9911796707
TMI Blog2024 (7) TMI 1641X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 92,50,000/- during the current financial year and accordingly, the case of the assessee was reopened u/s. 147 of the Act by issuing notice u/s. 148 dated 30.06.2021 by ITO, Ward- 2(1), Kolkata. The notice u/s 148A(b) was issued on 26.05.2022. Both the notices were issued by ITO Ward-2(1) Kolkata. The assessment was framed vide order dated 26.05.2023 passed u/s 147 r.w.s. 144B of the Act by making addition of 35.50 Lacs. 4. The ld AR vehemently argued that the assessment framed is invalid and bad in law on four counts. First, Ld. AR stated that the income of the assessee was Rs. 39,72,460/- and therefore the assessment has to be framed by the AC/DC in terms of CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011. The Board has issued instruction in exercise of power u/s 119 of the Act that in case of non-corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruction and therefore the same is without valid jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Apex court in the case of M/s. Arati Marketing Pvt. Ltd. Vs. Union of India & Ors. in WPO No. 2747 of 202 dated 12.02.2024 wherein the Hon'ble Apex Court has held that the provisions of old regime of section 148 of the Act including (TOLA) are read into or applied to the new regime applicable from 01.04.2021, it would also necessarily mean that provisions repealed by the Parliament without any saving and exception clause is applied by the revenue even after it has come to an end which is clearly not permissible in law. The Ld. AR stated that the said decision was rendered by the Hon'ble Apex Court in the context of old regime u/s. 148 having been repealed/abrogated and replaced by new set of provisions by finance Act, 2021 which came into force on 01.04.2021. The Ld. AR submitted that the new section 148A was inserted w.e.f. 01.04.2021. The Ld. AR argued that the Hon'ble Apex Court has held that no notice u/s. 148 of the Act (unamended provision) can be issued after 01.04.2021 within the said section as it is not on the statute book following abrogation/repealing of the said section w.e.f. 01.04.2021. The Ld. AR, therefore, prayed that even on this gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2023 dated 24.01.2024 wherein the Hon'ble Court has decided the same in favour of the assessee. 4.3. Arguing on the fourth limb, the Ld. AR submitted that as per the reasons recorded by the Ld. AO, it was noted that assessee has received and is beneficiary of accommodation entry amounting to Rs. 92,50,000/- received from the concerns belonging to or operated by Shri Mukesh Banka during the year and accordingly, the Ld. AO came to the conclusion that income has escapement to that extent. The Ld. AR stated that the assessee has filed objection to the notice issued u/s. 148A(b) dated 26.05.2022 vide his written submission dated 15.06.2022 in which the assessee stated that as per the books of account of the assessee there was no transaction of Rs. 27 lakh on 26.04.2013 as noted in the said notice with Funidea Vinimay Pvt Ltd. There was only one transaction of Rs. 25,50,000/- on 26.04.2013 from the said party which was the short term loan and which was repaid on 24.03.2015. Similarly, in respect of second party i.e. Manikala Dealmark Pvt. Ltd., the assessee stated that as per the notice issued by the AO, the assessee received Rs. 5.00 lakh on 01.05.2013 whereas as per the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing the rival submissions and perusing the material available on record, we find that undisputedly the returned income of the assessee was Rs. 39,72,460/- and the jurisdiction to issue notice and to frame the assessment vested with the ACIT/DCIT whereas the notice u/s. 148 of the Act dated 30.06.2021 has been issued by ITO, Ward-2(1), Kolkata. We note that the notice u/s 148A(d)of the Act dated 28.07.22 was replied by the assessee vide letter dated 11.08.2022, a copy of which is available at pages 18 to 25 of the paper book. In the said letter the assessee objected to the issuance of notice by ITO, Ward- 2(1), Kolkata to be without jurisdiction which would render all the proceeding as invalid and void. The said communication by the assessee to the AO went unheeded and no action was taken on the objection raised by the assessee and the AO proceeded with the assessment and framed the same accordingly. Now, issue before us is whether the assessment framed by the AO lacked jurisdiction. We have also perused the decisions relied on by the assessee as noted hereinabove which are discussed as under: (i) In the case of PCIT Vs. Shree Shoppers Ltd. (supra), the Hon'ble Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, we are of the clear view that the Tribunal rightly allowed the assessee's appeal and quashed the scrutiny proceedings as defect in issuance of notice is incurable as it goes to the root of the matter. Thus, we find no ground to differ with the findings recorded by the learned Tribunal. In the result, the appeal filed by the revenue (ITAT/39/2023) is dismissed and the substantial questions of law are answered against the revenue. Consequently, the connected application for stay (IA No.GA/2/1/2023) also stands closed ." (ii) Similarly, ratio has been laid down by Hon'ble Coordinate Bench in the case of Smita Biswas (supra), wherein the operative portion of the order is as under: "9. After hearing the rival contentions and perusing the material on record, I find that though the notice u/s 143(2) was issued by ITO, Ward-1(4), Jalpaiguri who is the jurisdictional AO however the assessment in this case was framed by ACIT, Circle-1(1), Jalpaiguri . We note that there is no valid order of transfer of jurisdiction from ITO to ACIT and therefore the transfer of jurisdiction is in contravention of provisions of Section 127(1), (2) and (3) of the Act. The case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Amiya Gopal Dutta (supra). For the sake of ready reference, the operative part is extracted below: "5. At the outset, the Ld. Counsel for the assessee submitted that the assessment passed u/s 144 of the Act dated 17.12.2018 is void,ultra vires and nullity in the eyes of law as the same was passed by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri whereas as per the CBDT circular 1/2011 [F. No. 187/12/2010-IT(A-I)] dated 31.01.2011 the Board has issued instruction in exercise of power u/s 119 of the Act that in case of non- corporate assessee where the income is declared up to Rs. 15 Lacs, the assessment would be framed by ITO and above Rs. 15 Lacs AC/DCs whereas the said limit was set at Rs. 20 Lacs and above Rs. 20 Lacs ITO/ and AC/DCs respectively. The Ld. A.R. submitted that since the order has been passed in violation of instruction of CBDT by the Assistant Commissioner of Income Tax, Circle-1(1), Jalpaiguri which is not a metro city and therefore the same may kindly be quashed. In defense of his arguments the Ld. A.R relied on the decision namely Hirak Sarkar vs. ACIT, Circle-23(1), Hooghly in ITA No. 850/Kol/2019 for AY 2011-12 dated 12.08.2021 and Sana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate returns Upto Rs. 20 lacs Above Rs. 20 lacs Upto Rs. 30 lacs Above Rs. 30 lacs Non-Corporate returns Upto Rs. 15 lacs Above Rs. 15 lacs Upto Rs. 20 lacs Above Rs. 20 lacs Metro charges for the purpose of above instructions shall be Ahmadabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011. In terms of the above instruction in the case of non-corporate assessee in non-metro cities, the ITR filed upto Rs. 15 lacs has to be assessed by ITO and therefore in the instant case the assessment is framed in violation of above instruction by the Board. The case of the assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata benches in the case of Hirak Sarkar (supra). The operative part is reproduced as under: 5. I have considered the rival contentions of both the ld. representatives of the parties. Before proceeding further, it will be appropriate to refer to section 120 of the Act which, for the sake of ready reference, is reproduced as under: "Jurisdiction of income- tax authorities (1) Income- tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. 8. A perusal of the above statutory provisions would reveal that jurisdiction to transfer case from one Assessing Officer to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from ITO, Ward-23(3), Hooghly to ACIT, Circle-23(1), Hooghly. Even, there is no document on the file that the ACIT, Circle-23(1), Hooghly had ever recorded any reasons to form belief that the income of the assessee has escaped assessment nor did he issue any notice u/s 147 of the Act. On the other hand, the ITO, Ward-23(3), Hooghly had recorded the reasons for reopening of the assessment and had issued notice u/s 148 of the Act, but did not proceed further with the framing of assessment. Under the circumstances, the assessment framed by ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue and does not require any investigation into the facts. The ld. Counsel for the assessee submitted that as per Board Instruction No. 1/2011 [F. No. 187/12/2010-IT(A-I)], dt. 31/01/2011, the jurisdiction of the assessee is with the Assistant Commissioner of Income Tax, Circle-1, Durgapur, as the assessee is a non-corporate assessee and the income returned is above Rs.15,00,000/- and whereas, the statutory notice u/s 143(2) of the Act, was issued on 29/09/2016, by the Income Tax Officer, ward-1(1), Durgapur, who had no jurisdiction of the case. He submitted that the assessment order was passed by the ACIT, Circle-1(1), Durgapur, who had the jurisdiction over the assessee, but he had not issued the notice u/s 143(2) of the Act, within the statutory period prescribed under the Act. Thus, he submits that the assessment is bad in law. 5.1. On merits, he rebutted the findings of the lower authorities. The ld. Counsel for the assessee relied on certain case-law, which I would be referring to as and when necessary. 6. The ld. D/R, on the other hand, submitted that the concurrent jurisdiction vests with the ITO as well as the ACIT and hence the assessment cannot be annulled simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the office of the ACIT, Circle-27, Haldia on 24.09.2014 and immediately ACIT issued notice u/s. 142(1) of the Act on the same day. From the aforesaid facts the following facts emerged: i) The assessee had filed return of income declaring Rs. 50,28,040/-. The ITO issued notice under section 143(2) of the Act on 06.09.2013. ii) The ITO, Ward-1, Haldia taking note that the income returned was above Rs. 15 lacs transferred the case to ACIT, Circle-27, Haldia on 24.09.2014. iii) On 24.09.2014 statutory notices for scrutiny were issued by ACIT, Circle-27, Haldia. 6. We note that the CBDT Instruction is dated 31.01.2011 and the assessee has filed the return of income on 29.03.2013 declaring total income of Rs. 50,28,040/-. As per the CBDT Instruction the monetary limits in respect to an assessee who is an individual which falls under the category of 'non corporate returns' the ITO's increased monetary limit was upto Rs. 15 lacs; and if the returned income is above Rs. 15 lacs it was the AC/DC. So, since the returned income by assessee an individual is above Rs. 15 lakh, then the jurisdiction to assess the assessee lies only by AC/DC and not ITO. So, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t done by Income-tax Officers as specified in CBDT instruction No. 1/2011." 9.2. The Hon'ble High Court of Calcutta in the case of West Bengal State Electricity Board vs. Deputy Commissioner of Income Tax, Special Range - I, reported in [2005] 278 ITR 218 (Cal.) has held as follows :- "Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of - Assessment years 1983-84 to 1987-88 - Whether a question of law arising out of facts found by authorities and which went to root of jurisdiction can be raised for first time before Tribunal - Held, yes Whether jurisdiction of Assessing Authority is not dependent on date of accrual of cause of action but on date when it is initiated - Held, yes - Whether once a particular jurisdiction is created, same must be prospective and cannot be retrospective and it has to be interpreted having regard to manner in which it has been sought to be created - Held, yes - Assessee" 9.3. The Hon'ble Supreme Court in the case of CIT vs. Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC), held as follows :- "7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... play. Coming to the argument of the ld. D/R that objection u/s 124(3) of the Act has to be taken by the assessee on rectifying notice u/s 143(2) of the Act from a non-jurisdictional assessing officer, I am of the view that I need not adjudicate this issue, as I have held that non-issual of statutory notice/s 143(2) of the Act by the jurisdictional Assessing Officer makes the assessment bad in law. Under these circumstances, we allow this appeal of the assessee." 6. Respectfully following the propositions of law laid down in these orders stated above, we hold that the orders are bad in law for the reason that the assessing authority passed the order u/s 143(3) of the Act i.e. DCIT-13(1), Kolkata has not issued a notice u/s 143(2) of the Act and also for the reason that the jurisdiction of these cases lies with the ITO and not the DCIT. Hence all the orders passed by the ld. CIT(A) in these four cases are hereby quashed and the appeals of the assessees are allowed." 9. In view of the discussion made above and respectfully following the decision cited above, it is held that the reassessment framed u/s 147 of the Act being without jurisdiction is bad in law and the same is accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment made by the AO. 6.2. The second argument of the AR for the assessee was with regard to the issue of assessment being barred by limitation as no notice u/s. 148 could be issued post 31.03.2021. We have perused the provisions of the Act carefully and found that the old regime of reassessment has undergone a sea change and section 148 of the Act has been repealed and abrogated and replaced by new sections of 148 and 148A w.e.f. 01.04.2021 by the Finance Act 2021. For the sake of better understanding of the provisions of the Act and Taxation and Other Laws (Relaxation and Amendment of certain provisions ) Act, 2020 (TOLA) and subsequent notifications, we would like to narrate the chronology of notifications of legislation concerning the said abrogation/repelling and substituting the new regime as under: "On March 31, 2020 the Taxation & Other Laws (Relaxation of certain Provisions) Ordinance, 2020 promulgated. On June 24, 2020 Notification No. 35/2020 was issued by the CBDT in exercise of the power of Section 3(1) of the Ordinance extending the time for issue of notice under Section 148 to March 31, 2021. The said notification came into force from June 30, 2020. On Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d replaced by a new set of provisions. Further, by Section 42, a new Section 148A was inserted also with effect from April 1, 2021. By Section 43 of Finance Act 2021, old Section 149 of the Act was substituted with effect from April 1, 2021 without any savings clause. The new Section 149 laid down new time limits for issue of notice under the new Section 148 of the Act. As such, the first proviso to the new Section 149(1) of the Act stipulated that no notice under the new Section 148 of the Act shall be issued at any time if such notice could not have been issued at that time on account of being beyond the time limit specified under the old Section 149(1)(b) of the limit for issue of notice under the old Section 148 of the Act had expired in terms of the old Section 149(1)(b) of the Act. Since by the Finance Act, 2021, the old Section 149 of the Act was repealed and replaced by a new provision with effect from April 1, 2021, there was no question of complying with the old Section 149 of the Act after March 31, 2021. Similarly, there was no question of extension of the time limit for compliance of the old Section 149 of the Act after March 31, 2021. Having regard to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, submission of the parties, relevant provisions of law including unamended old Sections 147, 148, 149 and 151 of the Income Tax Act, 1961 as stood on March 31, 2021, prior to enactment of the Finance Act, 2021, and present substituted Sections 147, 148, 149, 151 and newly inserted Section 148A of the Income Tax Act, 1961 as enacted by Finance Act, 2021, without having any savings clause for the old provisions relating to reassessment proceedings, Section 3 of the Taxation and Other Laws (Relaxation and Amendment of certain Provisions) Act, 2020 (TOLA), Notification No. 20/2021 dated 31st March, 2021 and Notification No. 38/2021 dated 27th April, 2021 issued by the CBDT in exercise of alleged delegated power conferred under TOLA, for aiding the old provisions relating to reassessment proceedings which stood and remained in force till 31st March, 2021, various judgments relied upon by the parties referred hereinabove and on reading all together I am inclined to hold that all the impugned notices issued under newly inserted Section 148A(b) of the Income Tax Act, 1961 by Finance Act, 2021, relating to assessment years 2013-14 and 2014-15, which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961, relating to assessment years 2013-14 and 2014-15 after coming into effect the Finance Act, 2021 from 1st April, 2021 amending and subsisting the old provisions under Section 147 to 151 of the Income Tax Act, 1961, without any saving clause does not arise and such exercise by the authority under TOLA under the aforesaid two notifications by the CBDT in conflict of the relevant provisions under Finance Act, 2021 is wholly unwarranted and bad in law. iii. The erstwhile regime of Section 148 of the Act (applicable up to 31.03.2021) had been repealed by the parliament without any savings and exception clause and was substituted with an altogether new regime vide the Finance Act, 2021 with effect from 01.04.2021. iv. Therefore, the provisions of TOLA which applied to the old law cannot be read into the new substituted regime to test the validity of a notice under old Section 148 of the Act issued on or after 01.04.2021, admittedly under the new regime, in view of the one-time leeway granted by Hon'ble Supreme Court in Principal CIT Vs Ashish Agarwal [2022] 444 ITR 1 (SC) - validity of such notice under the new/substituted regime has to necessarily be tested under the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns/statutory schemes; b. Apex Court in Ashish Agarwal (supra) categorically held that all defences, including defense of limitation, as available under the amended provisions, including the amended Section 149, shall be available - application of old law shall, however, defeat the said right specifically recognized by the Apex Court as available to the assessee; c. Even if the defense available to the assessee under the substantive provisions of Section 149(1)(b) and first proviso of the new Act thereto shall not be available, thereby rendering the said provision otiose and a dead letter of the law (from 01.04.2021 to 30.06.2021), and the operation of the amended provisions would have to be deferred/postponed up to and after 30.06.2021 without having any legislation by the Parliament to this effect. Revenue Respondent no. 3/Central Board of Direct Taxes ('CBDT") has erroneously resorted to Instruction No. 1 dated 11.05.2022 by contending that the Apex Court decision in Ashis Agarwal (supra) read with TOLA permits the notices to "travel back in time to their original date when such notices were to be issued" i.e., on or before 31.03.2021 and that consequent notices issued fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2021, has been codified following the judgment rendered by the Apex Court in the matter of GKN Driveshafts (India) Limited (supra). The provisions mandate that, before making any assessment under Section 147, the Assessing Officer must serve a notice to the Assessee requiring him to file his return of income within specified time and before such notice, the Assessing Officer shall record his reasons for the same. While the earlier provision required the Assessing Officer to have reason to believe that there is escapement of income, the new provision required any information as specified under Explanation 1 to Section 148 to be present for there to be a reopening of the case. Furthermore, Section 148A which was inserted by the Finance Act, 2021 reiterates the procedure to be followed by the Assessment Officer upon receiving such information, including conducting any inquiry regarding the information received, providing an opportunity of being heard to the Assessee through serving of notice to show cause within the prescribed time in the notice (which must not be less than 7 days and not more than 30 days on the date of serving the notice or the time period till which time ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued by the Ld. AO u/s. 148A(b) of the Act has been comprehensively replied as stated above controverting the allegations of the AO as incorrect and baseless. However, the AO has not applied his mind to the reply given by the assessee and not controverted the arguments of the assessee. Thus apparently the assessment framed by the AO without application of mind and without controverting the explanation given by the assessee is bad in law. The case of the assessee is squarely covered by the decision of jurisdictional High Court in the case of Excel commodity & Derivative Pvt. Ltd. Vs. Union of India & Ors. in APO/123/2023, IA No. GA/1/2023 dated 08.01.2024 in which the Hon'ble Court has held that the assessment framed u/s. 148A(d) without application of mind and without controverting the explanation of the assessee is bad in law and is accordingly being quashed. The relevant part of the decision is extracted as under: "The allegation against the assessee was that they have taken a loan from Brightmoon Supply Pvt. Ltd. and the same has been shown to adjust outstanding loan and the assessee was called upon to substantiate the transaction. The assessee, in no uncertain terms, state ..... X X X X Extracts X X X X X X X X Extracts X X X X
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