2023 (10) TMI 393 - AT - Income Tax

Reassessment Invalid Due to Lack of Jurisdiction: Notice Under Section 148 Issued Without Proper Verification

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order that the reassessment was invalid due to lack of jurisdiction. The AO issued a ... Reopening of assessment u/s 147 - communication received from ACIT, Corp. Cir 3(1) to reopen the case of the present assessee to tax short term capital gains - notice issued on old address of assessee - HELD THAT:- In the proposal seeking approval of reopening, it was mentioned that the assessee did not file the return of income and it did not have any PAN. However, the original scrutiny assessment u/s 143(3) was already carried out in the case of the assessee on 27-03-2014 and in that order, the sole issue was the jurisdiction of the assessee. In that order, a categorical finding has been rendered that the jurisdictional AO of the assessee would be ITO, Business Ward XV(4), Chennai. The address of the assessee was also mentioned as Alwarpet, Chennai. Despite that, present AO recorded contrary finding that there was no PAN and no return of income was filed by the assessee and the address of the assessee was mentioned as Porur address, which was no longer the address of the assessee. Consequent to the Cadre Restructuring of the Department w.e.f. 15-11-2014, the jurisdiction of the appellant for Alwarpet, Chennai 600018 address lie with Non-Corporate Range 3 whereas notice has been issued by present AO i.e., DCIT, NCC 8(1) at Porur address. It could also be seen that AO has wrongly invoked the provision of clause (a) of Explanation 2 of Section 147, which applies only where no return of income has been furnished by the assessee. In the case of the assessee, the return of income was filed and the scrutiny assessment u/s 143(3) was completed by the jurisdictional AO accepting the returned Income of the assessee. Therefore, present AO has wrongly invoked the provisions of Clause (a) of Explanation 2 of Section 147, which applies only where no return of income has been furnished by the assessee. The AO has not perused the original assessment records and had proceeded to issue the notice u/s 148 without verification of the documents on record. Accordingly, the conclusion that notice u/s 148 was issued mechanically without due application of find could not be faulted with. As in the present case, the reassessment notice has been issued at old address and the assessment order is an ex-parte order. The assessee has challenged the jurisdiction of Ld. AO at the first instance before first appellate authority. Decided against revenue. Issues Involved:1. Validity of the reassessment under Section 144 read with Section 147.2. Jurisdiction of the Assessing Officer (AO).3. Issuance of notice under Section 148.Summary:Validity of the Reassessment:The main issue was whether the reassessment made by the AO under Section 144 read with Section 147 was valid. The reassessment was initiated because the assessee firm was taken over by another company, and the AO believed that the transaction should have resulted in capital gains, which were not reported by the assessee. The AO issued a notice under Section 148 and assessed short-term capital gains on a best judgment basis due to the absence of a return of income from the assessee.Jurisdiction of the AO:The assessee challenged the jurisdiction of the AO, arguing that the AO who issued the notice did not have the proper jurisdiction over the assessee. The CIT(A) found that the AO had mechanically issued the notice based on information from another officer without verifying the correct jurisdiction. It was established that the jurisdiction of the assessee lay with a different AO, and the notice was issued by an AO who did not have jurisdiction. The CIT(A) concluded that the notice under Section 148 was invalid and the reassessment was annulled due to lack of valid jurisdiction.Issuance of Notice under Section 148:The CIT(A) noted that the AO issued the notice under Section 148 without proper verification of the records and mentioned incorrect facts, such as the absence of a PAN and no return of income, which were factually incorrect. The CIT(A) held that the notice was issued mechanically without due application of mind, and therefore, the reassessment was invalid.Findings and Adjudication:The Tribunal upheld the CIT(A)'s decision, noting that the reassessment was initiated merely based on communication from another officer without proper verification. The Tribunal found that the AO had wrongly invoked the provisions of Clause (a) of Explanation 2 of Section 147, which applies only where no return of income has been furnished by the assessee. The Tribunal also distinguished the case from other judicial decisions cited by the revenue, noting that in this case, the jurisdiction was assumed by an incorrect AO from the outset.Conclusion:The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order that the reassessment was without valid jurisdiction and thus annulled. The appeal was dismissed on 8th September 2023.