Asstt. CIT v. Resham Petrotech Ltd.

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The Tax Publishers2012 TaxPub(DT) 2154 (Ahd-Trib) : (2012) 046 (II) ITCL 0589 : (2012) 136 ITD 0185 : (2012) 147 TTJ 0730 : (2012) 073 DTR 0138 INCOME TAX ACT, 1961 --Reassessment--Jurisdiction of assessing officerAbsence of valid notice--The appellant company filed its return of income declaring total income at Rs.56,02,893. The said return of income was processed under section 143(1) without any change to the income returned. Thereafter, the case is selected for scrutiny assessment under section 143(3). Subsequently, the case was scrutinized and the taxable income was determined by the assessing officer was Rs.58,90,900. Thereafter, the assessment was reopened by ACIT, Circle 15(1), New Delhi and he issued notice under section 148. The notice under section 148 was served to the appellant. The appellant contested against the re-opening proceeding initiated by the ACIT, Circle 15(1), New Delhi stating that the appellant is assessed with ACIT, Vapi Circle, Vapi Gujarat. The re-assessment file was sent by the ACIT Circle 15(1), New Delhi to ACIT, Vapi for completion of assessment. The assessing officer, i.e., ACIT Vapi Circle, completed the re-assessment proceeding without further recording the reasons or issuing 148 notice in spite of the objection raised by the appellant. While completing the assessment under section 143(3) read with section 147/148, the assessing officer made addition on account of deemed dividend under section 2(22)(e) amounting to Rs. 1,15,72,891 and determined the total income at Rs. 1,74,63,600. The Commissioner (Appeals) allowed the legal grounds raised by assessee on the ground that the assessment made by assessing officer was without jurisdiction. The Commissioner (Appeals) held that the assessing officer has neither recorded the reasons nor issued notice under section 148. The Commissioner (Appeals) held that issue of notice under section 148 in accordance with law is mandatory and assessing officer had failed on this count. The Commissioner (Appeals) also examined the issue from the point of view whether, in the case under consideration, assessment can be qua or irregular assessment or it is to nullify. Held: In the absence of a valid notice, the assessing officer has no jurisdiction to reopen assessment of assessee. Section 148(1) provides that before making the assessment, reassessment or re computation under section 147, the assessing officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Sub section (2) provides that the assessing officer shall, before issuing any notice under this section, record his reasons for doing so. (Para 16) In reopening of a completed assessment there is nothing arbitrary about any of these provisions and that rigorous checks and controls have been provided on the exercise of power by the assessing officer to initiate an action for re-assessment. In the forefront of these checks and controls is the requirement of the section 148 to issue proper notice. (Para 17) It will be seen that section 148 contains a built-in-safeguard for the assessee in that it makes it obligatory on the assessing officer to disclose to the assessee the material on the basis of which it proposes to reassess his income and then give him an opportunity of being heard and explaining that material. The other checks and controls on the power of the assessing authority are enacted in sections 149 to 153. Therefore, the argument cannot be accepted that sections 147 and 148 contain delegation of arbitrary and uncontrolled power of the ITO to re-open an assessment without any reason. (Para 18) Though sections 147 and 148 contain all the necessary safeguards ensuring fair play to an assessee, Tribunal is not unmindful of a situation wherein an ITO, if he is determined to act in an arbitrary manner, may record reasons in the eye of law and thus issue notice to the assessee initiating action for reassessment of his income. Now, if that be so, one cannot condemn the statute as unconstitutional merely because the ITO has ignored the principles enunciated therein for regulating the exercise of his discretion. What should be struck down in such a situation is the action of the ITO rather than statute which he ignored in taking an illegal action. (Para 19) Apart from admission by revenue that it can be treated as irregularity on the part of ACIT Vapi Circle, Vapi by not issuing notice under section 148 again, there is nothing on record to show that pursuant to an order under section 127, the assessment records of the assessee were transferred from Delhi to Vapi. Contrary to that it is noticed that the Vapi assessing officer vide his letter dated 13-12-2010 continued the proceedings under section 148 issued on 29-6-2009 which was objected to by the assessee vide letter dated 6-8-2009. The Revenue emphasized that letter dt. 13-12-2010 is notice under section 148. This argument cannot be accepted because on acceptance of such argument the whole safeguards provided in sections 147 and 148 as discussed above will be collapsed. Under that circumstance how one can say that the jurisdictional assessing officer has acquired jurisdiction to re-assess the income under section 147. Under the circumstances how it can be said the reasons recorded by other assessing officer was satisfaction to jurisdictional assessing officer. The reasons for reopening must be recorded by jurisdictional assessing officer because he is keeping all relevant and primary record. The basic requirement of section 147 is that the assessing officer has reason to believe that any income chargeable to tax has escaped assessment. Such belief must be the belief of jurisdictional assessing officer and not any other assessing officer or authority of the department. Therefore, it is well settled that the assessing officer's jurisdiction to reopen an assessment under section 147 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. (Para 22) One of the contention of the revenue that there is no prescribed form of notice under section 148 Tribunal is aware that there is no standard form of notice prescribed under the Act. Therefore, all that is required that is required it should contain all requirements stated in the relevant provisions for which it is issued. The Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC) lay down the Law that assessment orders passed by assessing officer without complying with statutory provisions of notices to be served upon the assessee, mentioning the reasons for reopening of assessment and giving opportunity to file their objections as required under section 148(2) are not legally valid. In the light of this discussion there is no substance in the submission of revenue that letter dated 13-12-2010 given to assessee by Vapi assessing officer is to treat notice under section 148. (Para 23) Another aspect of contention of the revenue is that such irregularities can be cured under section 292BB. To examine this aspect of the matter one would like to see what is provided in section 292BB. The said section provides that where an assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provision of this Act required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding under this Act that the notice was - (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner: On plain reading of section of 292BB it is apparent that the said section is in respect of certain procedural lapses in respect service of notice, but, in the case under consideration, the question is of acquisition of jurisdiction which is a mandatory requirement of the Act. The Commissioner (Appeals) discussed this aspect of the matter of 'irregularity' and 'nullity' in detail. The Commissioner (Appeals) held that in the case under consideration lapses on the part of revenue cannot be treated as irregularity but it is nullity. (Para 24) It is well settled law that no consent can confer jurisdiction upon a Court if the Court has no jurisdiction, and if one takes the view that the assessing officer can have jurisdiction only provided he complies with the conditions laid down in sections 147 and 148. Since the order of the assessing officer is without jurisdiction, the Commissioner (Appeals) has rightly quashed the order of the assessing officer. Therefore, the order of the Commissioner (Appeals) is confirmed on the issue. (Para 25) SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2154 (Ahd-Trib) : (2012) 046 (II) ITCL 0589 : (2012) 136 ITD 0185 : (2012) 147 TTJ 0730 : (2012) 073 DTR 0138

INCOME TAX ACT, 1961

--Reassessment--Jurisdiction of assessing officerAbsence of valid notice--The appellant company filed its return of income declaring total income at Rs.56,02,893. The said return of income was processed under section 143(1) without any change to the income returned. Thereafter, the case is selected for scrutiny assessment under section 143(3). Subsequently, the case was scrutinized and the taxable income was determined by the assessing officer was Rs.58,90,900. Thereafter, the assessment was reopened by ACIT, Circle 15(1), New Delhi and he issued notice under section 148. The notice under section 148 was served to the appellant. The appellant contested against the re-opening proceeding initiated by the ACIT, Circle 15(1), New Delhi stating that the appellant is assessed with ACIT, Vapi Circle, Vapi Gujarat. The re-assessment file was sent by the ACIT Circle 15(1), New Delhi to ACIT, Vapi for completion of assessment. The assessing officer, i.e., ACIT Vapi Circle, completed the re-assessment proceeding without further recording the reasons or issuing 148 notice in spite of the objection raised by the appellant. While completing the assessment under section 143(3) read with section 147/148, the assessing officer made addition on account of deemed dividend under section 2(22)(e) amounting to Rs. 1,15,72,891 and determined the total income at Rs. 1,74,63,600. The Commissioner (Appeals) allowed the legal grounds raised by assessee on the ground that the assessment made by assessing officer was without jurisdiction. The Commissioner (Appeals) held that the assessing officer has neither recorded the reasons nor issued notice under section 148. The Commissioner (Appeals) held that issue of notice under section 148 in accordance with law is mandatory and assessing officer had failed on this count. The Commissioner (Appeals) also examined the issue from the point of view whether, in the case under consideration, assessment can be qua or irregular assessment or it is to nullify. Held: In the absence of a valid notice, the assessing officer has no jurisdiction to reopen assessment of assessee.

Section 148(1) provides that before making the assessment, reassessment or re computation under section 147, the assessing officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Sub section (2) provides that the assessing officer shall, before issuing any notice under this section, record his reasons for doing so. (Para 16) In reopening of a completed assessment there is nothing arbitrary about any of these provisions and that rigorous checks and controls have been provided on the exercise of power by the assessing officer to initiate an action for re-assessment. In the forefront of these checks and controls is the requirement of the section 148 to issue proper notice. (Para 17) It will be seen that section 148 contains a built-in-safeguard for the assessee in that it makes it obligatory on the assessing officer to disclose to the assessee the material on the basis of which it proposes to reassess his income and then give him an opportunity of being heard and explaining that material. The other checks and controls on the power of the assessing authority are enacted in sections 149 to 153. Therefore, the argument cannot be accepted that sections 147 and 148 contain delegation of arbitrary and uncontrolled power of the ITO to re-open an assessment without any reason. (Para 18) Though sections 147 and 148 contain all the necessary safeguards ensuring fair play to an assessee, Tribunal is not unmindful of a situation wherein an ITO, if he is determined to act in an arbitrary manner, may record reasons in the eye of law and thus issue notice to the assessee initiating action for reassessment of his income. Now, if that be so, one cannot condemn the statute as unconstitutional merely because the ITO has ignored the principles enunciated therein for regulating the exercise of his discretion. What should be struck down in such a situation is the action of the ITO rather than statute which he ignored in taking an illegal action. (Para 19) Apart from admission by revenue that it can be treated as irregularity on the part of ACIT Vapi Circle, Vapi by not issuing notice under section 148 again, there is nothing on record to show that pursuant to an order under section 127, the assessment records of the assessee were transferred from Delhi to Vapi. Contrary to that it is noticed that the Vapi assessing officer vide his letter dated 13-12-2010 continued the proceedings under section 148 issued on 29-6-2009 which was objected to by the assessee vide letter dated 6-8-2009. The Revenue emphasized that letter dt. 13-12-2010 is notice under section 148. This argument cannot be accepted because on acceptance of such argument the whole safeguards provided in sections 147 and 148 as discussed above will be collapsed. Under that circumstance how one can say that the jurisdictional assessing officer has acquired jurisdiction to re-assess the income under section 147. Under the circumstances how it can be said the reasons recorded by other assessing officer was satisfaction to jurisdictional assessing officer. The reasons for reopening must be recorded by jurisdictional assessing officer because he is keeping all relevant and primary record. The basic requirement of section 147 is that the assessing officer has reason to believe that any income chargeable to tax has escaped assessment. Such belief must be the belief of jurisdictional assessing officer and not any other assessing officer or authority of the department. Therefore, it is well settled that the assessing officer's jurisdiction to reopen an assessment under section 147 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. (Para 22) One of the contention of the revenue that there is no prescribed form of notice under section 148 Tribunal is aware that there is no standard form of notice prescribed under the Act. Therefore, all that is required that is required it should contain all requirements stated in the relevant provisions for which it is issued. The Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC) lay down the Law that assessment orders passed by assessing officer without complying with statutory provisions of notices to be served upon the assessee, mentioning the reasons for reopening of assessment and giving opportunity to file their objections as required under section 148(2) are not legally valid. In the light of this discussion there is no substance in the submission of revenue that letter dated 13-12-2010 given to assessee by Vapi assessing officer is to treat notice under section 148. (Para 23) Another aspect of contention of the revenue is that such irregularities can be cured under section 292BB. To examine this aspect of the matter one would like to see what is provided in section 292BB. The said section provides that where an assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provision of this Act required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding under this Act that the notice was - (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner: On plain reading of section of 292BB it is apparent that the said section is in respect of certain procedural lapses in respect service of notice, but, in the case under consideration, the question is of acquisition of jurisdiction which is a mandatory requirement of the Act. The Commissioner (Appeals) discussed this aspect of the matter of 'irregularity' and 'nullity' in detail. The Commissioner (Appeals) held that in the case under consideration lapses on the part of revenue cannot be treated as irregularity but it is nullity. (Para 24) It is well settled law that no consent can confer jurisdiction upon a Court if the Court has no jurisdiction, and if one takes the view that the assessing officer can have jurisdiction only provided he complies with the conditions laid down in sections 147 and 148. Since the order of the assessing officer is without jurisdiction, the Commissioner (Appeals) has rightly quashed the order of the assessing officer. Therefore, the order of the Commissioner (Appeals) is confirmed on the issue. (Para 25)