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2015 (10) TMI 2365 - ITAT DELHI

2015 (10) TMI 2365 - ITAT DELHI - TMI - Jurisdiction of the Additional CIT to frame the impugned order of assessment u/s 143(3) - as per assessee assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, there was no order under section 127(1) of the Act for transfer of jurisdiction from DCIT, Circle 6(1), New Delhi to Additional CIT, Range 6, New Delhi - Held that:- It is an .....

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ssessment so framed is without jurisdiction in as much as the Additional CIT did not have the requisite mandate power under the law to frame the impugned assessment under section 143(3) of the Act.

This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs the Additional Commissioner to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. As regards the notification no. .....

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mmissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi.

We thus find merit in the claim of the appellant that in absence of an order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks jurisdiction to exercise the functions of the AO and therefore consequ .....

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dditional CIT, Range-6 took over the assessment proceedings without there being an order u/s 127(1). - Decided in favour of assessee. - ITA No. 102/Del/2014 - Dated:- 22-9-2015 - SHRI I.C. SUDHIR AND SHRI L. P. SAHU For The Appellant : S/Shri Salil Aggarwal & Salesh Gupta, Adv. For The Respondent : Shri P. Dam Kanunjna, Sr. DR ORDER PER I.C. SUDHIR: JUDICIAL MEMBER 1. This appeal preferred by the assessee is directed against the order of learned CIT(A)-IX, New Delhi dated 29.11.2013 and rela .....

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4)(b) read with section 2(7A) of the Act to exercise the powers or perform the functions of Assessing Officer and as such, the same was without jurisdiction, invalid and deserve to be quashed as such. 1.1 That the learned Commissioner of Income Tax (Appeals) having admitted that there is no order under section 120(4)(b) of the Act as required under section 2(7A) of the Act was wholly incorrect in law and on fact to uphold the assessment on the basis of an order under section 120(2) passed by the .....

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d finding is in breach of the directions of the Hon ble Tribunal in order dated 16.01.2013, which has acquired finality and has not been challenged by the revenue. 2 That the learned Commissioner of Income Tax (Appeals) has otherwise too failed to appreciate that the order of assessment was without jurisdiction in absence of an order transferring jurisdiction u/s 127 of the Act from the learned DCIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi. 3 T .....

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resented long term capital gain accrued on disinvestment of shares and as such, the finding that, such gain represents business income of the appellant company is misconceived, misplaced and, wholly untenable. 3.2 That the learned Commissioner of Income Tax (Appeals) has overlooked the fact that, once it is an undisputed and admitted fact that, shares sold by the appellant in the instant assessment year were held and, accepted as investments in the preceding assessment year, there remained no ba .....

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tal gain of ₹ 6,10,92,870/- and as such since the gain had accrued to the assessee on transfer of long term capital asset , the same was not includible in the total income of the assessee and in any case the tax levied @ 30% instead of prescribed rate of tax @ 20% was beyond jurisdiction and, had erroneously been levied. 3.4 That the learned Commissioner of Income Tax (Appeals), has further failed to appreciate that such long term capital gain could not held to be business income on the me .....

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rd. 3.6 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, mere alleged violation of the provisions of SEBI could not be sufficient to disentitle the assessee, in treating the asset held as equity shares as long term capital asset, particularly when transactions of identical nature were accepted in the immediately preceding assessment year and as such, finding recorded are based on subjective, whimsical and, arbitrary considerations and, therefore not sustainabl .....

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and, assessed to tax. 3.8 That the learned Commissioner of Income Tax (Appeals) has further erred in recording contradictory and vague findings in order dated 6.12.2010. The findings recorded in the impugned order are totally contrary to the material placed on record and is nothing but is based on figment of an imagination including the finding that no STT was paid on such transactions and is not established from the contract notes issued by the broker, particularly when there is no material on .....

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of the appellant could not be a basis much less a valid basis to allege and, hold that, short-term capital gain arising on purchase and, sale of shares was not taxable @ 10% u/s 111A of the Act but @30% as business income of the appellant company. 4.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the finding of the learned AO that, the assessee has failed to produce evidence that these belong to transactions of shares held by it was based on misconceived fa .....

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of ₹ 4,27,86,793/- which came to be assessed at an income of ₹ 9,10,63,184/- in an order dated 29.12.2008 under section 143(3) of the Act. The appeal filed by appellant-assessee was dismissed vide order dated 6.12.2010 by learned CIT(A). On further appeal before Tribunal, the assessee raised following additional grounds of Appeal: 1. That order of assessment u/s. 143(3) of the Act 29.12.2008 is without jurisdiction since the learned Additional Commissioner of Income-tax, who framed .....

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2(7A) of the Act, then too, order of assessment is without jurisdiction in absence of an order transferring jurisdiction u/s. 127 of the Act from the learned DCIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi . 3.1 The ITAT in an order dated 16.1.2013 admitted the additional grounds and thereafter, set aside two issues raised in the additional ground to the file of learned CIT(A) for adjudication on merits. It was held as under: 7. We have duly cons .....

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has observed that if a particular legal issue which effects the taxability of the assessee then even at belated stage the assessee can be permitted to raise legal issue. Therefore, we admit the additional grounds of appeal raised by the assessee. As far as the merits of the grounds are concerned, admittedly first notice under sec. 143(2) was issued by the DCIT, Circle-6, New Delhi. Learned Additional Commissioner took charge of the assessment proceedings from 25.8.2008. The material placed on r .....

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inding may not be called for from the Learned First Appellate Authority on this issue who will be looked into relevant record available with the department. Both the representatives had expressed no objection over the suggestion. Considering all these aspects, we deem it appropriate to set aside these two issues to the file of the Learned CIT(Appeals) for adjudicating them on merit. Learned CIT(Appeals) shall pass a speaking order referring to all relevant material. 8. In case, the grounds are a .....

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us in the second round of litigation. Learned CIT(Appeals) need not to comment on any other issue. It is needless to say that the observations made by us will not impair or injure the case of the Assessing Officer and will not cause any prejudice to the defence/explanation of the assessee. Learned First Appellate Authority shall adjudicate the alleged grounds of appeal. 3.2 The learned CIT(A) thereafter, called for the comments from the Assessing Officer and dismissed the appeal of the assessee .....

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ed 15.10.2007 was issued by DCIT, Circle 6, New Delhi for framing assessment under section 143(3) of the Act. Thereafter, on 25.8.2008, notice was issued by Additional CIT, Range 6, New Delhi under section 142(1) of the Act and pursuant thereto, assessment has been framed under section 143(3) of the Act on 29.12.2008 by the Additional CIT, Range 6, New Delhi. The contention of the assessee is that the aforesaid assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as .....

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. CIT is without jurisdiction. It is a fact that there is no order u/s 120(4)(b). But there is an order u/s 120(2) passed by the CIT-II, Delhi, as pointed out by the Ld. AR of assessee, the issue remains whether order u/s 120(2) can fulfill the requirement of order u/s 120(4)(b). On the basis of principle laid down in the decision of City Garden Vs. ITO (Supra) that such decision has to keep in mind that defect of procedure should not invalidate the end action and allocation of functions is matt .....

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pted the additional ground of jurisdiction, the issue of Section 124(2) & (3) is not applicable. However, in view of the decision of the Hon ble High Courts in CIT Vs. British India Corporation Ltd. (Supra) and Mukti Properties (P) Ltd. Vs. CIT (supra), which are directly on the issue of jurisdiction raised by the appellant at a later stage and not at the stage of assessment, the admission of such grounds of appeal by the Hon ble ITAT may be re-examined. In view of this, the contention of th .....

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r: 15.3 The appellant objected that even if concurrent jurisdiction is given to the Addl. CIT, an order u/s 127 of the Act is required to be passed to give Addl. CIT the power to complete a particular assessment as it is done in the cases of transfer of cases to another AO after issue of notice u/s 143(2) of the Act by another AO. On this account, the issue raised is whether after notice u/s 143(2) is issued by the DCIT, Circle-6(1), assessment order can be passed by the Addl. CIT of Range-6 hav .....

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of the appellant or appellant is not adversely affected by the order. 4.2 Apart from the above, another additional basis adopted by the learned CIT(A) to reject the claim of the appellant is that the assessee has not challenged the jurisdiction or authority of the Assessing Officer to make the assessment itself at the stage of assessment and once the assessee had subscribed to the jurisdiction and participated in the assessment proceedings, the said contention is not tenable. He has held in this .....

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eedings unchallenged. This behavior of the assessee goes against raising any contention at later stage. After silently participating in the proceedings before the AO, the appellant has accepted the jurisdiction of the AO. Had the appellant raised the issue at the level of AO, the AO could have written to the Higher Authorities for defining the jurisdiction. By not doing so the appellant surrendered the right to object the jurisdiction of the AO which cannot be revived at the later stage just to .....

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6, New Delhi to frame the impugned assessment. It was submitted that in absence of such an order under section 120(4)(b) read with section 2(7A) of the Act so as to vest the Additional CIT the power to exercise and perform the functions of the Assessing Officer, the assessment framed is legally unsustainable. He referred to the provisions contained in sections 120, 121 and also section 124 along with 2(7A) of the Act to support his contention. It was contended that order dated 1.8.2007 in an ord .....

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was also submitted that there is no order under section 127 of the Act for transfer of jurisdiction from DCIT to Additional CIT. It has been contended that when a power is conferred upon two authorities concurrently one of them can exercise that power and once a decision is taken to exercise the power either by the two authorities, that exercise must be terminated by the either authority. In support of above, the learned counsel also relied upon the following decisions: a) M/s. Prachi Leathers .....

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(Guj), Valvoline Cummins Ltd 307 ITR 103 (Del), Swaran Yash vs. CIT 138 ITR 734 (Del) and Investors Industrial Corporation Ltd. s. CIT 194 ITR 548 (Bom). 4.5 The learned DR relied on the findings of the learned CIT(A) and contended that the contention raised by the assessee are not maintainable more particularly when the issue of jurisdiction was never raised during the assessment proceedings and therefore, order of assessment was within the jurisdiction framed by the Additional CIT, Range 6, Ne .....

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powers and functions of Assessing Officer under the Act. 5.1 To examine the above contention, we consider it appropriate to firstly extract section 2(7A) of the Act which reads as under: 2(7A) Assessing Officers (7A) Assessing Officer means the Assistant Commissioner or 2 Deputy Commissioner 3 or Assistant Director 4 or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1)or sub-section (2) of Sectio .....

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sioner or Deputy Commissioner or Assistant Director or Deputy Director or Income Tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1) or 120(2) or any other provision of this Act. The second part provides that Assessing Officer means the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functi .....

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or deputy Director or Income Tax Officer under the Act. This interpretation also derives strength from the provisions contained in section 120(4)(b) of the Act which reads as under: 120. Jurisdiction of income-tax authorities (4) Without prejudice to the provisions of sub-sections (1) and (2) , the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,-...... (b) empower the Director General or Chief Commissioner or Commi .....

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ther provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such 2[Additional Commissioner or]2 3[Additional Director or]3 Joint Commissioner [[ or a Joint Director, ]] by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the Joint Commissioner shall not apply. 5.3 It will be seen that the said provision provides that Board may by general or s .....

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r or an Additional Director or a Joint Commissioner or a Joint Director and where any order is made under this clause, reference in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such Additional Commissioner or Additional Director or Joint Commissioner or a Joint Director by whom, the powers and functions are to be exercised or performed under such order and any provision of this Act requiring approval or sanction of th .....

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ra) wherein it has been held in para 16.2 of the decision as under: 16.2 From the contents of the aforesaid provisions, it is quite clear that so far as Addl. Commissioner is concerned, firstly he has been included in the definition of Assessing Officer given under section 2(7A) of the Act with effect from 1.6.1994 as a result of retrospective amendment made by the Finance ACt, 2007 but at the same time, it is also clear that the Addl. Commissioner will be Assessing Officer as envisaged in secti .....

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s concerned, it is now clear from the provisions as discussed hereinbefore that the Additional CIT could act and exercise the powers of an AO only in consequence upon delegation of such authority by the Board, Chief Commissioner of Income-tax or Commissioner of Income-tax as envisaged in the provisions of section 120(4)(b) of the Act. However, the power given to the Chief Commissioner of Income-tax or Commissioner of Income-tax being in consequence upon the delegation of power duly authorized by .....

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view of ours is fully supported by the decision of the Hon ble Delhi High Court in the case of Dr. Nalini Mahajan vs. DIT, 257 ITR 123, wherein the Hon ble High Court, while discussing the powers of Additional Director Investigation, held as under: It is now well-settled that when a power is given to do a certain thing in a certain manner, the same must be done in that manner or not at all. A delegation of power is essentially a legislative function. Such a power of delegation must be provided .....

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not get any statutory power to issue authorization to issue warrant. Therefore, the Addl. Director (Investigation) cannot be said to have any power to issue any authorization or warrant to Joint Director. Consequently, notification dt. 6th Sep. 1989 is not valid in law to the said extent. 18.2 So far as the present case is concerned, though we are concerned with the powers of Additional CIT but the proposition of law laid down by the Hon ble High Court which was, though in relation to powers of .....

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5.5 Similar view has also been expressed in the case of City Garden vs. ITO (supra) whereby it was held as under: The Revenue s which has also placed its written submissions on record, stand that the Jt. CIT, Sri Ganganagar, had jurisdiction to assess the assessee u/s 120 of the Act, thus, cannot be accepted i.e., in the absence of a specific order issued in pursuance to section 120(4)(b) specifically authorizing him to exercise the powers and perform the functions as conferred on or assigned t .....

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er under section 2(7A) of the Act read with section 120(4)(b) of the Act. 5.7 In view of the above factual and judicial position, we are of the view that the order of assessment so framed is without jurisdiction in as much as the Additional CIT did not have the requisite mandate power under the law to frame the impugned assessment under section 143(3) of the Act. 6. The learned CIT(A) has however supported the validity of an order of assessment on the basis of an order dated 1.8.2007 under secti .....

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lhi-II, New Delhi, in pursuance of the notification issued by the Central Board of Direct Taxes vide Notification No. 732(E) dated 31.07.2001 and Notification No. 267 of 2001 dated 17.09.2001 issued by Central Board of Direct Taxes, New Delhi having been so authorized, hereby direct that the Additional Joint Commissioner of Income-tax specified in column (3) of Schedule-1, hereto annexed, shall exercise the powers and perform the functions in respect of such cases or classes of cases specified i .....

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early as in the case of companies registered under the Companies Act, 1956 with the name beginning with the any of the expressions M dot, MA to MN alphabets. The perusal of the above order dated 1.8.2007 would show that it refers to notification No. 267/2001 dated 17.9.2001 which reads as under: Section 120 of the Income-tax Act, 1961 - Jurisdiction of Income-tax authorities Notification No. 267/2001 [F.No. 187/5/2001-ITAT-I] dated 17-9-2001 In exercise of the powers conferred by clause (b) of s .....

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ax, vide Government of India, Central Board of Direct Taxes notification number S.O. 732 (E) dated 31.07.2001, S.O. 880(E) dated 14.09.2001, S.O.881(E) dated 14.09.2001, S.O.882(E) dated 14.09.2001 and S.O.883(E) dated 14.09.2001 published in the Gazette of India, Part II, Section 3, sub-section (ii), Extraordinary. 6.2 Furthermore we notice the learned CIT(A) has also held that section 120(2) empowers the Board to direct any other Income Tax Authority to issue orders to exercise the powers of a .....

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er order u/s 120(4)(b) of the Act. In other words he has held that section 120(2) is a coterminous to section 120(4)(b) of the Act. 6.3 To appreciate the above, we seek to note the provisions contained in section 120(1) to 120(3) which reads as under: 120. (1) Income-tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board .....

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under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely :- (a) territorial area; (b) persons or classes of person .....

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functions of an income tax authority shall be confined and restricted to the powers and functions conferred or assigned by Board under the Act. Further section 120(2) enables the Board u/s 120(1) to even authorize an income tax authority to issue an order in writing for exercise of powers and function by subordinate income tax authorities. In other words, section 120(2) does not in any manner provide that CIT can authorize an Additional Commissioner of Income Tax to perform the functions and, e .....

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order dated 1.8.2007 by CIT, Delhi-II, New Delhi is not an order u/s 120(4)(b) of the Act and is an order u/s 120(2) of the Act Moreover there are no direction in the said order so as to confer and assign the Additional Commissioner with the powers of an Assessing Officer and exercise the functions of an Assessing Officer. 7.1 On careful consideration we find merit in the said submission. This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs t .....

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ioner of Income Tax vide CBDT notification dated 14.9.2001 and 31.7.2001. It is thus apparent that the said notification is applicable in respect of Joint Commissioner authorized by Commissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi. 7.2 We thus find merit in the claim of .....

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acts in the case were that assessee filed its return of income for the assessment year 1974-75 which was processed by the Assessing Officer, namely, Income Tax Officer, Central Circle-I, Kanpur who completed the assessment under section 143(3)/144B of the Act on September 7, 1977 after making certain additions and disallowances to the returned income. On appeal assessee contended that the assessing authority had no jurisdiction to pass the assessment order in as much as the assessment file stood .....

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cts held as under: 18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court. 8.1 It is apparent that the said judgmen .....

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Act and as such the Hon ble Court held as under: 23. It has not come on record, not disclosed by the assessee at least, even before the first appellate authority in the additional memo of appeal as to when he got the knowledge of the transfer order dated July 1, 1977. The observation of the Tribunal that it is admitted that the order of transfer order is effective from July 1, 1977 is therefore, uncalled for. It has misdirected itself. The Tribunal has proceeded on a wrong footing that in the a .....

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as its duty to disclose the same. 8.2 In fact the Court finally concluded in the said judgment is as under: 27. The case on hand stands still on a weak footing inasmuch as the Income-tax Officer, CC-I had the jurisdiction when the assessment proceedings commenced and a draft assessment order was submitted to the Inspecting Assistant Commissioner. Subsequent change in the jurisdiction if any unless brought to the notice of the authority concerned, will not in any manner vitiate the assessment ord .....

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CIT 344 ITR 177 (Cal). In the said judgment their Lordships have held once an issue has not been raised before the first Appellate Authority then the appellant is stopped from raising the said issue at the later stage. The said judgment is also not applicable as this issue from raised by the appellant before the Tribunal and the Tribunal had then directed the CIT(A) to adjudicate the said issue on merits. The said order of Tribunal has became final and therefore having regard to the above the sa .....

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n the exercise of power by a person who does not have jurisdiction to exercise of power by a person who does not have jurisdiction to exercise that power, cannot work as an estoppels against him. 9. Another contention specifically raised is that there is no transfer order u/s 127 of the Act from transferring the case from the DCIT to the Addl. CIT, Range 6, New Delhi. The learned CIT(A) has held that in the cases of transfer of cases to another AO after issue of notice u/s 143(2) of the Act by a .....

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f the appellant or appellant is not adversely affected by the order. The Hon ble Delhi High Court in the above context in the case of Valvoline Cummins Ltd. (supra) has held as under: 28. On the issue of concurrent jurisdiction between the Additional Commissioner and the Deputy Commissioner, learned counsel for the assessee relied upon a decision of the Calcutta High Court in Berger Paints India Ltd. v. Asstt. CIT [2000] 246 ITR 1331. The Calcutta High Court had explained the meaning of the expr .....

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officer and the other part will be dealt with by one subordinate officer. . . . (p. 141) 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 .....

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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. 30. In the facts of the present case, since the Additional Commissi .....

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d left it to the Deputy Commissioner to decide the stay petition filed under section 220(6) of the Act. We are of the opinion that this was not permissible in law. 9.1 We therefore hold that applying the above judicial position that assessment has to be completed by the authority who has initiated the proceedings for making assessment and any other authority can take over the proceedings only after a proper order of transfer u/s 127(1) or 127(2) of the proceedings. The revenue has not brought an .....

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