiction, the reassessment proceedings will be void ab- initio.
Further, 292BB cannot confer jurisdiction on a person, who is not the AO. In terms of notification issued u/s 120(1) of the Act. Secondly provisions of Section 292BB are applicable from assessment year 2008-09 as has been held by the jurisdictional High Court in the case of CIT vs. Mani Kakar (2009) 18 DTR (Del) 145. It may be important to note that in this case also the issue was of reassessment u/s 148 and the Court has held that no reliance can be on the provisions of Section 292BB since this provision was not applicable to the assessment year 2001-02.
Allahabad High Court in the case of CIT & Anr. Vs. Mukesh Kumar Agrawal 345 ITR 29 (All) has dealt with the provisions of Section 292BB of the Act. In this case the revenue raised a contention that in view of the provisions of Section 292BB, the assessment cannot be quashed in case notice u/s 143(2) has not been issued. The Allahabad High Court has rejected the contention and has held as under:-
"Section 292BB is a rule of evidence, which validates the notice in certain circumstances. The newly inserted section 292BB provides that where an assessee has appeared in any proceedings or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. In the present case, the Tribunal has returned the findings that the notice under section 143(2) of the Act was admittedly not issued in this case. The assessing authority thus did not have jurisdiction to proceed further and make assessment. We do not find that the non- consideration of section 292BB, which is rule of evidence, and a deeming provision to validate the notice in certain circumstances, will have any effect on the judgment in Hotel Blue Moon (2010) 321 ITR 362 (SC). It was held in Hotel Blue Moon’s case (2010) 312 ITR 362 (SC) that the very foundation of the jurisdiction of the Assessing Officer is on the issuance of the notice under section 143(2).”
Similarly Punjab & Haryana High Court in the case of CIT vs. Cebon India Ld. (2010) 34 DTR 119 (P&H) has held that absence of a notice cannot be held to be curable under section 292BB. By approving the judgment of the Delhi Tribunal in the case of Cebon India Ltd. vs. Addl. CIT 12 DTR (Del Trib.) 402 the Court has observed "…. in the absence of notice being served, the AO had no jurisdiction to make assessment. Absence of notice cannot be held to be curable under section 292BB of the Act.”
The Delhi High Court in the case of ITO vs. Nasemen Farms Pvt. Ltd. (2010) 47 DTR 33 (Del) has also dealt with this issue and held that provisions of Section 292BB are applicable only from assessment year 2008-09 and also do not apply where there is failure to issue notice as jurisdiction to assess arises only after the notice has been issued. 24. The issue is also covered by the Special Bench of the Delhi Tribunal in the case of Kuber Tobacco Products Pvt. Ltd Vs. DCIT 117 ITD 173(Delhi Spl. Bench).
From the above discussion, we hold that the Section 292 BB being prospective in nature cannot be applied to the facts of the present case. Further, we are agreeable to the findings of the Ld.CIT(A) that Section 292 BB cannot be applied in a case where the notice u/s 148 has been issued by the A.O without having proper jurisdiction.
We are, therefore, of the considered opinion that the assessment concluded by the ITO, Ward-5(3), Delhi is not valid. We, therefore, uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal filed by the Revenue. Thus, the appeal filed by the Revenue is dismissed.
The order is pronounced in the open court on 21/10/2015