TaxTMI 
TaxTMI 
2016 (10) TMI 1228
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....st expenses to dividend income. 2. The CIT(A) erred in holding that the disallowance u/s. 14A of the administrative 3expenses attributable to the earning of the exempted income should be restricted to 1 crore as against 2% of such expenses disallowed by the AO." 2. During the course of hearing, arguments were made by Shri Dinesh Vyas, Authorised Representative (Sr. Counsel) on behalf of the Assessee and by Shri K. Srisha Murthy, Departmental Representative (CIT-DR) on behalf of the Revenue. 3. During the course of hearing, the assessee filed few more additional grounds on merits. The assessee vide its petition dated 15.01.2016 filed additional grounds raising jurisdictional validity of assessment order on the ground that the assessment order was passed by the Additional Commissioner of Income Tax u/s 143(3) who was not competent under the law to discharge functions of AO and therefore, impugned assessment order was passed by him without authority of law and thus, assessment order was bad in law. 3.1. During the course of hearing, Ld. Senior counsel vehemently argued that he should be heard first on the aforesaid legal grounds which go to root of the matter and if ....
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....se were subsequently adjourned on the persistent request of the CITDR on the ground that department wanted to produce the records. Accordingly, date of 29th June 2016 was given as last and final opportunity to the Revenue on the condition that no further adjournment shall be given and if still records were not produced, then, adverse view may be taken on 29.06.2016. On the said date, the AO was personally present along with Ld. CIT-DR to again make a request for further time. Somehow, accepting his request, the case was adjourned for11.07.2011. On said date, again adjournment request was made by the department and to accommodate the department, case was adjourned on 19.07.2016. On said date, the CIT-DR again moved an application requesting for two days time and gave an undertaking that no further adjournment shall be taken by the department. Thus, taking strict view on the conduct of the department following order was passed: "On 15t h June , 2016 the learned D.R. was di r e c ted to be present alongwi th necessary documents, on 27th June, 2016 last opportunity was provided to the Department with a direction that necessary documents/ case record will he produced. Again on ....
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....pportunities for providing the record. Today, the Ld. CIT(DR) has come out with a new plea in support of his written submissions. We are aware that these are old appeals and must be disposed of at the earliest. However, considering the totality of facts, these appeals are de-heard. It is adjourned for fresh hearing by the regular bench. Adjourned to 18th October; 2016 along with appeal in ITA No. 193/Mum/2006; 4542/Mum/2005; 2745/Mum/2006; NS ITA No.3623/Mum/2008. The Ld. CIT(DR) had no objection to this date. However, it is made clear that if the department still seeks time, at that time heavy costs will be put on the department and these appeals shall be decided on the basis of material held on record." 3.6. Under these circumstances, case was adjourned for 18th October, 2016, for producing requisite records and for making final arguments. On 18.10.2016, Ld. CIT-DR again made an adjournment application in a highly casual manner which was turned down as mentioned above and therefore, he was directed to argue the matter and was also directed to instruct the AO to remain present during the course of hearing. Under these circumstances, on 19.10.2016, AO appeared along with Ld. CIT....
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....o vs. CIT [204 ITR 312 (Bom)] 7. CIT vs. Govindram Bros. P. Ltd. [141 ITR 626 (Bom)]" 3.8. Following additional grounds have been raised along with the aforesaid petition: "1.On the facts and in the circumstances of the case the assessment order dated 19.03.2004 passed by the Additional Commissioner of Income Tax under section 143(3) is had in law, illegal and without jurisdiction and/or in excess of jurisdiction. on the grounds amongst others, that he failed to establish that he possessed legal and valid jurisdiction under the Act to pass the assessment order and consequently the Hon'ble Tribunal he pleased to quash the said order. 2. The Additional Commissioner of Income Tax lacked jurisdiction to pass the Order of Assessment u/s 143(3) dated 19.03.2004 and to exercise the powers of performing the functions of an Assessing Off icer, without establishing that he possess such jurisdiction conferred on him under section 120(4)(b) of the Act. Accordingly in the absence of an order u/s 120(4)(b) conferring jurisdiction on the Additional Commissioner of Income Tax the assessment order dated 19.03.2004 passed by him needs to be quashed. 3. The proc....
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....e circumstances, it is bounden duty of the Revenue to establish legal competence and authority of the officer passing the assessment order, if so challenged by an assessee at any stage. 3.12. We have examined this issue. It is well accepted position that the Tribunal is a final fact finding body. Requisite documents required for establishing legal authority of the Assessing Officer who had passed the assessment order are expected to be available in the assessment records. Thus, the legal issue raised by the assessee falls in the category of cases which can be decided on the basis of material held on record. 3.13. Further, it is noted by us that the aforesaid grounds are purely legal grounds and do not require any investigation of fresh facts and can be decided on the basis of records held on record. It has been held by the Hon'ble Supreme Court in the case of National Thermal Power Corporation 229 ITR 383 as well as in the other judgments as have been relied upon by the Ld. Counsel in its petition that assessee should be permitted to raise legal grounds at any stage, if they go to the root of the matter. 3.14. Revenue's argument to reject the additional grounds due to acqu....
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....resaid case held as under:- "This is well settled that mere acquiescence in the exercise of powers by a person who does not have jurisdiction to exercise that power cannot work as an estoppel against him." 3.15. It is further noted by us that in the case before us, a challenge has been made about the legal competence of the Additional Commissioner of Income tax and his jurisdiction to exercise the powers and perform the functions of the Assessing Officer of the assessee and to carry out the assessment proceedings and frame the assessment order in accordance with the provisions of the Income tax Act, 1961. Thus, reliance upon the provisions contained in Section 124 of the Act would be of no help to the Revenue as the assessee has not challenged either territorial jurisdiction or irregular exercise of jurisdiction by the Additional Commissioner of Income Tax but challenge was made to the authority and legal competence itself of the Additional Commissioner of Income tax to pass the impugned assessment order upon the assessee. Similar view has been taken by the Delhi Bench of ITAT in the case of Mega Corporation Ltd Vs. Additional CIT 155 ITD 1019 (Delhi) following the judg....
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....or Joint Commissioner could have exercised the power of an Assessing Officer only if they were so authorized specifically by their jurisdictional Commissioner. In support of his proposition, he relied upon following judgments: 1. Mega Corporation v. Addl. CIT (62 taxmann.com 351(Del. ITAT) 2. Bindal Apparels Ltd. ACIT 104 TTJ 950(Del) 3. City Garden vs. ITO (21 taxmann.com 373 (Jodhpur ITAT) 4. Microfin Securities (P) Ltd. vs. Addl. CIT 3 SOT 302 (Luk.) 5. Prachi Leathers Ltd. 26L/Luk/2010 in ITA No.744/Luk/2004 order dat. 29.03.2010 6. Harvinder Singh Jaggi vs. ACIT 67 Taxmann.com 109(Del. ITAT) 7. Dr. Nalini Mahajan vs. DIT (Inv.) 257 ITR 123(Del. HC) 8. Ghanshyam K. Khabrani vs. ACIT 346 ITR 443(Bom. HC) 9. CIT vs. SPL's Siddhartha Ltd. 345 ITR 223 (Del. HC) 3.18. Per contra, Ld. CIT-DR, with the assistance of Ld. AO, vehemently opposed the submissions of the Ld. Senior Counsel and argued that all the Additional Commissioners have concurrent jurisdiction upon all the assesses falling in their respective ranges and therefore, Additional Commissioner was well within his competence to pass the impug....
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....a notice was issued by the ACIT Cir-2(3), Mumbai, dated 5th September 2001, intimating the assessee about change in jurisdiction and claiming that jurisdictional was with the said officer. The relevant part of the said notice is reproduced hereunder: "Sub: Change in jurisdiction-Intimation regarding In terms of Notification No. SO No. 732(E) dated 31.7.2001 of Central Board of Direct Taxes and consequential Notification dated 7.8.2001 of CIT. MC-II, Mumbai, jurisdiction over your case with effect from 1.8.2001 vests with the undersigned. All IT./W.T. and Interest tax Returns and necessary correspondence on that account are therefore required to be filed with the undersigned. All payments towards Income-tax (by way of Advance tax, Regular tax or S.A. tax), Interest tax, Wealth tax and payment u/s. 115-0 of the I.T. Act are also to be made w.e.f. 1.8.2001 to the credit of the ACIT Circle 2(3), Mumbai. 2. Similarly, jurisdiction over the Managing Director, Director, Manager, and Secretary of your company also vests with the undersigned vide Notifications quoted supra. Consequently, all the returns of the above persons and follow up correspondences on that ac....
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....ed the jurisdiction by the higher authority. But, exercise of the jurisdiction between both the officers shall always be mutually exclusive to each other. If the jurisdiction has been assigned to one of the officers, it shall not be exercised by the other, and if the jurisdiction is taken away from the former officer and assigned to the latter, then it shall be exercised by the latter only and not by the former. Thus, the jurisdiction can be exercised by only one Assessing Officer at any given point of time who has been duly assigned the jurisdiction by the competent authority. The assignment of jurisdiction to an officer and its transfer from one officer to the other can be made only through the prescribed process of law. Section 127 of the Act contains provisions regarding process to be followed by the Revenue Officers and their powers for transfer of cases from one Assessing Officer to the other. Section 127(1) interalia provides and mandates that the Commissioner may after recording his reasons for doing so, transfer any case from one Assessing Officer subordinate to him to any other Assessing Officer (whether with or without concurrent jurisdiction) also subordinate to him. Th....
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.... the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer. . . ." ............It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an applicatio....
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....m the Income-tax Officer, Range 6(2), Kanpur to the Addl. CIT, Range-6,Kanpur and therefore, the assessment framed by the Addl.CIT, Range-6,Kanpur irrespective of the fact as to whether he was authorized to perform the functions of an AO or not, is illegal and void ab initio for want of jurisdiction. Consequently, we are of the opinion that the assessment order in the present case dated 31.3.2003 passed by the Addl.CIT, Range (6), Kanpur was illegal and void ab initio for want of jurisdiction. Consequently, the assessment order is quashed." 9.2 Consequently on this count also, the assessment made on 29.12.2008 by the Additional Commissioner is illegal and bad in law for want of jurisdiction. 10. for the reasons aforesaid we hold that the order of assessment dated 29.12.2008 was without jurisdiction and therefore is quashed as such. In result, ground Nos. 1 and 2 are allowed." 3.23. In the case before us, the facts are identical. It is noted that Ld. CIT-DR as well as the Assessing Officer (present incumbent) who was personally present during the course of hearing before us, jointly stated that no such order (as prescribed under section 127(1) required to be pas....
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.... performing the role as an Assessing Officer, despite the fact that for all the other purposes 'Joint Commissioner' meant 'Additional Commissioner' as well, as per section 2(28C). It is clear from the facts that by way of subsequent amendment by Finance Act, 2007, words 'Additional Commissioner' have also been inserted along with words 'Joint Commissioner' in section 2(7A) which defines the term for 'Assessment Officer' . In case, the legislature would have intended and meant that for the purpose of acting as Assessing Officer, 'Joint Commissioner' and 'Additional Commissioner' means one and the same, then there was no need to come out with an amendment made by Finance Act, 2007, wherein the word 'Additional Commissioner' was also inserted in the definition of 'Assessing Officer' as contained in section 2(7A). Thus, it is clear as per the plain reading of the statute that when the assessment order was passed, the 'Additional Commissioner' was not authorized to act as Assessing Officer. 3.26. In addition to the above, it further noted by us that only that 'Joint Commissioner' was authorized to act as an Assessing Officer who was directed under clause (b) of subsection 4 of sectio....
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....ion No.267/2001 is concerned, it reads as follows:- "In exercise of the powers conferred by clause(b) of subsection (4) of section 120 of the income -tax Act,1961(43 of 1961), the Central Board of Direct Taxes, hereby directs that the Joint Commissioners of Income Tax or the Joint Directors of Income tax, shall exercise the powers and functions of the Assessing Officers, in respect of territorial area or persons or classes of persons or incomes or classes of income or cases, or classes of cases, in respect of which such Joint Commissioners of Income tax are authorised by the Commissioner of Income tax, vide Government of India, Central Board of Direct Taxes notification number S.O.732(E) dated 31.07.2001, S.O.880(E) dated 14.09.2001, S.O.881(E) dated 14.09.2001, S.O. 882(E) dated 14.09.2001 and S.O. 883(E) dated 14.09.2001 published in the Gazette of India, Part II, Section 3, sub-section (ii), Extraordinary. (emphasis supplied) 3.29. Perusal of the aforesaid notification reveals that only those Joint Commissioners shall exercise the powers and functions of the Assessing Officers who have been authorized by the concerned Commissioners of Income tax in pursuance to the r....
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....nly 'Joint Commissioners' were authorized to perform the role of the Assessing Officers. However, the Revenue is not able to bring before us any order of the Commissioner authorizing even the 'Joint Commissioner' to perform powers and functions of Assessing Officer of the assessee. As per the discussion made by us in detail in the earlier part of our order, it is clear that no such order is available in the assessment record or in any other record. Legal consequences of the same have been elaborately analysed in many judgments by various courts. 3.32. Identical issue came up for consideration before Delhi Bench of Income Tax Appellate Tribunal in the case of Mega Corporation, supra. The bench discussed entire law available on this issue and held that an 'Additional Commissioner of Income Tax' cannot ipso facto exercise the powers or perform the function of an Assessing Officer under the Act. He can perform the functions and exercise the powers of an Assessing Officer only if he is specifically directed under section 120(4)(b) of the Act to do so. Relevant part of the observations of the bench is reproduced hereunder for the sake of ready reference:- "........... We have....
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....ditional Commissioner can only be directed u/s 120(4)(b) of the Act to "Assistant Commissioner" or "Deputy Commissioner" or "Assistant Director" or "deputy Director" or Income Tax Officer" under the Act. This interpretation also derives strength from the provisions contained in section 120(4)(b) of the Act which reads as under: "120. Jurisdiction of income-tax authorities (4) Without prejudice to the provisions of sub-sections (1) and (2) , the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein,- (b) empower the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director, and, where any order is made under this clause, references in any other provision of this Act, or in any rule made there ....
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....order as discussed therein is reproduced below:- "16.2 From the contents of the aforesaid provisions, it is quite clear that so far as Addl. Commissioner is concerned, firstly he has been included in the definition of "Assessing Officer" given under section 2(7A) of the Act with effect from 1.6.1994 as a result of retrospective amendment made by the Finance Act, 2007 but at the same time, it is also clear that the Addl. Commissioner will be Assessing Officer as envisaged in section 2(7A) so amended only if he is directed under clause (b)of sub-section (4) of section 120 to exercise or perform all or any of the powers and functions concerned on or assigned to an Assessing Officer; meaning thereby that the Addl. CIT can function or can exercise the powers and perform the functions of an Assessing Officer if he is empowered by the CBDT as required under clause (b) of sub-section (4) of section 120. ...... 18.1 So far as the issue before us in the present appeal is concerned, it is now clear from the provisions as discussed hereinbefore that the Additional CIT could act and exercise the powers of an AO only in consequence upon delegation of such authority by the Board....
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.... 18.3 In view of the aforesaid facts, circumstances and the discussion and following the law laid down by the Hon'ble Delhi High Court in the case of Dr. Nalini Mahajan (supra), first of all we are of the opinion that the Addl.CIT, Range-6, Kanpur having not been empowered to exercise or perform the powers or functions of an Assessing Officer, the assessment framed by him was illegal and void ab initio."...... 3.34. It is further noted that similar view has been expressed by Jodhpur Bench of ITA in the case City Garden Vs. ITO 21 taxman.com 373 (Jodhpur) wherein it has been held that in the absence of a specific order issued in pursuance to Section 120(4)(b) specifically authorizing Joint Commissioner of Income Tax to exercise the powers and perform the function as conferred on or assigned to an Assessing Officer by or under the Act or a notification under section 120 of the Act, he is not competent to act as an Assessing Officer and pass an assessment order. 3.35. Similar view has been taken by Lucknow Bench of ITAT in the case of Microfin Security Pvt. Ltd vs. Additional CIT 94 TTJ 767 wherein it was held that in absence of any allocation being made in favour of Addi....
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....essing officer must be performed strictly in the manner as have been prescribed and if it has not been done in the manner as prescribed under the law, then it becomes nullity in the eyes of law. Hon'ble Supreme Court in the case of CIT Vs. Anjum M. H. Ghaswala observed that it is a normal rule of construction that when a statue vests certain powers in an authority to be exercised in a particular manner, then that authority is bound to exercise it only in the manner provided in the statue only. 3.39. Hon'ble Bombay High Court dealt with a similar situation in the case of Ghansham K.Khabrani Vs. ACIT 346 ITR 443 wherein the said assessee raised an issue that requisite sanction prescribed u/s 151 for reopening of an assessment was required to be obtained by the AO from Joint Commissioner of Income tax whereas the same was granted by Commissioner of Income tax and therefore the same was nullity in the eyes of law. Revenue took a stand that sanction was granted by an officer superior in rank and therefore, no prejudice was caused to the assessee. But Hon'ble High Court did not agree with the contention of the Revenue and observed that:- "........The expression "Joint Commiss....