2016 (1) TMI 1342 - AT - Income Tax

Tribunal quashes order under Income Tax Act citing procedural error.

The Tribunal quashed the order passed under section 263 of the Income Tax Act, citing the invalidity of the notice issued by the Assistant Commissioner of ... Validity of order u/s 263 of the Act - Held that: - it is clear that the said notice u/s. 263 of the Act has not been signed by the “Commissioner of Income Tax” rather it has been signed by ACIT, Hqrs., Burdwan - The Hon’ble Allahabad High Court in the case of Rajesh Kumar Pandey [2012 (9) TMI 829 - ALLAHABAD HIGH COURT] has expounded that when the Ld. CIT has not recorded his satisfaction, but it was the satisfaction of the Income Tax Officer (Technical) who is not competent to revise his order u/s. 263 of the Act, the order passed was liable to be set aside. The assumption of jurisdiction u/s 263 of the Act in the present case is not valid - Order u/s 263 of the Act is accordingly quashed and the appeal of the assessee is allowed. Appeal allowed - decided in favor of assessee. Issues Involved:1. Validity of the order passed under section 263 of the Income Tax Act, 1961.2. Jurisdictional aspect related to the notice issued under section 263 of the Act.3. Examination of specific aspects by the Assessing Officer during assessment.Analysis:Issue 1: Validity of the order passed under section 263 of the Income Tax Act, 1961:The case involved an appeal by the assessee against the order passed by the Commissioner of Income Tax (C.I.T.) under section 263 of the Income Tax Act, relating to the assessment year 2008-09. The C.I.T. had set aside the assessment order passed by the Assessing Officer (AO) due to certain discrepancies, including underassessment of income related to dividend income and expenses, loss on sale of a motor car, and disallowance of certain expenses. The assessee challenged the validity of the order passed under section 263, claiming that the show cause notice was not signed by the C.I.T., but by an Assistant Commissioner of Income Tax (A.C.I.T.). The Tribunal referred to previous decisions and held that for a valid assumption of jurisdiction under section 263, the notice must be issued by the C.I.T. Since the notice in this case was not signed by the competent authority, the assumption of jurisdiction was deemed invalid, leading to the quashing of the order passed under section 263.Issue 2: Jurisdictional aspect related to the notice issued under section 263 of the Act:The Tribunal analyzed the significance of the notice issued under section 263 of the Act, emphasizing that the notice must be signed by the Commissioner of Income Tax for a valid assumption of jurisdiction. Referring to relevant case laws and legal provisions, the Tribunal concluded that the notice in this case was not signed by the appropriate authority, rendering the assumption of jurisdiction under section 263 invalid. The Tribunal highlighted the importance of procedural compliance in establishing jurisdiction under section 263, ultimately leading to the quashing of the order passed by the C.I.T.Issue 3: Examination of specific aspects by the Assessing Officer during assessment:The C.I.T. set aside the assessment order passed by the AO, citing various discrepancies such as underassessment of income related to dividend income, loss on sale of a motor car, and disallowance of certain expenses. The C.I.T. directed the AO to re-examine these aspects and pass an order in accordance with the provisions of the Income Tax Act. The assessee challenged these directions, arguing that the AO had duly scrutinized the issues during the initial assessment process under section 143(3). However, the Tribunal's focus primarily shifted to the jurisdictional aspect related to the notice issued under section 263, leading to the quashing of the C.I.T.'s order and allowing the assessee's appeal based on the invalid assumption of jurisdiction.In conclusion, the Tribunal's detailed analysis centered on the procedural compliance regarding the notice issued under section 263 of the Income Tax Act, emphasizing the necessity of proper authorization by the Commissioner of Income Tax for a valid assumption of jurisdiction. The quashing of the order passed under section 263 was based on the invalidity of the notice, highlighting the critical role of procedural adherence in tax assessment proceedings.