RAJ KUMAR MANGLA,GURGAON vs. ACIT, GURGAON

ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER All these appeals are filed by the assessee and are directed against the common order passed by the ld CIT(A), Faridabad dated 07.10.1996 in appeal No.146, 145 and 144/95-96 for the Assessment Years 1989-90, 1991-92 and 1990- 91.

2. These appeals were filed before the First Appellate Authority against the orders passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (herein after referred to as ‘Act’) on 31/03/1995. Before the first appellate authority the assessee challenged the jurisdiction of the ACIT, Investigation Circle, Gurgaon to assess his income for the impugned assessment years. He had also challenged the merits of the case. The first appellate authority adjudicated the jurisdictional issue in favour of the revenue and on merits he set aside the assessment to the file of AO on the ground of natural justice.

3. Aggrieved with the decision of the first appellate authority on the issue of jurisdiction, the assessee has filed this appeal before us on the following grounds:- “1. That the Id. ACIT (Inv. Circle), Gurgaon arbitrarily usurped jurisdiction u/s 147/148 of the Act in the case of the appellant when none of the appellant income liable to tax has accrued, arisen or received within the territorial jurisdiction assigned or the case having been transferred to him u/s 127 or assigned to him u/s 120 of the Act, hence assumption of jurisdiction, recording Page 2 of 16 Assessment Year : 1989-90 to 1991-92 reasons for escapement of alleged income, issue of notice u/s 148 of the Act were wholly without jurisdiction, void ab initio, patently illegal and the same ought to have been annulled or cancelled by the Id. CIT (A) rather than upholding the jurisdiction of the A.O. when issue of jurisdiction is not justice able before the appellate authorities .

2. That the Id. ACIT (Inv. Circle), Gurgaon erred in law in not making reference to the Id. Chief Commissioner/Commissioner of Income Tax u/s 124(4) of the Act when the appellant called in question the jurisdiction of the Id. ACIT (Inv. Circle), Gurgaon well within time in reply to his notice u/s 148 of the Act thus arbitrarily usurped jurisdiction and completed the assessment, hence the impugned assessment order and resultant demand notice are patently illegal, without jurisdiction, void ab initio and the same ought to have been cancelled/annulled by the Id. CIT (A).

3. That income of the appellant having already been assessed to tax by the Id. LT.O ward 10(1), New Delhi as far back as on 31-3-1992, rectified u/s 154 of the Act and the said assessment/order having remained in existence till date, the Id. ACIT (Inv. Circle), Gurgaon has grossly erred in law in invoking section 147/148 of the Act for not filing return before him and arbitrarily made second assessment of the same assessee, of same income, for the same assessment year despite the settled position of law that income of the same assessee for the same assessment year, from the same sources of income cannot be taxed more than once, thus the impugned order as well as resultant demand notice are dehore section 4 of the Act, and the impugned assessment order and resultant demand notice ought to have been cancelled/annulled by the Id. CIT (A). 4, That the Id. ACIT, Gurgaon having issued notice u/s 142(1) failed to completed the assessment within the statutory limitation, thus allowed to lapse the time allowed to complete assessment, and later on wrongly & illegally resorted to the provisions of section 147/148 of the Act, and as such assessment made was patently illegal, without jurisdiction & void ab initio and the same ought to have been cancelled/annulled by the Id. CIT (A).

5. That the impugned assessment order was passed u/s 143(3) of the Act by the Id. ACIT (Inv. Circle), Gurgaon despite the fact the appellant had not filed return of income before him nor any notice u/s 143(2) of the Act was issued and served on the appellant, as such the impugned assessment order was patently arbitrary, illegal, void ab initio and the same ought to have been cancelled/annulled by the Id. CIT (A).

6. That the reasons recorded by the Id. ACIT (Inv. Circle), Gurgaon before issue of notice u/s 148 of the Act clearly show that in law he had no jurisdiction to issue notice u/s 148 of the act. Consequently, the assessment order as passed u/s 143 (3) in pursuance of notice u/s 148 is wholly unjust, arbitrary, illegal, void ab initio and the same ought to have been cancelled/annulled by the Id. CIT (A).

7. That on facts and in view of the documentary evidence filed by the appellant, the Id ACIT (Inv. Circle), Gurgaon had neither the jurisdiction nor the powers to issue notice u/s 148 and then to pass the impugned assessment order u/s 144 of the Act on an income of Rs.3,60,000/- and the Id. CIT(A) had erred on facts and under the law in holding that the Id. ACIT (Inv. Circle), Gurgaon had jurisdiction to issue notice u/s 148 of the act and then to pass the impugned assessment order.

Page 3 of 16 Assessment Year : 1989-90 to 1991-92 Various observations made by the authorities below in their respective orders are either incorrect or are legally untenable. Facts, circumstances and the submissions made supported by evidence had either been ignored or had not been given due weight by the Id. ACIT (Inv. Circle), Gurgaon and the Id. CIT(A).

8. That the Id. CIT (A) erred in not taking judicial notice of various pleadings as well as documentry evidences namely appellant letters dated 9-3-1993 & 11- 4-1993 to the respective Id. Chief Commissioners with copies to A.O's urging to transfer records of the appellant from Gurgaon to Delhi; Id. ACIT (Inv. Circle), Gurgaon letter dated 12-4-1993 requesting Id. CIT-Hr to pass order u/s 127 of the Act and transfer case & records of the appellant from ACIT, Gurgaon to the Id. I.T.O Ward 10(1), New Delhi; Id. CIT (Hr) order/letter dated 22-3-1995 transferring case & records of the appellant from Gurgaon to Delhi etc, as such the Id. CIT (A) impugned order in respect of determining jurisdiction is liable to be cancelled/annulled. 9.That the Id CIT(A) erred in law in suo motu deciding the question of jurisdiction of the Id. ACIT (Inv. Circle), Gurgaon which was called in question by the appellant in time in reply to notice u/s 148 of the Act despite the well settled law that question of jurisdiction of the Assessing Officer is not justicable before the appellate authority and such question shall be decided by the Chief Commissioner/Director General/Commissioner of Income tax in accordance with sub-section (2) of section 124 of the Act. The impugned order of the Id. CIT (A) is liable to be cancelled/annulled.

10. That the Id. CIT (A) erred in not deciding various legal grounds of appeal

taken in the memorandum of appeal filed before him and the impugned order of the Id. CIT(A) is liable to be set aside on such grounds with direction to decide such issues after hearing the appellant.”

4. Both the parties submitted that the issues are identical in all the three assessment years and hence they may be heard together and disposed off by way of a common order.

5. There is delay of 5149 days for filing all these three appeals. The Tribunal vide its order dated 26th November 2014 had condoned the delay and admitted the appeals. This order attained finality.

6. Facts in brief are that, the assessee was an employee of M/s. Ravi Trading Co., Gurgaon, prior to 31/03/1988. He used to derive his income from salary/commission and other sources and was assessed to tax by the ITO, Gurgaon. On 20.01.1988, a search was conducted u/s 132 at the residence of the assessee. On 03.05.1988, the Commissioner of Income Tax, Haryana, Rohtak vide order F.No.CB_28(70)/88-89/3261-3324 passed an order under Sub-section (1) and Sub- section (2) of Section 120 of the Act read with section 124(1) of the Act. Page 3 of schedule of the said order reads as follows:-

Page 4 of 16 Assessment Year : 1989-90 to 1991-92 “3. Assistant Commissioner of (1) All persons or classes of persons, Income Tax, Investigation incomes or classes of income and the areas Circle, Gurgaon of Gurgaon, Rohtak and Sonepat Districts of Haryana State wherein action under section 132 of the IT Act has been/ is taken other than those assessable by Deputy Commissioner(s) of Income Tax empowered to exercise the powers and perform the functions of an assessing officer vested with jurisdiction over the above three districts in respect of the specified cases. (2) All persons of classes of persons, income or classes or income and cases or classes of cases within the areas of Gurgaon, Rohtak and Sonepat Districts of Haryana state whose returns of income as on 1st April, 1988 and those filed subsequently show total income/ loss of (a) Rs.50,000/- and above but below Rs.5 lacks in coys & trusts cases and (b) Rs.2 lakhs and above but below Rs.5 lakhs in other cases.”

This is to inform your goodself that I have left employment with M/s. Ravi Trading Co, Gurgaon and started my own proprietary business in the name and style of M/s Deep Technical, Shop No.20, 1st Floor, 1767/68, Bhagirath Place, Chandni Chowk, Delhyi with effect from 30.06.1988. Copy of Sales Tax licence obtained from Delhi, Sales Tax copy of advance tax deposited with ITO Ward No.10(1), Drum Shape Building, Vikar Minar, IP Estate, New Delhi You are therefore, requested to please transfer my assessment records to the ITO, Ward No.10(1), Drum Shape Bldg, Vikar Minar, New Delhi at the earliest. Since I do not come within your jurisdiction anymore and any proceeding cannot be initiated or completed or decided and by your goodself, but will be decided by the ITO, Ward No.10(1), Delhi only. Thanking you Yours faithfully,

(Raj Kumar Mangla)

Page 7 of 16 Assessment Year : 1989-90 to 1991-92 I am enclosing Photostat copies of the advance tax challans vide which I have deposited tax in Delhi on 14.09.89, 12.12.89 and 14.03.90 for the verification. Thanking you, Yours faithfully, (Raj Kumar Mangla) C/o M/s. Ravi Trading Co. Opp Civil Hospital, Gurgaon (HR)”

Page 8 of 16 Assessment Year : 1989-90 to 1991-92 17. Thereafter on 22.03.1995, the ld CIT, Haryana, Rohtak transferred the jurisdiction of the case to ITO, Ward 10(1), New Delhi. Order is extracted for ready reference:- Limitation Matter Speed Post To, Date:22/03/1995 Income Tax Officer, Ward 10(1) New Delhi. Sir, Subject: Transfer of case-jurisdiction-Sh. Raj Kumar Mangla-reg. Kindly find enclosed a copy of the letter No.ACIT/94-95/721- R.8438 dated 15.03.1995, and letter No.159 dated 12.04.1993 from the Asstt. Commissioner of Income Tax, Investigation Circle, Gurgaon on the above mentioned subject.

Page 9 of 16 Assessment Year : 1989-90 to 1991-92 Rohtak, Copy to:-

1. 1. Asstt. Commissioner of Income Tax, Inv. Circle, Gurgaon w.r.t. letter No. ACIT/94-95/721-B/8938 dated 15.03.1995 for necessary action. He is requested to contact the concerned AO at New Delhi and transfer the relevant records.

2. Dy. Commissioner of Income Tax, Rohtak Range, Rohtak, for information and necessary action, please, -Sd/- (Chand Shyam Sharma) Income Tax Officer, (Tech) For Commissioner of Income Tax, Haryana, Rohtak, (Emphasis own)” Thereafter a notice u/s 142(1) dated 27.03.1995 was issued by ACIT, Investigation, Gurgaon to the assessee directing the assessee as under:- “a. to prepare and correct return of income b. produce the accounts and other documents before the AO on or before 29.03.1995 at 10.30 AM.”

18. The assessee vide his letter dated 29.03.1995 challenged the notice u/s 142(1). The AO on 31.03.1995 framed separate assessment orders for all the three years.

19. Aggrieved the assessee carrying the matter in appeal. The first appellate authority adjudicated the issue of jurisdiction in favour of the revenue. At Para 5 in his order as follows:- “5. I have considered the submissions of the appellant. A report was also called from the Assessing Officer on the objections raised. A copy of the reply received from the AO was also given to the appellant for his comments and his comments were received. I have gone through the submission of the appellant as also the replies given by the Assessing Officer as also the material on record. The first question to be decided is whether the assessing office had jurisdiction to proceed with this case. The assessee had regularly been assessed to tax up the assessment year 1988-89. Since no return of income was received for the years under consideration, the assessing officer issued noticed under section 148 for assessment year 1989-90, 1990-91 and 1991-92. In response to these notices, the appellant filed a reply and stated that he had filed returns of income with ITO-10(1), New Delhi as he had left the employment of M/s Ravi Trading Co. and he has started his own proprietory business at Bharigarh Palace, New Page 10 of 16 Assessment Year : 1989-90 to 1991-92 Delhi. The assessee continued to reside at Gurgaon. Section 124(1) deals with the jurisdiction of assessing officer which reads as follows:- 124(1) whereby virtue of any direction or order issued under sub-section (1) or sub-section(2) of with jurisdiction over any areas, within the limites of such area, he shall have jurisdiction. (a) in respect of any person carrying on a business or business or profession, if the place at which he carries on his business or profession is situates within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of (any other person) residing within the area.” Sub-clause (b) provides that the assessing officer will have jurisdiction over the assessee who resided in his area. The claim of the appellant on the other hand is that since he has his business activities was in Delhi, The jurisdiction lay with ITO-10(1), New Delhi and not with Assessing Officer, Gurgaon. This argument of the appellant was not correct. Since he had not moved out of Gurgaon jurisdiction continued to vast with Assessing Officer Gurgaon unless on the request of the assessee his case was transferred to the Assessing Officer of another District. It has also been mentioned by the Assessing Officer, Gurgaon that correct jurisdiction if at all lay with ACIT, Investigation Circle, 10(1), New Delhi and not with ITO-10(1) as it was search case and if the case had been transferred to Delhi then the case would have been transferred to ACIT, Investigation, Circle 10(1) and ITO-10(1). The process of filing of return therefore did not automatically if so faster given the correct jurisdiction to the assessing officer who processed the return in a mechanical manner. This view is supported by Hon’ble Supreme Court in the case of Industrial Trust Ltd. Vs. CIT 91 ITR 550. The appellant has taken the stand that it was for the assessing officer to move the Commissioner of Income Tax, Haryana, Rohtak because the assessee had challenged the jurisdiction under section 124)3). The appellant could have also moved an application for transfer of assessment record which it appeals did not do so. The assessing officer did to the commissioner of Income Tax, Haryana, Rohtak for transfer of record on 12.04.1993 but did not receive any orders. In view thereof, the ACIT, Investigation, Circle, Gurgaon continued to hold jurisdiction and had to proceed with this case as the assessments were getting barred by limitation. In view of the these facts, all these grounds of appeal are dismissed.”

20. Aggrieved the assessee is before us.

21. The assessee Mr. Raj Kumar Mangla appeared in person and argued his case. The case of the revenue was argued by Mr. Vikram Sahay, ld Sr. DR.

22. Shri Raj Kumar Mangala, ld assessee submitted that the assessee had challenged the jurisdiction of the ACIT, Investigation, Gurgaon u/s 124(3) of the Act, in such a situation the AO is required under law to refer the matter for Page 11 of 16 Assessment Year : 1989-90 to 1991-92 determination of the jurisdiction to the ld CIT(A) or Chief Commissioner of Income Tax u/s 124(4) read with section 124(2) of the Act or in the alternative, if he is convinced that he has no jurisdiction, then he should drop the proceeding of assessment. In this case, it was argued that the AO had not followed the provisions of law as mandated by Section 124.

23. He relied on the order of the ld CIT(A), Faridabad in Appeal No.143/1995-96, dated 29.11.1999, for the Assessment Year 1988-89, wherein he held that the jurisdiction of the assessee’s case was already transferred to Delhi vide letter of the ITO (Hq) dated 22/23.03.1995 and hence the ACIT, Investigation, Circle-Gurgaon has no jurisdiction over the case as on 31.03.1995. He submitted that this order of the ld CIT(A) has been accepted by the revenue and no appeal had been filed before the ITAT. He pointed out that the assessment order for the Assessment Year 1988- 89 was passed on 31.03.1995, by the same AO, who passed orders u/s 143(3), for the impugned three assessment years 1989-90, 1990-91 and 1991-92 on the same day i.e.31.03.1998. He submitted that the order of the ld CIT(A) for the assessment year 1988-89 declared the correct position of law and this should be followed. That the order u/s 124(2) read with section 121(2) extracted above, demonstrates that case of the assessee does not fall within the jurisdiction of ACIT, Investigation, Gurgaon, for the reasons that the assessee is an individual and his income as on 1st April is below Rs.2 lakh. He submitted that he moved an application before the CCIT on 09.03.1992 and 11.03.1992 for transfer of records and no action was taken by them on these requests. Alternatively he submitted that the assessee’s place of business is Delhi and hence the natural jurisdiction is of the assessee is ITO, Ward 10(1), New Delhi and in such a situation there is no requirement to move an application before any authority for transfer of jurisdiction.

24. He relied on the following case laws:- Sardar Baldev Singh Vs. CIT reported in 40 ITR 605 (SC) CIT Vs.S.S. Ahluwalia reported in (2014) 225 Taxmann.com 131 (Del) Uma Loomba/ K. K. Loomba Vs. Commissioner of Income-Tax and others reported in 241 ITR 152 (Del) 25. He also relied on the Circular of CBDT No.1739 dated 19.12.1986. He submitted that the assessee filed its return of income before ITO, Ward 10(1), New Page 12 of 16 Assessment Year : 1989-90 to 1991-92 Delhi and the same was processed u/s 143(1) and thereafter rectification was made u/s 154 of the Act and that the assessment of income of the assessee by ACIT, Gurgaon resulted in two assessment orders, by different AO, on the same person, on the same income, which is against the Section 4 of the Income Tax Act. He argued that the AO, ACIT, Gurgaon issued a notice u/s 142(1) and without dropping the proceeding of before completion the proceedings, erred in making the assessment u/s 144 of the Act and initiating penalty proceeding etc, He submitted that the AO does not get the jurisdiction to recorded reasons and issue a notice u/s 148 and that in the reasons records u/s 148 the AO suppressed the known facts, which was very much on record, that the assessee has a place of business in Delhi and that the assessee has filed return of income with ITO, Ward 10(1), Delhi. Hence he argued that the reopening is bad in law. He argued that the ld CIT had no power to decide the territorial jurisdiction and at best, he could have directed the AO, to refer the matter to the appropriate authority for determining the jurisdiction and hence the order of the ld CIT(A) dated 20.08.1991 is bad in law. He relied on the decision in the case of Rai Bhadur Seth Teomal Vs. CIT reported in 36 ITR 9 (SC) in support of his contention.

26. The assessee also relied on the number of case laws as well as his correspondence and submitted that the assessment should be cancelled on the ground of jurisdictions.

27. The ld DR, in reply argued at length. The sum and substance is as follows:- a. The argument that once a notice u/s 142(1) is issued, proceedings u/s 147 cannot be taken unless the proceeding u/s 142(1) are dropped or brought to final conclusion was not argued before the ld CIT(A) nor was ground taken. Hence this argument has to be dismissed. b. That proceeding u/s 147 can be initiated without dropping proceeding u/s 142(1) c. The order u/s 124 dated 03.05.1988 states that, wherever action u/s 132 of the act has been taken, then the jurisdiction lies with the ACIT, Investigation, Gurgaon. He submitted that post search assessments for subsequent Assessment Years also lies with the same AO, unless an order is made, de notifying to assessment from the investigation circle.

Page 13 of 16 Assessment Year : 1989-90 to 1991-92 d. While admitting that the assessee had made repeated application on the issue of jurisdiction, he submitted that the assessee’s residence was in Gurgaon, and that he was partner in partnership concern situated in Gurgaon and under those circumstances the assessment was correctly done in Gurgaon. He submitted that the AO did write to the ld CIT(A) but had not received any reply for the same. e. On the issue of two assessment being made by different assessing officers on the same income, he submitted that u/s 143(1)(a) is not an assessment and hence the argument of the assessee is erroneous. Similarly an order u/s 154 cannot be considered as an assessment order. f. On the order of ld CIT, Faridabad for the assessment year 1988-89 he submitted that the issue of the territorial jurisdiction cannot be adjudicated by him and that he has no information as to whether the revenue has disputed this order before the Hon’ble High Court. Hence he submits that this order cannot be taken as a precedent. g. That the assessee had challenged the issue of jurisdiction before the Hon’ble Punjab and Haryana High Court and he did not get any relief. Thus he submits this ground is not maintenance. i. He placed reliance on the common order of the ld CIT(A), Delhi for the impugned three years. j. Before the Hon’ble Delhi High Court, the assessee filed a writ petition on the issue of jurisdiction and the assessee did not get any relief. Hence this ground of the assessee should be dismissed. k. The assessee had conceded before the Hon’ble Delhi High Court that he would not agitate the issue of jurisdiction in future. Thus the issue is settled and cannot be adjudicated before the Tribunal. l. That adjudicating the issue of jurisdiction, on the face of the order of the Hon’ble Delhi High Court would be a case of contempt of court. He referred to the judgment of the Hon’ble Delhi High Court dated 05.05.2010 which reads as under:- “6………we also make it clear that this order has been passed under the clear understanding that the petitioner shall not agitate the question of transfer of the case from Gurgaon to New Delhi any further nor would be file any further application/ applications under Section 154 of the said Act Page 14 of 16 ITA No. 556-558/Del/2011 Assessment Year : 1989-90 to 1991-92 in respect of the very same appellate orders, which were passed in appeal No.s.144, 145 and 146/95-96. m. That the Hon’ble Delhi High Court adjudicating the issue raised by the assessee of jurisdiction lies with the CIT or the CCIT, does not mean that the ACIT, Investigation, Gurgaon has wrongly assumed jurisdiction of the case. He prayed that the order of the first appellate authority be upheld and the appeal of the assessee may be dismissed.