TMI Blog2017 (12) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... nted by the Chief Commissioner of Income-tax, Bhopal and no opportunity of being heard was given to the assessee before passing of this order. It has also been found that the reason for transferring the case under section 127 of the Act was not mentioned in the order. Further, and importantly, even if the order under section 127 dated March 24, 2009 is considered to be existing even today, as not having been challenged in a court under appropriate proceedings, the Assessing Officer cannot assume jurisdiction on the assessee, M/s. Welcome Coir Industries Ltd. on the strength of this order, because the entity centralised with the Deputy Commissioner of Income-tax/Assistant Commissioner of Income-tax (CC) on the basis of this order is M/s. Welcome Coir Industries, the firm and not M/s. Welcome Coir Industries Ltd., the company, as even admitted by the Assessing Officer in his letter dated April 30, 2012 written to the Joint Commissioner of Income-tax, Central Range, Kanpur. Deemed service of notice under section 292BB does not deal with, nor would cure such jurisdictional defect, i.e., the absence of jurisdiction. As discussed by the learned Commissioner of Income-tax (Appeals) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gupta shifted to Gwalior in 1988 where he was doing manufacturing of foam mattresses in a company, M/s Welcome Coir Industries Ltd. having its factory in Gwalior, but ten years earlier, there had occurred a fire in the factory and the factory incurred heavy losses and it was closed and then, he came to Agra and at the time of survey, it was informed that he was doing share business as sub-broker. 3. As discussed by the Assessing Officer in the assessment order, this company is connected with the Shanker Gutkha group. The case of the assessee-company was centralised under section 127 of the Income-tax Act, 1961 by the learned Commissioner of Income-tax, Gwalior with the Deputy Commissioner of Income-tax/Assistant Commissioner of Income- tax, Central Circle, Agra, vide order dated March 24, 2009 circulated vide letter F. No. CIT/Gwl/Tech/127/2008-09. After centralisation of this case with Central Circle, Agra, during the course of assessment proceedings for the assessment year 2008-09, the Assessing Officer found that substantial amounts were deposited in the Bank Account No. 51700101 003301 of this company maintained with Union Bank of India at Gwalior and in Bank Account No.1212 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add : 1. Unexplained deposit in account with Union Bank of India, Gwalior ₹ 77,21,920 2. Unexplained deposit in account with HDFC Bank ₹ 13.29,080 ₹ 90,51,000 Total assessed income ₹ 90,51,000 Assessment year 2004-05 Returned income as estimated Rs. Nil Add : 1. Unexplained deposit in account with Union Bank of India, Gwalior ₹ 2,06,53,000 2. Unexplained deposit in account with HDFC Bank ₹ 24,35,000 ₹ 2,30,88,000 Total assessed income ₹ 2,30,88,000 Assessment year 2005-06 : Returned income as estimated Rs. Nil Add : 1. Unexplained deposit in account with Union Bank of India, Gwalior ₹ 23,15,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been amply met by the learned Commissioner of Income-tax (Appeals) in paragraph Nos. 11 to 16.2.11 of his elaborate reasoned order. 9. The learned Commissioner of Income-tax (Appeals) has relied on CIT v. Norton Motors [2005] 275 ITR 595 (P H), wherein, it has been held that section 292B of the Act can be relied on for registering a challenge to the notice, etc., only if there is a jurisdictional defect or omission therein ; and that however, there is nothing in the plain language of the section to infer that the section can be relied on for curing a jurisdictional defect in the assessment notes, summons, or other proceedings. 10. Before the learned Commissioner of Income-tax (Appeals), as pointed out by the learned Commissioner of Income-tax (Appeals) at pages 27-58 of the impugned order, no contra decision was cited by the Assessing Officer, in the hearing conducted by the learned Commissioner of Income- tax (Appeals) in the presence of the Assessing Officer. Before us also, the Department has not referred to any decision opposed to Norton Motors (supra). Therefore, Norton Motors (supra), is squarely applicable and has rightly been applied by the learned Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be in general held to be applicable to other proceedings. The reliance of the Assessing Officer for validation of jurisdiction in the three assessment years on the basis of compliance made by the assessee in the assessment year 2008-09, is, as correctly held by the Commissioner of Income-tax (Appeals), also not legally tenable because erroneous assumption of jurisdiction cannot, in general, be validated. Such validation is specific in section 124(3) and failure of the assessee to object within the time allowed under section 124(3) is available to specific proceedings and not to every proceeding as also held in M. I. Builders (supra). 12. The Commissioner of Income-tax (Appeals) has correctly observed that the provisions of section 124(3) are not applicable in the present case, because both clauses (a) and (b) of the said section are not applicable for the three reassessment orders. Clause (a) applies where after filing of return under section 139(1), proceeding is initiated and not objected to within a month by the assessee calling in question the jurisdiction of the Assessing Officer after issuance of notice under section 142(1)/143(2). In that scenario, the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, in the present case, the Assessing Officer has claimed jurisdiction over the assessee by virtue of an order under section 127 of the Act, which has been found to be neither passed as per law, nor passed specifically in the case of the present assessee. Therefore, the assessment orders are neither protected by the provisions of section 124, nor sustainable under law, having been passed without jurisdiction in view of a defective order passed under section 127 of the Act. 15. The Commissioner of Income-tax (Appeals) cannot be said to have gone wrong in observing that the jurisdiction of the assessee-company was never transferred under section 127 of the Act to the Deputy Commissioner of Income-tax/Assistant Commissioner of Income-tax (Central Circle), Agra and thus, the Deputy Commissioner of Income-tax /Assistant Commissioner of Income-tax (Central Circle), Agra did not have jurisdiction over the assessee-company and, therefore, the reassessment proceedings initiated under section 147 of the Act by the issuance of the notice under section 148 dated December 2, 2009 by the Deputy Commissioner of Income-tax (Central Circle), Agra, who had no jurisdiction over the assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the office of the Commissioner of Income-tax, Gwalior on the Commissioner of Income-tax (Appeal)'s direction to find out the details of the procedure adopted for passing of this order, a reply was received from the office of the Commissioner of Income-tax, Gwalior, vide letter, F. No. CIT/Gwl/Hqrs/127/2011- 12/5133, dated March 14, 2012 which was available in the file maintained by the Assessing Officer for remand report. In this letter, it stood informed that the order was passed on the basis of the approval of and direction from the learned Chief Commissioner of Income-tax, Bhopal, vide letter No. CCIT/MP/Tech/Centralisation/127/2009-10/4170/2, dated March 13, 2009 and it was further mentioned that the name, address and permanent account number of the assessee/assessee-company was mentioned in the order under section 127 as proposed by the Assistant Director of Income-tax (Inv.) Agra in proposal dated April 15, 2008. After going through the letter dated March 13, 2009 issued from the office of the CCIT, Bhopal granting approval for centralisation, the Commissioner of Income-tax (Appeals) found that such approval was given only on the basis of the proposal of the Assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because such order is not an administrative order, but a quasi-judicial order, also stands firm. This order, undisputedly, was not even served on the entity mentioned therein and for the service of this order, endorsement has been made to the concerned assessee through the Assessing Officer concerned, without specifying whether it is the erstwhile Assessing Officer [Income-tax Officer-2(3), Gwalior], or the Assessing Officer with whom the case was centralised (Assistant Commissioner of Income-tax (Central Circle), Agra). Despite the Commissioner of Income-tax (Appeal)'s direction, given in his letter dated February 3, 2012 the Assessing Officer could not collect the record of the assessee mentioned in this order from its erstwhile Assessing Officer in Gwalior to find out whether this order of transferring of jurisdiction was served on the concerned assessee or not. As per the record of the assessee before the Commissioner of Income-tax (Appeals) there was no evidence available to show that this jurisdiction order was served on the assessee before the initiation of any proceedings against it by the Deputy Commissioner of Income-tax (CC), Agra. A certified copy of the same was pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Pvt. Ltd.' was originally incorpo rated on December 29, 1988 under the Companies Act, 1956 with the Registrar of Companies, N. C. T. of Delhi and Haryana. Subsequently it became Public Ltd. and accordingly on the basis of necessary res olution on January 20, 1995 its name was changed to Welcome Coir industries Ltd. In support of such facts copy of fresh certificate of incorporation consequent upon change of name on conversion to public limited company issued by Registrar of Companies, N. C. T. of Delhi and Haryana on March 10, 1995 is enclosed herewith. (B) That at the time of search and survey proceedings conducted on March 30/31, 2008 the address of registered office of the assessee- company was E-118, Preet Vihar, New Delhi. Presently the address of regd. office is as under : 101 Barodia Tower, Central Market, D Block, Prashant Vihar, Rohini, New Delhi-110085 Such change of address has duly been informed by the assessee company to the concerned authorities. In support of such facts search report with regard to the company from the portal of ROC is enclosed herewith. (C) That initially the Income-tax return(s) of the company were file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. On the basis of the above-said information collected by the Assessing Officer, the Commissioner of Income-tax (Appeals) found it clear that the jurisdiction of the assessee-company was actually not centralised in the Central Circle, Agra ; that permanent account number-AAACW0311P was originally allotted to the assessee-company, when it was incorporated as Welcome Coir Industries Pvt. Ltd. on December 29, 1989 with the Registrar of Companies, N.C.T. of Delhi and Haryana ; that at that time, it was having its Registered Office at 3776/309, Nirmal Market, Netaji Subhash Darya Ganj, New Delhi and this permanent account number fell in the jurisdiction of the Income-tax Officer Ward-18(3), which was still lying there, but later, it was converted into a public limited company in March 1995 and it started filing its return of income with the Joint Commissioner of Income- tax Range-2, Agra on the basis of its factory and administrative office address at 113, Industrial Area, Malanpur, Gwalior, Bhind (M.P) ; that however, its registered office remained in Delhi ; that as per the audited balance-sheet of the assessee-company available on record, its registered office was earlier at 301, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment proceeding for the assessment year 2008-09. However, as observed by the Commissioner of Income-tax (Appeals), no further submission was made by them to substantiate their plea that any defect in jurisdiction order can be cured by invoking the provisions of section 292B, to show that any entity mentioned in the jurisdiction order having different permanent account number and status can be considered to be a different entity, if that entity has made compliances before the Assessing Officer. 23. The Commissioner of Income-tax (Appeals) still went through the assessment record of the assessment year 2008-09 to examine the nature of compliances made by the assessee-company, on the basis of which, the jurisdiction assumed by the Assessing Officer on the assessee-company could be justified. 24. He found that the first notice under section 142(1)(i), dated July 14, 2009 for the assessment year 2008-09, had been issued by the Assessing Officer after receiving the jurisdiction order passed under section 127 vide order dated March 24, 2009. In accordance with the jurisdiction order, this notice was issued to M/s. Welcome Coir Industries, M-19, Madhav Nagar, Gwalior (permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of these two notices are contained in paragraph 14.2 of the order appealed against. 26. The Commissioner of Income-tax (Appeals) observed that it appeared that it was at this stage, that the Assessing Officer became aware of the correct name and status of the entity against whom he was exercising his power to initiate assessment proceedings by assuming jurisdiction over that entity, but no evidence was available on record to show that he took any corrective step with the concerned authorities to get the necessary correction made in the order under section 127, so that jurisdiction over the correct entity could be transferred to him. The Commissioner of Income- tax (Appeals) observed that the Assessing Officer did not even care to check as to whether the permanent account number being quoted by him in the notice belonged to a firm, because the fourth letter in the permanent account number was F , instead of C . According to the Commissioner of Income-tax (Appeals), as per the scheme of permanent account number, the fourth letter shows the status of the entity. If it is an F , it would belong to a firm and if it is a C , it would belong to a company. Therefore, if the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular case is transferred to another officer only when an order to this effect is passed ; and that however, it appeared that the Assessing Officer did not care to follow this principal of law to assume jurisdiction over the assessee correctly by getting the necessary correction made in the order under section 127 after coming to know that the entity against whom he was exercising jurisdiction was different from the one mentioned in the order under section 127. The said legal position and the factual situation based on record, as brought out by the Commissioner of Income-tax (Appeals) face no dispute before us at the hands of the Department. 28. It is held by the hon'ble Supreme Court in case of K. P. Mohammed Salim v. CIT [2008] 300 ITR 302 (SC) that (page 306) : The power of transfer in effect provides for a machinery provision. It must be given its full effect. It must be construed in a manner so as to make it workable. Even section 127 of the Act is a machinery pro vision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner where for the statute was enacted. 29. This decision has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one, and we do not find any reason to differ therewith. The same is accordingly confirmed, rejecting the grievance sought to be raised by the Department as shorn of merit and non est. I.T.A. No. 269/Agra/2013 31. In this case, one issue raised by the Department, for the assessment year 2008-09, by way of Ground No. 3, is that the learned Commissioner of Income-tax (Appeals) overlooked the provisions of section 292BB of the Act, despite the fact that power of attorney was filed by the director of the assessee-company, various notices were received by it, hearings were attended and compliances were made. 32. In this regard, section 292BB of the Act, deems a notice to be valid where the assessee appears and makes compliance. The provision precludes the assessee in such circumstances from raising any objection regarding the service of notice. Now, in our discussion regarding I.T.A. Nos. 266/Agra/2013 to 267/Agra/2013 (supra), we have upheld the observations made by the learned Commissioner of Income-tax (Appeals) and his conclusion about the lack of jurisdiction of the Assessing Officer over the assessee. Once the Assessing Officer did not have jurisdiction over the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 40,44,140 by computing deemed interest at rate of 8 per cent. on the total amount of ₹ 5,05,51,750. However, no evidence has been brought in the assessment order, whether such interest has been either charged or actually received by the assessee (appellant) or not. The learned authorised representative has contended that the above amount of advances are shown in the name of group companies of Shanker Gutkha Group (namely M/s. LDK Builders (P) Ltd., M/s. LDK Shares and Securities (P.) Ltd. and M/s. Shanker Merchant (P.) Ltd.) and none of these companies have paid any interest to the assessee (appellant). In fact these companies have booked the amount of advances in their books of account as share capital and therefore, question of paying any interest to the assessee (appellant) did not arise. Also, there is no evidence on record to show that any interest on such advances was paid by these companies to the assessee (appellant). In fact, during the assessment proceeding, when a letter dated September 9, 2010 was filed by the director of the assessee-company, he has even asked the Assessing Officer in this letter to let him know, if these three companies have pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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