TaxTMI 
TaxTMI 
2007 (9) TMI 324
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.... to challenge the jurisdiction of ACIT, Range IV, Lucknow during the course of assessment proceedings for assessment year 2001-02. (3) On the facts and circumstances of the case and in law, the ld. CIT(A) should have held that the notice under section 148 dated 29-3-2004 for assessment year 1997-98 was illegal and ab initio void as it was issued by the ACIT, Range IV, Lucknow without obtaining the prior approval of CIT, Lucknow. Consequently, the CIT(A) should have annulled the reassessment order under section 144/148, dated 24-3-2005 passed by ITO 1(1), Lucknow for assessment year 1997-98 on this ground also. (4) On the facts and circumstances of the case and in law and without prejudice to the ground No. 3 above, the notice under section 147/148, dated 29-3-2004 deserves to be quashed also on the ground that the reasons recorded for the reopening of the assessment were arbitrary and illogical in nature, having no live link with any income escaping assessment and that the CIT, Lucknow has accorded his approval for the issue of said notice without proper application of mind. Consequently the reassessment order under section 144/148, dated 24-3-2005, passed by ITO 1 (1), Luckn....
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....Officer who did not have jurisdiction over the assessee at the material point of time; no prior approval of the CIT was taken as required under the law, learned CIT(A) if at all accorded approval did not apply his mind before according the approval if any; the Assessing Officer had not recorded the details and did not follow the procedure laid down by Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19; the addition under section 68 has been made even though the assessee discharged his onus and the learned CIT(A), has, while disposing of grounds of appeal, passed a non-speaking order. 3. Regarding the first issue, the facts of the case are that assessee is a private limited company and is being assessed to tax since 1989-90 and onwards. It is engaged in the civil construction activity. The registered office of the company was located on 2nd Floor, Karamat Market Complex, Nishatganj, Lucknow. On the basis of the location of its registered office, the jurisdiction over the assessee was with ACIT, Company Circle, Lucknow. The assessee had. filed the return of income from assessment years 1989-90 to 2000-01 with ACIT, Company Circle, Lucknow. Later there w....
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....now has processed the returns filed by the assessee. He, accordingly, requested the Assessing Officer, Range-4, Lucknow to withdraw/drop the notice under section 148 and transfer the file to Addl. CIT, Range-1, Lucknow. The Assessing Officer initially did not accept the objection of the assessee even though the assessee had sent letters to that Assessing Officer on 29-4-2004, 31-5-2004, 16-6-2004, 5-8-2004 and 15-9-2004 in addition to the original objection raised on 19-4-2004. The assessee seems to have written to CIT-II, Lucknow about the approach of the Assessing Officer. It seems that either suo moto or on the direction of CIT-II, Lucknow, the ACIT, Range-4 transferred the file of the assessee to Income-tax Officer-1 (1), Lucknow under the jurisdiction of Addl. CIT, Range-1, Lucknow and thereafter fresh notice under section 142(1), dated 27-1-2005 was issued to the assessee by the Income-tax Officer-1(1), Lucknow in continuation of the proceedings initiated by the Assessing Officer, Range4, Lucknow. The assessee challenged the continuation of the proceedings by Income-tax Officer-1(1), Lucknow on the ground that said proceedings are illegal as the notice itself was devoid of pr....
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.... Skymoon Plantation and Finance Ltd. Since books were not produced, the Assessing Officer inferred that money paid by M/s. Skymoon Plantation and Finance Ltd. belong to M/s. M.I. Builders (i. e., the assessee). The Assessing Officer also noted that Shri Satpal Singh has stated that no agreement was executed for the purchase of office space and no schedule of payment was drawn. No office space so far has been given by M/s. M.I. Builders to M/s. Skymoon Plantation and Finance Ltd. It was also stated before the Assessing Officer that no interest has been charged for the money paid to the assessee. It was claimed before the assessee by Shri Satpal Singh that M/s. Skymoon Plantation and Finance Ltd. had collected the money from various depositors for the purpose of plantation which had not yet started as all the money so collected has been paid to M/s. M.I. Builders. The Assessing Officer strengthened the adverse inference drawn by him on the ground that M/s. Skymoon Plantation and Finance Ltd. has not returned even a single rupee to the alleged depositors. The Assessing Officer sought from M/s. Skymoon Plantation and Finance Ltd. books of account, vouchers, copies of the bank account b....
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....ubmissions of the Assessing Officer in remand report and finally passing an one line judgment that assessee's objection on this issue deserves to be rejected. 10. On merits, learned CIT(A) reproduced 4 reasons made out by the Assessing Officer for holding that sum of Rs. 22,00,000 found credited in the name of M/s. Skymoon Plantation and Finance Ltd. is not genuine. These reasons are as under: "(a) Out of 14 credit entries appearing in our bank account of the relevant previous year, 11 pertain to M/s. Skymoon Plantation & Finance Ltd. (b) That these credit entries appear in our bank account as and when the bank in our account reaches a very low figure; meaning thereby that our business during the relevant financial year was carried on with the help of funds from M/s. Skymoon Plantation & Finance Ltd. (c) According to the Assessing Officer, it is rather surprising that M/s. Skymoon Plantation & Finance Ltd. has invested bulk of its funds with us against the purchase of the office space; instead of purchasing agricultural land for the purpose of plantation. (d) The expenditure incurred by M/s. Skymoon Plantation & Finance Ltd. on salary, commission or furniture was ver....
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.... Rs. 23,720. (v) Since M/s. Skymoon Plantation & Finance Ltd. was required to grow plantation, it did not buy any agricultural land but preferred to make advance to the assessee and that too within a period of 2-3 days months from its incorporation. M/s. Skymoon Plantation & Finance Ltd. is very negligible infrastructure having furniture and fixture amounting to Rs. 3,083.20 as on 31-3-1997 and had paid a salary of Rs. 12,000, for the whole of financial year 1996-97, therefore, it is not possible to accept that it would be requiring an office space of 8,000 sq. ft." 13. The Assessing Officer also noted the following facts about Skymoon Plantation & Finance Ltd.:- "(1) Company successfully attracted deposits amounting to Rs. 32,74,500 from the public as plantation deposit with the period of 14 months of its incorporation, despite the fact that the company paid total Rs. 12,000 as salary and wages and paid not a single rupee to any commission agent to attract the deposits which is a regular feature in this kind of business activities. (2) As per the P&L a/c during the financial year the company made total expenses of Rs. 24,348.80 only. After making such meager expenses h....
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....Ker.) and (v) East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal.). 17. The next argument of ld. A.R. of the assessee was that the ld. CIT(A) who is required to accord sanction/approval to the issuance of notice by the Assessing Officer has mechanically given such sanction/approval and there is no material to show that there is any application of mind by him. Thus, an approval/sanction issued without application of mind and thereafter assessment so framed thereupon would not be valid in the eyes of law. For this proposition, he relied on the following authorities: (i) CIT v. Smt. Attri Devi [2005] 276 ITR 532 (Punj. & Har.), (ii) East Coast Commercial Co. Ltd.'s case, (iii) K.C.P. Ltd. v. ITO [1984] 146 ITR 284 (AP) and (iv) United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317 (Delhi). 18. Ld. A.R. of the assessee then submitted that Assessing Officer is required to follow a set procedure as laid down by Hon'ble Supreme Court in GKN Driveshafts (India) Ltd.'s case. Once Assessing Officer has issued a notice under section 148 and served it on the assessee then it is the right of the assessee to seek the reasons for issuance of such notice. After ....
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....Kusumben M. Parikh v. CBDT [2000] 242 ITR 501 (Guj.). 21. Against this, learned D.R. submitted that the assessee had filed the return of income for the assessment year 2001-02 with ACIT, Range-IV. The assessee did not challenge the jurisdiction with the ACIT, Range-IV. The assessment proceeding for that year continuing for the period from 14-10-2002 to 3-3-2004 and order for that year was passed on 23-3-2004. Thus, on the date of issuance a notice under section 148 on 29-3-2004, ACIT, Range-IV, Lucknow was continuing to assess assessee. Once he is holding jurisdiction for the assessment of assessment year 2001-02 then there in no reason as to why ACIT, Range-IV, Lucknow will not have jurisdiction for the assessment year 1997-98. Regarding recording of reasons and their communication to the assessee, the learned D.R. submitted that the reasons recorded by the Assessing Officer before issuance of notice under section 148(1) was duly communicated to the assessee vide his letter dated 12-7-2004. This letter was issued by DCIT, Range-IV, Lucknow. Due approval was obtained by the Assessing Officer from the Commissioner. There are proper order sheets to that effect and the charge that ....
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....nted by consent. For this proposition, he relied on following authorities: (i) Anant Mills Ltd. v. CIT [1994] 206 ITR 582 (Guj.), (ii) CIT v. D.P.F. Textiles Ltd. [2000] 241 ITR 548 (Mad.) and (iii) CIT v. V. Chandra [2000] 245 ITR 610 (Delhi). 23. We have considered the rival submissions and perused the material available on record. Before discussing the issue of jurisdiction, we would like to deal with the other issues raised by the ld. A.R. of the assessee. We notice that reasons were recorded, they were communicated to the assessee, assessee had objected to them and the Assessing Officer dealt with them in accordance with law as reflected in the order of the ld. CIT(A). Even the approval was granted by the ld. CIT(A) as required under law and there is no material to suggest that there was no application of mind by ld. CIT(A). However, we are not satisfied with the revenue on the issue of jurisdiction. In our considered view, ACIT, Range-IV, Lucknow did not have jurisdiction over the assessee on 29-3-2004 when the notice under section 148(1) was issued by him. Admittedly, jurisdiction over the assessee was transferred to the Additional CIT, Range-I. Lucknow vide orde....
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....on is transferred to another officer as soon as an order to this effect is passed the competent authority. Thus, after having passed an order under section 120, ACIT, Range-IV, Lucknow ceased to have jurisdiction over the assessee. He cannot issue notice under section 148(1) as he lacked jurisdiction. Since assessee has challenged the jurisdiction of the ACIT, Range-IV, Lucknow vide his letter dated 19-4-2004. ACIT, Range-IV, Lucknow ought not to have proceeded with the reassessment proceedings. In any case, acceding to the protest by the assessee, ACIT, Range-IV, Lucknow transferred the proceedings for the assessment year 1997-98 to the Addl. CIT, Range-I, Lucknow, who finally passed a reassessment order. It was not the case that assessee had not objected to the assumption of jurisdiction by ACIT, Range-IV, Lucknow within one month under section 124 as claimed by ld. DR. However, estoppel cannot be invoked from the proceeding for the assessment year 2001-02 which were initiated by the ACIT, Range-IV, Lucknow on the basis of return filed by the assessee with him prior to change of jurisdiction vide order under section 120 of 1-8-2001. It is settled principle of law that jurisdictio....
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....nt should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier." 27. The clause (a) of above sub-section clearly shows that proceeding initiated by virtue of return filed or notice issued under section 142(1)/143(2) has to be objected within a month by the assessee if he calls in question the jurisdiction of the Assessing Officer. This clause provides validation of the proceedings initiated on filing of a return, or by issuance of notice under section 142(1) or under section 143(2) or to a show-cause notice issued to complete the assessment under section 144 if there is a failure to object within one month of initiation of such proceeding. As per clause (b) where assessee has not filed return originally, then Assessing Officer can issue notice under section 148(1) asking the assessee to file the return and in that situation if the assessee does not call in question the jurisdiction of the Assessing Officer issuing the notice under section 148(1) then such proceedings and reassessment made thereafter is protected. In the present case, the assessee was originally assessed for the assessment year 1997-98 for which return was filed on 30-11-199....