2022 (12) TMI 1585 - AT - Income Tax

Addl. CIT lacked jurisdiction to issue notices and pass assessments without CBDT direction under s.120(4)(b) and s.2(7A)

ITAT MUMBAI held that an Addl. CIT lacked jurisdiction to issue notices under s.143(2) and pass assessment orders under s.143(3) for AYs 2005-06 and ... Power to pass scrutiny assessment - grievance of the assessee that notice u/s 143(2) has been issued and the assessment order u/s 143(3) has been passed by the Addl. CIT who doesn’t have jurisdiction under the Act, in absence of the order under section 120(4)(b) - HELD THAT:- The term “Assessing Officer” has been defined in section 2(7A) of the Act. As per the provisions of section 2(7A) of the Act, Addl. CIT can exercise the powers of the Assessing Officer under the Act if the direction in this respect has been issued under section 120(4)(b) of the Act. As per section 120(4)(b) of the Act, CBDT may by general or special order empower the authorities mentioned under the provision to issue orders in writing that the powers and functions assigned to the Assessing Officer shall be exercised or performed, inter-alia, by the Addl. CIT. The issue in dispute has already been decided in favour of the assessee by various decisions of the coordinate bench of the Tribunal. Therefore, in absence of separate order passed under section 120(4)(b) authorising the Addl. CIT to perform functions and, exercise the powers of an Assessing Officer under section 2(7A), the notice issued under section 143(2) and assessment order passed under section 143(3) of the Act, in the case of the assessee, by the Addl. CIT for assessment years 2005–06 and 2006–07 are without the jurisdiction and hence are set aside. As a result, additional grounds of appeal filed by the assessee in its appeal are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an Additional Commissioner can act as an Assessing Officer for conducting scrutiny assessment and passing orders under section 143(3) of the Income-tax Act in the absence of a specific direction or order issued under section 120(4)(b) empowering the Additional Commissioner to exercise the powers and functions of an Assessing Officer. 2. Whether a taxpayer may raise, for the first time before the Tribunal, a legal challenge to the jurisdiction of the officer who issued notices under section 143(2) and passed assessment orders under section 143(3), when the relevant facts (statutory notices and notifications/orders conferring jurisdiction) are on the assessment record, notwithstanding delay in raising such grounds. 3. Whether notifications/orders issued under subsections (1) and (2) of section 120 can be read as authorising an Additional Commissioner to perform the functions of an Assessing Officer as required by section 2(7A) read with section 120(4)(b). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power of Additional Commissioner to act as Assessing Officer absent an order under section 120(4)(b) Legal framework: Section 2(7A) defines 'Assessing Officer' and expressly provides that Additional Commissioner may exercise powers and functions of an Assessing Officer only when directed under clause (b) of sub-section (4) of section 120. Section 120(4)(b) empowers the Board to authorise specified senior authorities to issue orders that the powers/functions of an Assessing Officer shall be exercised by Additional Commissioners subject to conditions. Precedent treatment: Coordinate bench decisions and higher court reasoning were invoked in the judgment to the effect that an Additional Commissioner cannot be treated as an Assessing Officer for purposes of section 143(3) unless there is a valid order under section 120(4)(b) authorising them; notifications under section 120(1) and (2) do not suffice for this purpose. Authorities at different levels have considered and supported the distinction between orders under sub-secs (1)/(2) and (4)(b). Interpretation and reasoning: The Court examined the statutory text and concluded that Parliament deliberately demarcated the mechanism for vesting Assessing Officer powers. Assistant/Deputy Commissioners (and analogous ranks) are vested with jurisdiction under subsections (1) or (2) of section 120, while Additional Commissioners (and analogous ranks) require a specific direction under section 120(4)(b). Consequently, notifications/orders under section 120(1)/(2) cannot be construed to confer the specific authority contemplated by section 120(4)(b) and section 2(7A). The Tribunal observed that where jurisdiction of the assessing authority is challenged, the Revenue must produce the authorising order under section 120(4)(b) to justify the Additional Commissioner's exercise of jurisdiction; absence of such order renders notices and assessment orders vulnerable to quashing. Ratio vs. Obiter: Ratio - The legal conclusion that an Additional Commissioner requires a specific order under section 120(4)(b) to act as an Assessing Officer and that notifications under section 120(1)/(2) are not substitutes for such an order is applied as the operative holding. Obiter - Discussion of administrative reasons for non-traceability of records and routine file transfers is ancillary and not essential to the statutory interpretation. Conclusions: In the absence of a produced order under section 120(4)(b) authorising the Additional Commissioner to act as Assessing Officer, the notices issued under section 143(2) and assessments completed under section 143(3) by the Additional Commissioner were held to be without jurisdiction and were set aside. Issue 2 - Admission of belated legal grounds challenging jurisdiction before the Tribunal Legal framework: The Tribunal has discretion to admit new grounds of appeal; established principles permit raising pure questions of law before the Tribunal for the first time so long as the relevant facts are on the assessment record and no fresh factual inquiry is required. Precedent treatment: The judgment relies on controlling guidance that legal questions derivable from facts already on record may be entertained by the Tribunal even if raised for the first time at that stage. Coordinate bench and High Court decisions were cited as having admitted similar belated jurisdictional challenges. Interpretation and reasoning: The Tribunal applied the principle that where the issue is purely legal and rests on facts already forming part of the assessment record (for example, issuance or absence of statutory orders/notifications), it is proper to allow such grounds despite delay. The Tribunal rejected Revenue's contention that delay or failure to raise the point earlier is determinative, noting that the polemical question is one of law and no new factual investigation was required. The Tribunal further emphasised that when jurisdiction is in issue, documents authorising the officer are part of the assessment record and the Revenue bears the onus of producing them. Ratio vs. Obiter: Ratio - A legal challenge to jurisdiction that can be decided on facts already on record may be admitted for the first time before the Tribunal notwithstanding delay. Obiter - Comparative citations to multiple coordinate bench outcomes illustrate consistency but are not necessary for the core legal rule. Conclusions: The additional grounds challenging the jurisdiction of the Additional Commissioner were admitted and entertained by the Tribunal despite their belated filing because they raised pure questions of law that could be decided on existing assessment records. Issue 3 - Sufficiency of notifications issued under section 120(1)/(2) to vest Additional Commissioner with Assessing Officer powers Legal framework: Section 120(1)/(2) enable the Board (and delegated authorities) to make general arrangements for assignment of jurisdiction to various income-tax authorities; section 120(4)(b) separately contemplates empowering senior authorities to direct that Additional Commissioners perform Assessing Officer functions. Precedent treatment: Coordinate decisions have held that notifications issued under subsections (1) and (2) do not have the statutory character required to vest Additional Commissioners with powers reserved under section 120(4)(b) and section 2(7A). The Tribunal followed that line of authority. Interpretation and reasoning: The Tribunal analysed an impugned 2001 notification issued under section 120(1)/(2) which authorised Additional Commissioners generally to exercise powers except certain TDS functions. It concluded that such a notification, being under subsections (1)/(2), cannot be equated with an authorisation under section 120(4)(b), which is the specific statutory route for enabling Additional Commissioners to exercise Assessing Officer powers. The Tribunal noted the legislative and textual basis for maintaining this distinction and reiterated the requirement that a separate section 120(4)(b) order must be shown when jurisdiction is challenged. Ratio vs. Obiter: Ratio - Notifications under section 120(1)/(2) do not suffice to vest Additional Commissioners with Assessing Officer powers required by section 2(7A) read with section 120(4)(b). Obiter - Observations about routine administrative file movement and non-traceability of records were explanatory but not decisive of the statutory interpretation. Conclusions: The notification produced (under section 120(1)/(2)) did not meet the statutory requirement of section 120(4)(b); absent a distinct section 120(4)(b) authorisation on record, the Additional Commissioner lacked jurisdiction to issue the contested notices and pass the assessments. Remedial and consequential conclusions Having admitted the additional legal grounds and found absence of requisite authorisation under section 120(4)(b), the Tribunal quashed the scrutiny notices under section 143(2) and the assessment orders under section 143(3) issued/passed by the Additional Commissioner for the assessment years in question. As a result, the Tribunal declined to decide the merits of the regular grounds of appeal, treating them as academic, and dismissed the Revenue's cross-appeals as infructuous.