2022 (10) TMI 764 - AT - Income Tax

Validity of the jurisdiction assumed by ITO Ward-2(2) Bhilai for framing the impugned assessment - case of the assessee was transferred - HELD THAT - Even in a case where jurisdiction over the case of an assessee that is vested with one A.O (having concurrent jurisdiction over the case of the assessee) is to be transferred to another A.O (having concurrent jurisdiction over the case of the assessee) even then the authority specified under sub-section (1) of Section 127 is obligated to record his reasons for doing so. Considering the aforesaid position of law we are of the considered view that now when in the present case the assessment proceedings were initiated by the Dy. CIT Circle-1 Bhilai vide notice u/s.143(2) dated 24.09.2013 which thereafter were taken up and culminated by the Income-Tax Officer Ward-2(2) Bhilai vide his order passed u/s.143(3) dated 30.03.2015 then as per the mandate of sub-section (1) of Section 127 of the Act the specified authority i.e. Commissioner or above was obligated to have recorded his reasons for transferring the case from the aforesaid Dy. CIT Circle-1 Bhilai to the Income-Tax Officer Ward-2(2) Bhilai. However nothing has been brought to our notice which would justify the transfer of jurisdiction over the assessee s case from the Dy. CIT Circle-1 Bhilai to Income-Tax Officer Ward-2(2) Bhilai. Be that as it may we are of the considered view that as in the case of the assessee the assessment order u/s.143(3) dated 30.03.2015 had been passed by a non-jurisdictional officer i.e. the Income-Tax Officer Ward-2(2) Bhilai which is in clear contravention of the CBDT Instruction No.1/2011 dated 31.01.2011 therefore the same cannot be sustained and is liable to be struck down on the said count itself. We are of the considered view that as in the present case before us the assessment had been framed by the Income Tax Officer Ward-2(2) Bhilai u/s. 143(3) dated 30.03.2015 in clear contravention of the CBDT Instruction No.1/2011 dated 31.01.2011 which divested him of his jurisdiction over the case of the assessee for the year under consideration i.e AY 2012-13 therefore the same cannot be sustained and is liable to be struck down in terms of our aforesaid observations. We thus in terms of our aforesaid observations quash the order passed by the Income-Tax Officer Ward-2(2) Bhilai for want of jurisdiction on his part.

Issues Involved:

1. Jurisdiction of the Assessing Officer.
2. Share of the assessee in the sold property.
3. Sale consideration for computing long-term capital gain.
4. Claim of stamp duty expense.
5. Claim of cost of acquisition and cost of improvement.
6. Claim under Section 54F.
7. Claim of home loan interest under Section 24(b).
8. Increase in house property income percentage.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The primary issue raised by the assessee was the validity of the jurisdiction assumed by the Income-Tax Officer, Ward-2(2), Bhilai, for framing the assessment. The assessee argued that per CBDT Instruction No.1/2011, dated 31.01.2011, the pecuniary jurisdiction over the case was vested with the Dy. CIT, Circle-1, Bhilai, as the returned income was above Rs.15 lacs. The Tribunal admitted this ground, citing the Supreme Court's judgment in National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC). The Tribunal concluded that the assessment framed by the Income-Tax Officer, Ward-2(2), Bhilai, was invalid and non-est as it was not in conformity with the CBDT Instruction No.1/2011. The Tribunal relied on various judicial pronouncements, including the Hon'ble Supreme Court's judgments in UCO Bank Vs. CIT (1999) 237 ITR 889 (SC) and Commissioner of Customs Vs. Indian Oil Corporation Ltd. (2004) 267 ITR 272 (SC), which held that CBDT Circulars/Instructions are binding on the department.

2. Share of the Assessee in the Sold Property:
The assessee contended that the CIT(A) erred in confirming the AO's action of taking the share of the assessee in the sold property at 50% instead of 11%. However, as the Tribunal quashed the assessment order due to lack of jurisdiction, this issue was left open and not adjudicated on merits.

3. Sale Consideration for Computing Long-Term Capital Gain:
The assessee argued that the CIT(A) erred in confirming the AO's action of taking the sale consideration as Rs.2,69,43,000/- instead of Rs.2,61,00,000/- (actual sale consideration). This issue was also left open due to the quashing of the assessment order.

4. Claim of Stamp Duty Expense:
The assessee claimed that the CIT(A) erred in confirming the AO's action of not allowing the stamp duty expense of Rs.22,83,000/- in computing the long-term capital gain. This issue was similarly left open.

5. Claim of Cost of Acquisition and Cost of Improvement:
The assessee contended that the CIT(A) erred in confirming the AO's action of not allowing the claim of cost of acquisition and cost of improvement totaling Rs.30,04,144/-. This issue was left open due to the quashing of the assessment order.

6. Claim under Section 54F:
The assessee argued that the CIT(A) erred in confirming the AO's action of not allowing the claim of Rs.14,75,197/- under Section 54F. This issue was also left open.

7. Claim of Home Loan Interest under Section 24(b):
The assessee contended that the CIT(A) erred in not adjudicating the matter regarding the claim of home loan interest of Rs.17,51,509/- under Section 24(b). This issue was left open.

8. Increase in House Property Income Percentage:
The assessee argued that the CIT(A) erred in confirming the AO's action of increasing house property income from 11% to 50%. This issue was also left open.

Conclusion:
The Tribunal quashed the assessment framed by the Income-Tax Officer, Ward-2(2), Bhilai, for lack of valid jurisdiction as per CBDT Instruction No.1/2011, dated 31.01.2011. Consequently, the other grounds raised by the assessee regarding the sustainability of the additions on merits were left open and not adjudicated. The appeal filed by the assessee was allowed on the grounds of invalid jurisdiction.

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