2024 (7) TMI 1180 - AT - Income Tax

Reassessment notice under Section 148 invalid due to Assistant Commissioner lacking pecuniary jurisdiction over assessee's income

The ITAT Nagpur held that a reassessment notice issued u/s 148 by the Assistant Commissioner of Income Tax was invalid due to lack of pecuniary ... Jurisdictional validity of notice under section 148 - Assessee's jurisdiction and pecuniary limits - Transfer of cases under section 127 - Reopening under section 147 - Non-est/void-ab-initio reassessment - Incurable jurisdictional defectJurisdictional validity of notice under section 148 - Assessee's jurisdiction and pecuniary limits - Transfer of cases under section 127 - Incurable jurisdictional defect - Validity of notice issued under section 148 and the consequent reassessment for AY 2012-13 where the officer issuing the notice lacked pecuniary jurisdiction and the case was transferred without statutory transfer under section 127. - HELD THAT: - The Tribunal examined whether the notice under section 148 for AY 2012-13 was issued by an officer vested with jurisdiction. On the materials it was found that, as on the date of issuance of the notice, the pecuniary jurisdiction did not lie with the Assistant Commissioner who issued the notice; the relevant jurisdiction, determined by income thresholds and departmental distribution, lay with the Income Tax Officer, Ward 4(1). The record shows a subsequent transfer of scrutiny records from the ACIT to the ITO, but no valid transfer in terms of section 127 was on record. Reliance was placed on binding decisions and consistent Tribunal and High Court authorities holding that reasons for reopening and notices under section 148 must be recorded by the jurisdictional assessing officer and that transfer of jurisdiction requires compliance with section 127 (and its requirement of a transfer order/record). The Tribunal held that an initial jurisdictional defect in issuance of notice under section 148 is not curable by later transfer or procedural regularisation, and that such defect renders the reassessment proceedings void-ab-initio. Since the plea of lack of jurisdiction was determinative, the Tribunal declined to consider the Revenue's substantive grounds challenging the CIT(A)'s order on merits. [Paras 5, 6, 10, 12]Notice under section 148 for AY 2012-13 was issued by a non-jurisdictional officer and the consequent reassessment is void-ab-initio; Revenue's appeal dismissed.Final Conclusion: The revenue appeal is dismissed because the notice under section 148 for assessment year 2012-13 was issued without jurisdiction and subsequent transfer did not cure the defect; the reassessment is quashed and the Tribunal declines to adjudicate the remaining substantive grounds. Issues Involved:1. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 148.2. Validity of reassessment proceedings based on the jurisdiction of the AO.3. Compliance with Section 127 for transfer of cases.4. Genuineness and creditworthiness of transactions under Section 68.Detailed Analysis:1. Jurisdiction of the Assessing Officer (AO) in issuing notice under Section 148:The primary issue raised by the department was whether the Assistant Commissioner of Income Tax (ACIT) had the jurisdiction to issue the notice under Section 148. The judgment emphasized that the notice must be issued by the jurisdictional AO. The ACIT issued the notice, but the assessment was conducted by the Income Tax Officer (ITO), who did not issue the notice.The judgment cited several cases to establish that the jurisdiction to reopen an assessment depends on the issuance of a valid notice by the jurisdictional AO. The cases cited included:- ACIT v. Resham Petrotech Ltd. (2012) 136 ITD 185 (Ahd.)(Trib.)- Smriti Kedia (Smt.) v. UOI [2011] 339 ITR 37 (Cal.)(HC)- ITO v. Rajender Prasad Gupta (2010) 48 DTR 489/135 TTJ 9 (Jodhpur)(Trib.)- Gaurav Joshi v. ITO (2019) 174 DTR 353 / 197 TTJ 946 (Asr.) (Trib.)2. Validity of reassessment proceedings based on the jurisdiction of the AO:The reassessment proceedings were challenged on the grounds that the ACIT, who issued the notice, did not have the pecuniary jurisdiction at the time of issuance. The judgment highlighted that the jurisdictional transfer was not valid as it was not done under Section 127 of the Income Tax Act, which mandates a formal order for transfer of cases.The judgment referenced:- Ashok Devichand Jain v. Union of India & Ors (2023) 452 ITR 43- Sarita Jain v. ITO Ward-4(1), Raipur ITA No. 260/RPR/2023- Kusum Goyal Vs. ITO and Ors. (2010) 329 ITR 283 (Cal.)3. Compliance with Section 127 for transfer of cases:The judgment found that the transfer of the case from ACIT to ITO was not compliant with Section 127, which requires a formal order and recording of reasons for the transfer. The transfer was done through a letter, which is not sufficient under the law.The judgment cited:- Ajanta Industries Vs. Central Board of Direct Tax (1976) 102 ITR 281 (SC)- Roop Das Vs. ITO, Ward-2(1), Bhilai ITA Nos.310 & 311/RPR/2023- D. Craft Entertainment P. Ltd. Vs. ITO ITA No.1461/Kol/20174. Genuineness and creditworthiness of transactions under Section 68:The department challenged the genuineness and creditworthiness of the loan transactions with Priority Exports Pvt. Ltd., labeling it a shell company. The judgment upheld the CIT(A)'s decision that the assessee had discharged the burden of proof by providing necessary documentation, including bank statements, financial statements, and confirmations from the lender.The judgment referenced:- CIT v. Lovely Exports (P) Ltd. 2009 TaxPub (DT) 0261 (SC)- CIT v. Gagandeep Infrastructure (P) Ltd. 2017 TaxPub(DT) 1238 (Bom-HC)- CIT v. Veedhata Tower (P) Ltd. 2018 TaxPub(DT) 2030 (Bom-HC)Conclusion:The judgment concluded that the notice issued under Section 148 was without jurisdiction and the subsequent assessment order was invalid. The transfer of the case was not compliant with Section 127, making the reassessment proceedings void. The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld. The judgment emphasized the importance of jurisdictional compliance and proper procedural adherence in reassessment proceedings.