2008 (6) TMI 236 - AT - Income Tax

Assumption of jurisdiction u/s 147 - notice u/s 148 issued - reassessment proceedings initiated on wrong notion and belief which are contrary to the facts on record - HELD THAT - It is clear that the assessee was assessed to income-tax and as on 30th March 2005 the ITO did not have any jurisdiction over the assessee. Therefore the notice issued u/s. 148 of the Act by the ITO is without jurisdiction. Further u/s. 149 of the Act no notice u/s. 148 shall be issued for the relevant assessment year if four years but not more than six years have elapsed from the end of relevant assessment year unless income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1, 00, 000 or more for that year. Therefore notice u/s. 148 could be issued for AY 1998-99 upto 31st March 2005. The present AO when received the relevant file from ITO containing material for proceedings initiated u/s. 147 in December 2005 the time of six years had already elapsed. Therefore he could not have issued further notice u/s. 148 of the Act. Accordingly the assessment framed on the basis of notice issued without jurisdiction is bad in law and does not have legs to stand. The ld DR also contended that the defect in the notice can be ignored u/s. 292B of the Act. Sec. 292B of the IT Act 1961 says that no return of income assessment notice summons or other proceedings etc. shall be invalid or shall be deemed to be invalid merely by reason of any mistake or defect or omission in such return of income assessment notice summons or other proceedings if such return of income assessment notice summons or other proceedings is in substance and effect in conformity with or in according to the intent and purpose of this Act. The notice issued by the ITO is not in substance and effect in conformity with the provisions of s. 120 r/w s. 147 of the Act. The notice was issued without jurisdiction. Therefore the provisions of s. 292B will not be of any help to the Revenue. The provisions of s. 292B could have been invoked if the ITO was having jurisdiction over the assessee and some mistake was committed in the notice issued by him u/s. 148. Therefore we do not find any force in the argument of the ld DR. Therefore the notice issued by the AO was without jurisdiction and consequentially the assessment made is bad in law and deserves to be quashed. We order accordingly. Since we have quashed the assessment on jurisdiction we do not feel it necessary to decide the other grounds of appeal on merits. Now coming to the Revenue s appeal which relates to deleting the addition made on account of capital gains arising out of acquisition of land by the Government since we have quashed the assessment on the ground of jurisdiction the appeal filed by the Revenue becomes infructuous and dismissed as such. In the result the appeal filed by the assessee is allowed and the Revenue is dismissed.

Summary

Issues:
1. Jurisdiction under section 147 of the IT Act.

Detailed Analysis:
The first issue in the assessee's appeal concerns the assumption of jurisdiction under section 147 of the IT Act. The notice under section 148 was issued for the assessment year 1998-99 by the ITO, Ward 2(2), Ghaziabad, but the assessee argued that he was regularly assessed in New Delhi. The reasons recorded for reassessment included unreported income from land sale and interest. The assessee contended that the reopening was based on incorrect grounds, as the income from capital gains was not taxable due to the nature of the land. The CIT upheld the reopening citing information available to the AO. The authorized representative of the assessee challenged the jurisdiction, arguing that the notice was issued without proper authority and that the AO in Ghaziabad had no jurisdiction over the assessee. The Departmental Representative defended the jurisdiction citing procedural compliance and legal precedents. The Tribunal analyzed the facts, noting that the assessee was assessed in Delhi and the notice from Ghaziabad lacked jurisdiction. The Tribunal emphasized that the notice was issued after the statutory time limit, rendering it invalid. The Tribunal rejected the Revenue's arguments on jurisdictional challenges and upheld the assessee's appeal, quashing the assessment on jurisdictional grounds.

In conclusion, the Tribunal found that the notice issued by the AO in Ghaziabad lacked jurisdiction, rendering the assessment invalid. The Tribunal also dismissed the Revenue's appeal regarding the addition of capital gains due to the quashing of the assessment. Therefore, the assessee's appeal was allowed, and the Revenue's appeal was dismissed.

This comprehensive analysis highlights the legal intricacies involved in determining jurisdiction under section 147 of the IT Act and the Tribunal's decision to quash the assessment based on jurisdictional grounds.