2015 (10) TMI 2365 - AT - Income Tax

Assessment order quashed due to jurisdiction issue, appeal allowed.

The Tribunal quashed the assessment order dated 29.12.2008 as the Additional Commissioner of Income Tax lacked jurisdiction to frame the assessment. ... Jurisdiction of the Additional CIT to frame the impugned order of assessment u/s 143(3) - as per assessee assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, there was no order under section 127(1) of the Act for transfer of jurisdiction from DCIT, Circle 6(1), New Delhi to Additional CIT, Range 6, New Delhi - Held that:- It is an undisputed position and not challenged by the revenue in the present appeal either by placing on record any order or any notification supporting the position that an order was made under section 120(4)(b) of the Act so as to confer jurisdiction of the Additional CIT to exercise the powers or perform the functions of an Assessing Officer under section 2(7A) of the Act read with section 120(4)(b) of the Act. In view of the above factual and judicial position, we are of the view that the order of assessment so framed is without jurisdiction in as much as the Additional CIT did not have the requisite mandate power under the law to frame the impugned assessment under section 143(3) of the Act. This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs the Additional Commissioner to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. As regards the notification no. 267/2001 dated 17.9.2001 we notice that such notification by CBDT u/s 120(4)(b) of the Act directs that Joint Commissioner of Income Tax or Joint Director shall exercise the power and function of an Assessing Officer in respect of specified cases in respect of which such Joint Commissioner or authorized by Commissioner of Income Tax vide CBDT notification dated 14.9.2001 and 31.7.2001. It is thus apparent that the said notification is applicable in respect of Joint Commissioner authorized by Commissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi. We thus find merit in the claim of the appellant that in absence of an order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks jurisdiction to exercise the functions of the AO and therefore consequently the order of assessment framed is without jurisdiction. Assessment has to be completed by the authority who has initiated the proceedings for making assessment and any other authority can take over the proceedings only after a proper order of transfer u/s 127(1) or 127(2) of the proceedings. The revenue has not brought any order for transfer of the proceedings from DCIT, Circle-6(1), New Delhi to the Additional CIT, Range-6, New Delhi and therefore it is quite evident that the Additional CIT, Range-6 took over the assessment proceedings without there being an order u/s 127(1). - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Additional Commissioner of Income Tax to frame the assessment order.2. Validity of the assessment order in the absence of an order under section 127 for transferring jurisdiction.3. Classification of long-term capital gains and short-term capital gains as business income.4. Levy of interest under section 234B.Issue-Wise Detailed Analysis:1. Jurisdiction of the Additional Commissioner of Income Tax:The primary contention was whether the Additional Commissioner of Income Tax had the jurisdiction to frame the assessment order under section 143(3) of the Act. The appellant argued that the Additional Commissioner was not authorized under section 120(4)(b) read with section 2(7A) of the Act to exercise the powers of an Assessing Officer. The Tribunal noted that, according to section 2(7A), an Additional Commissioner can only perform the functions of an Assessing Officer if specifically directed under section 120(4)(b). The Tribunal found that there was no such order empowering the Additional Commissioner in this case, thus rendering the assessment order invalid and without jurisdiction.2. Validity of the Assessment Order in the Absence of an Order under Section 127:The appellant also contended that there was no order under section 127 of the Act transferring jurisdiction from the DCIT to the Additional Commissioner. The Tribunal agreed, noting that the assessment proceedings initiated by one authority must be concluded by the same authority unless a proper transfer order under section 127 is issued. Since no such order was presented, the Tribunal held that the Additional Commissioner lacked the jurisdiction to complete the assessment, further invalidating the assessment order.3. Classification of Long-Term Capital Gains and Short-Term Capital Gains as Business Income:The appellant challenged the classification of Rs. 6,10,92,870/- as business income instead of long-term capital gains, which would be exempt under section 10(38) of the Act. The Tribunal did not adjudicate on this issue, as it quashed the assessment order on jurisdictional grounds. However, it noted that the appellant had consistently treated the shares as investments in previous years, and the gains should logically be considered long-term capital gains.4. Levy of Interest under Section 234B:The appellant contested the levy of interest under section 234B amounting to Rs. 98,80,958/-. The Tribunal held that this issue was consequential and did not require separate adjudication since the assessment order itself was quashed.Conclusion:The Tribunal quashed the assessment order dated 29.12.2008 on the grounds that the Additional Commissioner of Income Tax did not have the jurisdiction to frame the assessment. Consequently, the issues regarding the classification of gains and the levy of interest were rendered moot. The appeal was allowed in favor of the appellant.