2010 (9) TMI 903 - AT - Income Tax

Tribunal upholds annulment of reassessment due to lack of jurisdiction, void notice, and importance of valid Section 148 notice

Income-tax Officer Versus Naseman Farms (P.) Ltd.

The Tribunal upheld the CIT(A)'s decision to annul the reassessment, ruling that the Assessing Officer in Agra lacked jurisdiction over the assessee, ... Validity of Reassessment proceedings - notice issued AO without jurisdiction - whether curable defect u/s 292BB - HELD THAT:- Assessing Officer at Agra did not have any jurisdiction over the assessee company for the year under consideration, go unrebutted as also available from the record. Therefore, the learned CIT(A) cannot at all be said to have committed any error in annulling the reassessment order passed by the Assessing Officer at Agra. Assessing Officer at Agra was not an ‘Assessing Officer’ qua the assessee within the meaning of section 2(7A) of the Income-tax Act; Reassessment notice issued to the assessee by the Assessing Officer at Agra was void ab initio and was no notice within the meaning of section 148(1) of the Income-tax Act; Section 292BB is applicable with effect from 1-4-2008 and it does not apply to the year under consideration, i.e., assessment year 2001-02 - Also section 292BB does not cure the jurisdictional defect in the notice; Reassessment notice being void ab initio, the assessee cannot be said to have acquiesced in any proceeding or enquiry within the meaning of section 292BB and section 292BB does not lay down that even where a notice is void ab initio for want of jurisdiction, such notice shall still be deemed to have been duly served on an assessee in accordance with the provisions of the Income-tax Act - Appeal filed by the Department is dismissed. Issues Involved:1. Jurisdiction of the Assessing Officer.2. Applicability of Section 292BB of the Income-tax Act.3. Validity of the reassessment notice under Section 148 of the Income-tax Act.4. Jurisdictional defect and its implications.Issue-wise Detailed Analysis:1. Jurisdiction of the Assessing Officer:The primary issue in this case revolves around whether the Assessing Officer (AO) at Agra had the jurisdiction to issue a reassessment notice to the assessee. The assessee was registered in Delhi and had filed its tax returns there for the relevant years. The CIT(A) annulled the reassessment order on the grounds that the AO at Agra did not have jurisdiction over the assessee. The Tribunal confirmed this, stating that the AO at Agra was not vested with the relevant jurisdiction under Section 120(1) or 120(2) of the Income-tax Act, nor directed under Section 120(4)(b) to exercise such powers.2. Applicability of Section 292BB of the Income-tax Act:The Department contended that the CIT(A) erred in ignoring Section 292BB, which deems a notice to be valid if the assessee has cooperated in the proceedings. However, the Tribunal clarified that Section 292BB, introduced by the Finance Act, 2008, effective from 1-4-2008, does not apply retrospectively to the assessment year 2001-02. Moreover, even if it were applicable, it does not cure jurisdictional defects.3. Validity of the Reassessment Notice under Section 148 of the Income-tax Act:The reassessment notice was issued by the AO at Agra, who lacked jurisdiction over the assessee. The Tribunal emphasized that only an AO with jurisdiction under Section 2(7A) can issue such a notice. Since the AO at Agra did not meet this criterion, the notice was void ab initio. The Tribunal reiterated that a valid notice under Section 148 is a prerequisite for initiating reassessment proceedings.4. Jurisdictional Defect and its Implications:The Tribunal held that a jurisdictional defect is not a mere irregularity but an incurable illegality. The notice issued by a non-jurisdictional AO cannot be validated by Section 292BB. The Tribunal explained that acquiescence, as envisaged under Section 292BB, requires the notice to be valid in the first place. Since the notice was void ab initio, the assessee's participation in subsequent proceedings did not cure the defect. The Tribunal also noted that Section 292BB does not preclude objections regarding jurisdictional issues.Conclusion:The Tribunal confirmed the CIT(A)'s order annulling the reassessment. It held that the AO at Agra was not the 'Assessing Officer' within the meaning of Section 2(7A) of the Income-tax Act concerning the assessee. Consequently, the reassessment notice issued was void ab initio and did not meet the requirements of Section 148. Section 292BB, applicable from 1-4-2008, does not apply retrospectively to the assessment year 2001-02 and does not cure jurisdictional defects. The appeal filed by the Department was dismissed.