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INCOME-TAX OFFICER Versus MAHENDRA SINGH TYAGI

Validity of reopening of assessment - validity of notice - Held that:- Since it has been established that notice under section 148 of the Act was issued by the Assessing Officer having no jurisdiction over the assessee, the reopening is bad in law and, therefore, the assessment framed consequent thereto is not sustainable in the eyes of law. - Decided in favour of assessee - I. T. A. No. 446 /LKW/ 2013 (assessment year 2009-10). - Dated:- 6-11-2015 - SUNIL KUMAR YADAV (Judicial Member) and A. K. .....

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apement of income was based on sale of land at Makanpur, Loni which was detected during the course of assess ment proceedings under section 143(3) for the assessment year 2008-09. 2. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in annulling the assessment without appreciating the fact that the assessee deliberately filed his return of income in territorial jurisdiction whereas the jurisdictions/as with the Income-tax Officer-5(4), Kanpur and the assessment for t .....

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148 was issued during the pendency of regular assessment proceedings and only notice under section 143(2) could have been issued and notice under section 148 is without jurisdiction ignoring the fact that the Act does not debar the Assessing Officer from taking recourse to provisions of section 147 of the Act even when time to issue notice under section 143(2) is available. 5. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in annulling the assessment without appr .....

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d bad in law be vacated and the order of the Assessing Officer be restored. 2. During the course of hearing of the appeal, learned counsel for the assessee has invited our attention to the facts that the assessment for the assessment year 2008-09 was framed under section 143(3) of the Income- tax Act, 1961 (hereinafter called in short "the Act") by the Income-tax Officer-5(4), Kanpur. At that time, the assessee was only a salaried employee, but later on when the assessee had some other .....

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osit of ₹ 4 lakhs in bank represents the advance received towards sale of agricultural land situated at Gram Makanpur, Pargana Loni, Tahsil Ghaziabad. Since the return was not filed with the Income-tax Officer-5(4), Kanpur, the Income-tax Officer- 5(4), Kanpur reopened the assessment and issued notice under section 148 of the Act having formed a belief that the income of the assessee of ₹ 31,77,511 has escaped assessment for the assessment year 2009-10. The Assessing Officer accordin .....

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deserves to be quashed. The learned Commissioner of Income-tax (Appeals) re-examined the claim of the assessee and being convinced with it, he was of the view that reopening was done by an officer having no jurisdiction over the assessee, therefore, the reopening was not valid and he accordingly annulled the assessment framed consequent to the bad reopening. 4. Aggrieved, the Revenue is in appeal before the Tribunal and placed heavy reliance upon the order of the Assessing Officer ; whereas lea .....

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me-tax Officer 3(2), Kanpur, as the Income-tax Officer-5(4), Kanpur refused to accept the same. The assessee has disclosed complete facts with the Income-tax Officer-3(2), Kanpur, therefore, the reopening made by an incompetent officer is bad in law and deserves to be quashed. 5. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that undisputedly in the assessment year 2008-09, the return was filed with the Income-tax Officer-5(4), Kanpu .....

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h the correct Assessing Officer having jurisdiction over the assessee. During the course of hearing, it was also specifically asked from the learned Departmental representative whether the assessee was under any obligation to inform the old Assessing Officer with whom he had been filing the return of income, when on account of change in circumstances, the assessee was required to file the return of income with some other Assessing Officer. Despite affording various opportunities, the learned Dep .....

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tment and it is the duty of the Assessing Officer to send the return of income to the correct Assessing Officer if it is filed with the wrong Assessing Officer. Since the assessee has filed the return of income with the correct Assessing Officer on account of change of jurisdiction, the assessee cannot be held responsible for any mistake or error on the part of the Department. It is also undisputed fact that at the relevant point of time when the notice under section 148 of the Act was issued by .....

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ave considered the facts and circumstances of the case and have gone through the written submissions as filed by the authorised representative. The undisputed facts are that the assessment for the assessment year 2008-09 was framed under section 143(3) on August 12, 2010 by the Income-tax Officer-5(4), Kanpur by which time, the Income-tax returns for the assessment years 2009-10 and 2010-11 had already been filed on September 30, 2009 and September 30, 2010 with the Income-tax Officer-3(2), Kanp .....

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ion 143(3), the Assessing Officer raised a specific query regarding the deposits made by the assessee in his bank account to which the assessee replied that the deposit of ₹ 4 lakhs in bank represents advance received towards sale of agricultural land at village Makanpur, Loni, Ghaziabad. The relevant portion of the letter dated May 12, 2010 filed is as under : 'With reference to the above and in continuation of previous hearing I am enclosing herewith the following for your kind consi .....

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information is as per your requirements.' This information is available on the file of the Assessing Officer for the assessment year 2008-09. Thus two things are clear, that the information regarding sale of agricultural land at Makanpur, Loni, Ghaziabad by the assessee and receipt of advance of ₹ 4 lakhs had been duly considered by the Assessing Officer while framing the assessment for the assessment year 2008-09. As per the reasons, recorded by the Income-tax Officer-5(4), it is cle .....

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in ward 3(2), would be non est and invalid. In the present case not only the assessee filed his return in ward 3(2), Kanpur but the Income-tax Officer-3(2) also knowing well that the jurisdiction over the said case was with the Income-tax Officer- 5(4), Kanpur processed the return under section 143(1) of the Act 1961 and created a demand of ₹ 34,140. By processing the returns under section 143(1). The Income-tax Officer-3(2) accepted the return as filed by the assessee 'as a valid ret .....

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Income- tax to cancel the processing of the return under section 263 of the Act 1961. Processing of the return by the Income-tax Officer-3(2), under section 143(1) has the effect of validating the return filed. It is well accepted proposition that even if a return has been filed with an Income-tax Officer who does not have jurisdiction over the assessee, but at the same time process the return so filed, then it cannot be said that the return filed is invalid though in this case the Income-tax O .....

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has been processed, demand has been raised no fault can be fastened to the assessee. Since the return has been processed, it cannot be said that no return has been filed at all. I have gone through the decision of the hon'ble Income-tax Appellate Tribunal, Lucknow, in the case of Paint Trade Linkers v. ITO as cited by the learned authorised representative and as reported in 471 Tax man 30 (Mag) wherein it has been held that once a return of income has been filed even in wrong jurisdiction, .....

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me-tax Officer-5(4) and on failure to file the return with the officer having jurisdiction, there is escapement of income. As already held by the hon'ble Tribunal (supra) that mere non-filing of the return with the jurisdic tional officer would not be a valid reason to initiate proceedings under section 148, on this ground alone the notice issued by the Assessing Officer is without jurisdiction and the reassessment is annulled. The second limb of the argument that notice under section 142(1) .....

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ns of sections 142(1) and section 148 were in conflict with each other. The Delhi Special Bench in the case of Motorola Inc v. Deputy CIT [2005] 95 ITD 269 (Delhi) [SB], held that notice under section 142(1) could be issued any time before the end of the assessment year. In other words section 147/148 would come into play as soon as the relevant assessment year ended. To resolve this controversy the Finance Bill, 2006 made it specifically clear that the notice under section 142(1) could be issue .....

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notice under section 148 instead of 142(1) there would be vio lation of the provisions, for in such circumstances the provisions of section 142(1) would become redundant. There is no necessity to issue notice under section 148. Notice under section 148 is issued when there is any escapement of income. Further, notice under sec tion 142(1) can be issued for two purposes, one for the calling of the return when not filed under section 139(1) and the other calling for information to verify the cont .....

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cular provision does, not fall flat. Reference in this connection be made to the decision of University of Allahabad v. Amrit Chand Tripathi AIR 1987 SC 57 wherein it has been held 'thus a construction that reduces one of the provisions to a useless lumber or dead letter, is not a harmonious construction (Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal AIR 1962 SC 1044)'. Therefore even on a harmonious construction of the provisions, sections 142(1) and 147/148, there ari .....

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and Sohan Pai. This again is factually incorrect. The land in question has been sold to Ultrahome Construction Pvt. Ltd. and not to Shri G. K. Sharma or Sohan Pal. Besides there cannot be escapement of income merely because there is a difference between the stamp duty value as assessed by the stamp duty authority (SVA) and the consideration as received by the assessee. The cost of acquisition and improvement, if any has to be considered and deducted from the estimated value/ actual consideratio .....

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the Income-tax Officer-3(2) how can he conclude that the assessee has failed to disclose income from capital gains on sale of agricultural land. In absence of the return before the Income-tax Officer-5(4), there could be no occasion for the Assessing Officer to believe or form reasons for any income escaping assessment. The reasons recorded lack belief as contemplated in section 147 and cannot be termed as valid reasons to initiate action under 147/148 of the Act. Again when the Income-tax Offi .....

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frame the assessment under section 143(3) would be pending. Once the return filed in a wrong jurisdiction has been acted upon by processing the same, the return ceases to be an invalid return. In such circumstances the proceedings would be pending and has to be continued by issue of notice under section 143(2) culminating into a regular assessment under section 143(3). It is a trite law that when regular proceedings are pending, no notice under section 148 can be issued and if any notice under s .....

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