2022 (11) TMI 367 - AT - Income Tax

Tribunal upholds assessment order; lack of jurisdiction objection dismissed, deduction denied under Section 54

The Tribunal upheld the assessment order, ruling that the lack of jurisdiction objection raised by the assessee was untimely and did not render the order ... Jurisdiction of an AO - Assessee submitted that the assessment order dated 14/12/2018 was passed by the Income Tax Officer, Ward-12(3), Hyderabad, which falls within the jurisdiction of Range-12, Hyderabad, which is a salary range, where only the tax payers who are having salaried income are assessed to tax, whereas the assessee is not a salaried employee and, therefore, the order passed by the learned Assessing Officer is without jurisdiction and assessment order is void ab initio - HELD THAT:- As undisputed that in the earlier years the assessee was a salaried employee and the assessment was taking place in the salary range. For this year, depending upon the PAN, the case was allotted to Income Tax Officer, Ward-12(3), Hyderabad. Assessee never objected for the jurisdiction of AO. At no point of time, the assessee brought it to the notice of the authorities that because there is no salary income in this year, though according to the PAN the matter was allotted to the Income Tax Officer, Ward-12(3), Hyderabad as a matter of fact, the salary range has no jurisdiction over the assessee for this year. For that matter, it is not the case of the assessee that she was never a salaried employee. Assessment order starts with the sentence that ‘the assessee, salaried employees has filed’, suggesting that the assessee filed returns of income earlier years as a salaried employee. Basing on the PAN, the case was picked up for scrutiny by the Income Tax Officer, Ward-12(3), Hyderabad. Assessee never objected to the jurisdiction of Income Tax Officer, Ward-12(3). On this aspect, section 124(3) of the Act mandates that no person shall be entitled to call in question the jurisdiction of an Assessing Officer, where he has made a return under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier. Having regard to the legislative policy in enacting 124(3) of the Act, no different conclusion can be reached in the case on hand. Legislature is very clear in laying down the policy that no questions relating to the jurisdiction of the learned Assessing Officer in a matter where the return under section 139(1) of the Act, shall be entertained after expiry of one month from the date on which the notice under section 142(1) of the Act was served. Thus neither the facts nor law are in favour of the assessee. Though the want of inherent jurisdiction vitiates the proceedings ab initio, lack of pecuniary or territorial jurisdiction does not vitiate the proceedings ipso facto but it requires the proof of resultant failure of justice because of such want of jurisdiction. This is the policy of the legislature under section 21 of the CPC as well as section 124(3) of the Act. We, therefore, find it difficult to sustain the argument advanced by the learned AR that the assessment is void ab initio for want of territorial jurisdiction with the learned Assessing Officer. We accordingly reject the contention advanced on behalf of the assessee that the assessee order is void ab initio for want of jurisdiction with the Income Tax Officer, Ward-12(3), Hyderabad. Deduction u/s 54 - Admittedly, assessee does not purchase the flat under the self-financing scheme of DDA. She, therefore, relies on Circular No. 672 wherein the board having considered the matter, decided that if the terms of the schemes of allotment and construction of a flats/houses by the cooperative societies or other institutions are similar to those mentioned in para to of the board circular No. 471, dated 15/10/1986, such cases may also be treated as cases of construction for the purpose of section 54 and 54F of the Act. Though reliance is placed on the Circular Nos. 471 and 672, no material is produced before us to show that the assessee purchased the flat from any co-operative society or other institution under the schemes of allotment and construction of flats/houses which have the trappings of the self-financing scheme of DDA referred to in Circular No. 471. Purchase of property from a private real estate agency cannot be equated with DDA or any co-operative society and essentially the terms of purchase should match the scheme under which the DDA/any co-operative society, allots and constructs the flats/houses. Admittedly, the assessee did not deposit the un-utilized amounts in a notified bank account as required under law. In Humayun Suleman Merchant [2016 (9) TMI 70 - BOMBAY HIGH COURT] it was held that where the assessee filed return of income and entire amount which was subjected to capital gain tax had not been utilized for the purpose of construction of new house, nor were un-utilized amounts deposited in notified bank accounts before filing return of income, the assessee is not entitled to claim deduction of that part of capital gains. This decision covers the case on hand. On a careful consideration of the facts and law on this aspect, we do not find anything illegality or irregularity in the action of the authorities below and accordingly the grounds of appeal are devoid of merits. - Decided against assessee. Issues Involved:1. Validity of the jurisdiction of the Assessing Officer.2. Eligibility for deduction under Section 54 of the Income Tax Act, 1961.Detailed Analysis:1. Validity of the jurisdiction of the Assessing Officer:The assessee challenged the assessment order on the grounds of jurisdiction, arguing that the Income Tax Officer, Ward-12(3), Hyderabad, lacked jurisdiction as it is a salary range, and the assessee was not a salaried employee during the relevant assessment year. The assessee contended that the assessment order was void ab initio due to this jurisdictional defect, citing several legal precedents.The Revenue countered that the assessee had habitually filed returns with the said officer and had not raised any jurisdictional objections within the stipulated time frame as per Section 124(3) of the Income Tax Act. The Tribunal noted that the assessee had been a salaried employee in previous years and had filed returns with the same officer without objection. The Tribunal emphasized that Section 124(3) mandates that jurisdictional objections must be raised within one month from the date of service of notice under Section 142(1).The Tribunal referred to several judgments, including Kiran Singh and Others Vs. Chaman Paswan, to assert that a decree passed by a court without jurisdiction is a nullity. However, it also noted that objections to jurisdiction must be raised timely and that lack of pecuniary or territorial jurisdiction does not vitiate proceedings unless there is a resultant failure of justice. The Tribunal concluded that the assessee's failure to raise jurisdictional objections within the stipulated period precluded her from challenging the jurisdiction at this stage, and thus, the assessment order was not void ab initio.2. Eligibility for deduction under Section 54 of the Income Tax Act, 1961:The assessee sold a house property for Rs. 2.45 crores and claimed a deduction of Rs. 2.11 crores under Section 54, while offering Rs. 34 lakhs as long-term capital gains. The Assessing Officer disallowed the deduction, noting that the assessee had only paid Rs. 11 lakhs towards the purchase of a new property.The assessee argued that the issuance of the allotment letter conferred title to the property, and the payment of installments was merely a follow-up action. She relied on CBDT Circular Nos. 471 and 672, which treat allotments under the self-financing scheme of the Delhi Development Authority (DDA) as cases of construction for the purpose of Section 54.The Revenue contended that the assessee did not purchase the property under a scheme similar to the DDA's self-financing scheme and had not deposited the unutilized amount in a notified bank account. The Tribunal observed that the assessee did not provide evidence that the purchase was under a scheme similar to the DDA's self-financing scheme. Additionally, the Tribunal referred to the decision in Humayun Suleman Merchant, which held that unutilized amounts must be deposited in a notified bank account to claim the deduction.The Tribunal concluded that the assessee was not entitled to claim the deduction of Rs. 2.11 crores, as only Rs. 11 lakhs had been paid, and the unutilized amount was not deposited in a notified bank account. Consequently, the Tribunal upheld the addition of Rs. 2 crores to the assessee's income.Conclusion:The Tribunal dismissed the appeal, ruling that the assessment order was not void ab initio for lack of jurisdiction, and the assessee was not entitled to the claimed deduction under Section 54. The Tribunal found no illegality or irregularity in the actions of the authorities below.