TaxTMI 
TaxTMI 
2023 (2) TMI 1348
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....ssessee brought to our notice that even though the assessee has not preferred any appeal/cross-objection (CO) against the impugned orders of the Ld. CIT(A) but is supporting the action of the Ld. CIT(A) deleting the addition made by the AO by preferring an application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 (hereinafter "the Rules") wherein the assessee is challenging the jurisdiction of the AO to have re-opened the assessment. According to him, the AO who had initiated the reopening of the assessment itself was not competent to do so because as per the CBDT instruction No. 01/2011, the AO of the assessee ought to have been ITO, Ward -3(3) in respect of M/s. Watermark System India Pvt. Ltd. (hereinafter M/s. W. System) and not DCIT, Circle-3(3). And even for M/s. Watermark Financial Consultants Ltd. (hereinafter M/s. W. Financials) according to the Ld. AR, it should have been the ITO ward 3(3) and not DCIT, Circle-3(3) who had recorded the reasons for reopening the assessment and had issued the notice u/s 148 of the Income Tax Act, 1961 (hereinafter "the Act"). The aforesaid contention assailing the jurisdiction of AO, according to the Ld. AR flows from the C....
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.... Nil DCIT, Circle 3(3) ITO, Ward 3(3)(4) Chart No. 2 Watermark Capital Ltd. (formerly known as Watermark Financial Consultants Ltd.) ITA. No. Asst. Yr Date Original return filed Income declared Pecuniary jurisdiction as per CBDT Circular 1/2011 Date- Return filed u/s 148 Income declared AO recording reasons and issuing 148 notice AO completing assessment remarks 4830/M/16 2007-08 31.03.2007 24,31,830 ITO 09.12.2013 1,89,940 DCIT, Circle 3(3) DCIT, Circle 3(3) 4831/M/16 2008-09 28.09.2008 6,28,140 ITO 23.04.2012 4,78,300 DCIT, Circle 3(3) DCIT, Circle 3(3) 4832/M/16 2009-10 30.09.2009 -71,23,213 AC/DC 23.04.2012 1,84,580 DCIT, Circle 3(3) DCIT, Circle 3(3) Reasons recorded are vague and the Income escaping assessment has not been quantified 3. Drawing our attention to the chart No. 1, the Ld. AR pointed out that the income declared by the assessee M/s W. System for AY. 200607 was only to the tune of Rs. 1,89,940/-; and for AY. 2007-08 it was only to the tune of Rs. 4,78,300/-; and for AY. 2008-09 it was only 1,84,580/- an....
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....-turn could have decided the jurisdiction of AO (whether it was ITO or DCIT etc) as per the Section 124 of the Act. According to her, the assessee failed to do so, therefore the assessee is precluded from assailing the jurisdiction of the AO at this belated stage after the assessment has been framed and for that, she drew our attention to sub section (3) of section 124 of the Act and contended that assessee was prohibited from questioning the jurisdiction thereafter. So according to Ld. CIT DR, the issue of jurisdiction/competence of the AO cannot be raised at this belated stage (at the second appellate stage). Therefore, according to her, the Rule 27 application itself should not be admitted and for that she drew our attention to Rule 27 of the Rules which reads as under: "Respondent may support order on grounds decided against him. "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." 5. According to the Ld. CIT-DR, the Rules are very clear. According to her, the respondent/assessee in this case may support the action of the Ld. CIT(A) even if the assessee has not preferred any app....
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....on as per instruction 1/2011 dtd 31st Jan 2011 issued by CBDT held in favour of the assessee and quashed the notice u/s 148 of the Act. Further, according to the Ld. AR, the legal issue can be raised before the Tribunal by way of filing of Rule 27 application by assessee. However, this contention of the assessee has been vehemently opposed by the Ld. CIT-DR who relied on the decision of Hon'ble Allahabad High Court order in Shiva Adityiya Jems & Jewellery Pvt. Ltd. Vs. ITO order dated July 14, 2022 wherein when jurisdictional issue came up before the Hon'ble Allahabad High Court, their Lordship's held in favour of the revenue and the issue of jurisdiction was not entertained by the Hon'ble High Court because it was not raised before the AO as per section 124(4) of the Act. According to Ld. CIT-DR the judicial-precedents cited by the Ld. AR of assessee to support the plea against jurisdiction of AO (be it pecuniary or territorial) if examined carefully will reveal that those assessee's have approached Hon'ble High Court at the first instance, after having objected to the jurisdiction of AO as per section 124 of the Act; and since the AO rejected their plea, has filed immediately wri....
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....inst the action of the Ld. CIT(A) dismissing the legal issue of reopening the assessment]. And on the other hand, the revenue aggrieved by the action of the Ld. CIT(A) giving relief to the assessee on merits, has preferred the captioned appeals. 9. The assessee's has filed applications for admission of the legal ground challenging the competence of AO to have initiated re-opening of assessment for assessment years (except AY 2009-10) and issued notice u/s 148 of the Act, through the Rule 27 application, wherein according to the assessee, the very initiation of reopening i.e. the jurisdiction to reopen the assessment for AY. 2006-7, AY. 2007-08, AY. 2008-09 And AY. 2010-11 [except AY. 2009-10] can be done only by the jurisdictional Assessing Officer i.e. who exercised both territorial as well as pecuniary jurisdiction (except jurisdiction vested by order u/s 127 of the Act); and in these cases jurisdiction of AO is vested as per the CBDT Instruction No. 01/2011, and by virtue of it for a corporate entity like assessee, if the income returned by assessee is less than Rs. thirty (30) Lakhs, the pecuniary jurisdiction lies with that of the ITO, Ward-3(3) (territorial jurisdiction IT....
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....bay High Court was pleased to set aside the notice u/s 148 of the Act dated 30.03.2019. Countering the submission of Ld. CIT DR, that relief was granted to assessee's only by exercise of writ jurisdiction by Hon'ble High Courts, the Ld. AR drew our attention to the decision of the Hon'ble Bombay High Court in the case of Peter Vas Vs. CIT (2021) 128 taxmann.com 180 (Bom) which was passed on 05.04.2021 (which is found placed at page No. 453 of the PB). In this case, (Peter Vas) the Tribunal did not admit the Rule 27 application filed by the assessee before it. And in that case by filing Rule 27 application before the Tribunal, the assessee (Peter Vas) had raised a legal ground challenging the jurisdiction of the AO u/s 153C of the Act. The Tribunal's action for not admitting and considering the ibid Rule 27 application was not countenanced by the Hon'ble High Court and the matter was remitted back to the Tribunal to decide the legal ground u/s 153C of the Act raised by assessee by filling under Rule 27 application. Further, the Ld. AR of the assessee, drew our attention to the decision of the Hon'ble Gujarat High Court in the case of PCIT Vs. Sun Pharmaceuticals Industries Ltd. (201....
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....ner, against any part of the order of the Assessing Officer (Appeals) and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).]" 7. Under sub-section (4) of section 253 thus, either an Assessing Officer or the assessee, on receipt of a notice that an appeal against the order of the Commissioner (Appeals) has been preferred before the Tribunal may notwithstanding the fact that he may not have appealed against such order within thirty days of the receipt of the notice, file a memorandum of crossobjections against any part of the order of the Commissioner (Appeals) and such memorandum would be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3). In plain terms, sub-section (4) of section 253 gives the right to the Assessing Officer as well as to the assessee to challenge the order of the Commissioner (Appeals) or part thereof upon receipt of the notice issued by the Tribunal in an appeal filed by the other side, even though previously he may not have preferred any such appeal and if such cross-objection is filed within the ....
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....ntirely in favour of the assessee and no part of the appeal of the assessee's claim is rejected. Under sub-section (4) of section 253, it is open for a person either an Assessing Officer or, the assessee, upon receipt of a notice of the appeal filed before the Tribunal to file cross-objection against any part of the order of the Commissioner (Appeals) and such cross-objection would be dealt with by the Tribunal as if it were an appeal presented within the time specified. Two things thus become clear. A cross-objection under section (4) of Section 253 could be directed against any part of the order of the Appellate Commissioner and if so presented, it would be disposed of by the Tribunal in the manner an appeal would be decided. In other words, such cross-objection would have independent existence even if for some reason, the appeal of the opponent does not survive. The cross-objection could be filed only against any part of the order of the Appellate Commissioner and necessarily therefore, that part of the order of the Commissioner (Appeals) has to be adverse to the person raising the cross-objection. Rejection of a ground, an argument or a contention would not come within the ....
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.... under: "7. The High Court, in our view, was clearly in error in holding that the appellant not having filed a memorandum of crossobjections in terms of Order XLI Rule 22 of the Code, could not challenge the finding of the trial court that the suit was not barred by Order II Rule 2 of the Code. The respondent in an appeal is entitled to support the decree of the trial court even by challenging any of the findings that might have been rendered by the trial court against himself. For supporting the decree passed by the trial court, it is not necessary for a respondent in the appeal, to file a memorandum of cross-objections challenging a particular finding that is rendered by the trial court against him when the ultimate decree itself is in his favour. A memorandum of cross-objections is needed only if the respondent claims any relief which had been negatived to him by the trial court and in addition to what he has already been given by the decree under challenge. We have therefore no hesitation in accepting the submission of the learned counsel for the appellant that the High Court was in error in proceeding on the basis that the appellant not having filed a memorandum of cr....
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....o file cross objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against the respondent. The Tribunal has, in the present case, unfortunately drawn such an inference which is not supported by the plain language employed by the provision. 20. If the inference drawn by the Tribunal is accepted as a correct proposition, it would render Rule 27 of the Tribunal Rules redundant and nugatory. It is not possible to interpret the provision in such manner. Any interpretation placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and an interpretation which makes other connected provisions otiose has to be to avoided. Rule 27 of the Tribunal Rules is clear and unambiguous. The right granted to the respondent by the said Rule cannot be taken away by the Tribunal by referring to provisions of Section 253(4) of the Act. The Tribunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections." 15. Th....
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....aised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 as also the provisions of section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross-objections. Accordingly, the additional substantial question of law is required to be answered in favor of the Appellants/assessees and against the Revenue. ----------- -------------------- ---------------- --------- ---------- 43. The ITAT in the present matters, has not referred to the above principles explained by the Hon'ble Supreme Court in considering applications for condonation of delay. This was a case where the final order made by CIT(appeals) was entirely in favor of the assesses. They had nothing to gain by delaying the filing of cross-objections. According to us, even without filing cross-objections, the ....
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....section 153C or after the completion of the assessment, whichever is earlier. Now, this provision refers to mainly the territorial jurisdiction of the Assessing Officer. This provision cannot be interpreted to mean that an assessee is left without a remedy where the Assessing Officer invokes the provisions of Section 153C of the IT Act without fulfillment of the jurisdictional parameters prescribed therein." 15. Further, the Ld. AR of the assessee, drew our attention to the order passed by the Tribunal in assessee's group cases (sister concern) in the case of DCIT Vs. Satya Securities Ltd. (ITA. Nos. 6669 & 6673/Mum/2016 dated 04.11.2022) which is found at page No. 403 to 418 of PB wherein similar grounds were raised by the assessee in department appeals through Rule 27 of the Rule wherein the Tribunal admitted the assessee's Rule 27 application and similar/identical grounds of appeal (i.e. the issue of validity of reopening of the assessment) and thereafter, the Tribunal was pleased to find the legal issue in favour of the assessee. 16. Now, the question before us, is regarding admission of Rule 27 application filed by the assessee. After having gone through the decisions ci....
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....in the scale of trade and industry since 2001, when the present income limits were introduced. It has therefore been decided to increase the monetary limits as under:- Income Declared (Mofussil areas) Income Declared (Metro cities) ITOS ACs/DCs ITOS DCS/ACS Corporate returns Upto Rs. 20 lacs Above Rs. 20 lacs Upto Rs. 30 lacs Above Rs. 30 lacs Non-corporate returns Upto Rs. 15 lacs Above Rs. 15 lacs Upto Rs. 20lacs Above Rs 20 lacs Metro charges for the purpose of above instructions shall be Ahmedabad, Bangalore, Chennai, Delhi, Kolkata, Hyderabad, Mumbai and Pune. The above instructions are issued in supersession of the earlier instructions and shall be applicable with effect from 1-4-2011. 18. From a perused of the aforesaid instruction of CBDT which is binding on Income Tax Authorities, it is clear that in respect of Corporate entities (Metro Cities), who are assessee's then if the returned income is less than Rs. 30 lacs, then the jurisdiction is vested with ITO's (Income Tax Officers), and if it is above Rs. 30 lacs then it is with the Deputy Commissioner/Additional Commissioner (DC/AC); Hence, in ....
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....m, PAN of Petitioner was lying with ITO Ward (12)(3)(1), Mumbai and it was not feasible to migrate the PAN having returned of income exceeding Rs. 30 lakhs to the charge of DCIT, Circle 12(3)(1). Mumbai, as the time available with the ITO 12(3)(1) was too short to migrate the PAN after obtaining administrative approval from the higher authorities by 31 March, 2019. 5. The notice under section 148 of the Act is jurisdictional notice and any inherent defect therein is not curable. In the facts of the case, notice having been issued by an officer who had no jurisdiction over the Petitioner, such notice in our view, has not been issued validly and is issued without authority in law. 6. In the circumstances, we have no hesitation in setting aside the notice dated 30th March, 2019. 7. Consequently the order dated 18th November, 2019 rejecting Petitioner's objection is also quashed and set aside. 19. In the present captioned appeals, it is undispued that other than assessment for AY. 2009-10 (supra), in all other appeals, the assessee has filed return of income which is less than Rs. 30 Lacs. As per the CBDT instruction No. 01/2011, in case of an assessee....
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....And therefore, all the captioned appeals (except for AY 2009-10) of the revenue has been rendered academic. And therefore, the same stands dismissed. Viz ITA. No. 4836/Mum/2016, ITA. No. 4827/Mum/2016, ITA. No. 4828/Mum/2016, ITA. No. 4833/Mum/2016, ITA. No. 4830/Mum/2016 & ITA. No. 4831/Mum/2016 are dismissed. 20. Now coming to the other two appeals ITA. No. 4834/Mum/2016 for AY. 2009-10 (M/s. Watermark System India Ltd) and ITA. No. 4832/Mum/2016 for AY. 2009-10 (M/s. Watermark Financial Consultant Ltd.) by way of Rule 27, the assessee has challenged the validity of reopening of the assessment by the DCIT by issue of notice u/s 148 of the Act on 30.03.2012. For that let us having look at the reasons recorded by the AO to reopen the assessment in this case of M/s Watermark Capital Ltd (formerly M/s Watermark Financial Constitute Ltd) herein after M/s W Financials which is reproduced as under: - "The assessee filed its return of income for the A. Y. 2009-10 by way of 'e-filing' declaring current year's loss at Rs. 71,23,213-on 30-09-2009. The return of income was processed us. 143(1) of the Act on 29-09-2010, accepting the return of income. Further, scrutiny....
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....he assessee's books of account contain camouflage entries though the bank statements of the assessee company reveal high value transactions embedded with the element of taxable income which the assessee has not disclosed in the return of income. Therefore, I have reason to believe that income for the year under consideration has escaped assessment within the meaning of section 147 of the I. T. Act, 1961. Hence, notice u/s. 148 issued to the assessee." 21. Referring to the aforesaid reasons recorded, the Ld. AR pointed out that the based on the aforesaid reasons the AO has issued notice u/s 148 of the Act to re-open the assessment for AY 2009-10. This impugned action of the AO have been challenged by the assessee by raising the legal issue against the validity of the re-opening of assessment. Before we advert to the legal issue let us look at the settled position law regarding re-opening of the assessment. The concept of assessment is governed by the time-barring rule; and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments can be disturbed only when there is information or evidence regarding undisclosed income or AO has inform....
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....me) to validly reopen the assessment. 22. Since we are going to examine the validity of re-opening the assessment, we have to first examine the "reasons recorded by AO' as it is i.e. on a stand-alone basis (without making any addition or deletion; and the inference can be drawn only from the facts stated therein). So when we examine the "reason recorded" as such by AO in respect of M/s. W. Financial (supra) we note that there are five (5) paragraphs, wherein AO has noted his reasons for re-opening. Out of it first & second paragraphs contain only the facts which are in the public domain (Return of Income filed on 30.09.2019 declaring loss of Rs. 71,23,213/- and the same had undergone scrutiny assessment u/s 143(3) on 24/3/2011 wherein the total loss was assessed at Rs. 43,70,487/-). And thereafter the assessee's address is given & that Shri Arun Dalmia & Shri Harish Dalmia are the directors of assessee and that they are engaged in business of financial consulting, brokering for land deals and arranging for term loans and working capital (loans). At paragraph 3, the AO is stating about information received from a government agency (no names given) that the aforesaid directors has....
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....ed "loan syndication fees" (Nothing new, since AO admits that the assessee itself has shown the same, so no new facts). In the light of the above information from Investigation Agency, the AO states that the receipts from the said entities vis-a vis TDS claims needs full verification (only vague allegation without any new facts or relevant facts to base the allegations and finally the AO is saying he needs to fully verify the expenditure claimed by the assessee). And in fifth para, the AO concludes that from the afforested facts the assessee's books of account contain camouflage entries through bank statement which reveal high value transaction embedded with element of taxable income which assessee has not disclosed in the return of income. And therefore he proposed the re-opening of the assessment of M/s. W. Financial for AY. 2009-10. 24. Having analysed the reason recorded by AO for re-opening the assessment for AY 2009-10 in the case of M/s W. Financial Ltd, since assessee has challenged the legal issue in respect of other assessee (M/s W. System), let us look at the reasons recorded by AO for reopening the assessment of M/s W. System which is reproduced as under: - ....
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....d Shri Harsh Dalmia are the directors of assessee company which are engaged in the business of trading in shares and other securities both listed and non-listed.(No new facts in the reason recorded). The AO thereafter notes that he has received information from investigation agency of the government (No names given) that the aforesaid directors had floated several dummy concerns including the assessee company which are providing accommodation entries. According to the information the directors of the assessee company always shows losses and thereby evade Income Tax. According to the AO, for evading the tax, the directors show camouflage transactions in the books of account in the garb of purchases, sales and advances. (All general allegation, no incriminating facts referred to base the allegation). According to the AO it is interesting to note that assessee has shown share trading loss besides claiming huge expenditures under various heads. Therefore, according to the AO, the assessee's books of account contain camouflage entries though the bank statement of the assessee company reveal high value transactions embedded with the element of taxable income which the assessee has not di....