Income Tax Appellate Tribunal - Hyderabad
Vijay Vikram Dande, Kurnool, Hyderabad vs Adit, International Taxation-Ii, Hyd, ... on 18 April, 2019
ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' B ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri S.Rifaur Rahman, Accountant Member
ITA No.947/Hyd/2016
(Assessment Year: 2011-12)
Shri Vijay Vikram Dande Vs Asstt. Director of Income
Kurnool Tax (International Taxation)
PAN:AIVPD8319C Hyderabad
(Appellant) (Respondent)
For Assessee : Shri Ajay Gandhi
For Revenue : Shri Nilanjan Dey, DR
Date of Hearing: 23.01.2019
Date of Pronouncement: 18.04.2019
ORDER
Per Smt. P. Madhavi Devi, J.M.
This is assessee's appeal for the A.Y 2011-12 against the order of the CIT (A)-10, Hyderabad, dated 24.03.2016.
2. Brief facts of the case are that the assessee, an individual, filed his return of income for the A.Y 2011-12 on 6.4.2012 admitting total income of Rs.71,18,403/-. The return of income was processed u/s 143(1) and subsequently, the case was selected for scrutiny under CASS. Thereafter, the Additional CIT, Kurnool, vide letter dated 28.10.2013 transferred the files to Addl. CIT (IT-II) Hyderabad, stating that the jurisdiction of the case vested with the AO (IT) Hyderabad since the assessee is a non- resident.
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3. Thereafter, the AO issued a notice u/s 143(2) and 142(1) on 26.11.2013 which were served on the assessee. In response to the notices, the assessee's Authorized Representative attended from time to time and filed the relevant details called for. After verification of the information and other material available on record and after considering the assessee's submissions at length on each of the issues, the assessment was completed by making various additions and the total taxable income was arrived at Rs.1,41,82,750/-. Aggrieved by the same, the assessee preferred an appeal before the CIT (A) challenging the jurisdiction of the AO at Hyderabad on making the assessment and also the additions made by the AO. The assessee also made detailed submissions along with relevant material before the CIT (A). The CIT (A) called for a remand report from the AO dated 28.10.2015 which was submitted on 21.1.2016. The CIT (A), after considering the same and also obtaining the remand report also from the Dy.CIT (I.T) Visakhapatnam, held that the assessee did not question the jurisdiction within one month as per the provisions of section 124(3), on the issue of notice and also the issue of jurisdiction before the AO before the completion of the assessment proceedings and therefore, the assessee is prevented from raising the issue after completion of the assessment proceedings as per section 292B of the I.T. Act. As regards the merits of the addition made by the AO, he confirmed the additions made by the AO. Thus, the CIT (A) confirmed the assessment order both on the grounds of jurisdiction as well as the additions made by the AO. The assessee is in second appeal before us by raising the following grounds of appeal:
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"1. The Order of the Commissioner of Income Tax is in gross violation of the provisions of law and hence is bad in law.
2. The Commissioner of Income Tax has erred in upholding the assessment order.
3. The Commissioner of Income Tax has erred in upholding the jurisdiction of the assessing officer.
4. The Commissioner of Income Tax has erred in sustaining the addition of Rs.l,46,435 under the head short term capital gains towards discrepancies as per Form 26AS and the return of income.
5. The Commissioner of Income Tax has erred in sustaining the disallowed claim pertaining to set off of short term capital loss of Rs.13,58,290.
6. The Commissioner of Income Tax has erred in sustaining the addition of Rs.24,673 under the head 'Income from House Property'.
7. The Commissioner of Income Tax has erred in sustaining the addition of Rs.54,00,000 as unexplained money uls 69A of the Income Tax Act.
8. The Commissioner of Income Tax has erred in sustaining the addition of Rs.l,74,400 as unexplained expenditure uls 69C of the Income Tax Act.
9. The Commissioner of Income Tax has erred in sustaining disallowance of deduction claimed u/s 80C of Rs.20,296.
10. The Commissioner of Income Tax has erred in upholding the assessment of total income at Rs.1,41,82,750.
11. The Commissioner of Income Tax has erred in upholding the demand raised of Rs.27,91,360.
12. The Commissioner of Income Tax has erred in upholding the penalty proceedings initiated ul/ 271(1)(c).
13. Any other ground that may be urged at the time of hearing".Page 3 of 11
ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
4. As regards Grounds 1 to 3, we find that they are against the jurisdiction of the AO in passing the assessment order. It is the case of the assessee that the assessee has filed his return of income as a non-resident electronically for the A.Y 2010-11 on 28.10.2010 before he filed his return of income for the A.Y 2011-12 also in the status of non-resident and that he did not file any other return of income before completion of the assessment for the A.Y 2011-12. He submitted that subsequently, he filed his returns of income in response to notices u/s 148 issued by the Asstt. Director (IT) for the A.Ys 2007-08 to 2009-10 on 3.7.2014 and that all the assessments were completed u/s 143(3) on 31.3.2015 by the Dy. CIT (IT) Visakhapatnam. He submitted that the return filed on 6.4.2012 for the A.Y 2011-12 was processed u/s 143(1) on 4.08.2012 and thereafter the notice u/s 143(2) was issued by the Dy.CIT Kurnool on 6.8.2013. He submitted that the last date for issuance of a notice u/s 143(2) was on 30th Sept. 2013; whereas the notice u/s 143(2) issued by the Asstt. Director (IT) Hyderabad was dated 6.11.2013 and the assessment was completed by the Add. DIT (IT) at Hyderabad on 28.03.2014. It is submitted that when a return is filed electronically, the system allocates the return to a specific officer and accordingly the Dy. CIT, Kurnool issued notice u/s 143(2) on 6.8.2013 demonstrating that he has jurisdiction over the assessee. He submitted that thereafter, the jurisdiction was transferred to the Officer at Hyderabad who issued notice u/s 143(2) on 6.11.2013 which is way beyond the last date permitted u/s 143(2) i.e. 30.09.2013. He submitted that u/s 127 of the I.T. Act, a notice and an opportunity of being heard was required to be given to an assessee and since the said procedure has not been Page 4 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
followed by the Department in assessee's case, the assessment order itself is null and void. He accordingly prayed for setting aside of the assessment order. In support of his contention, he placed before us, a paper book containing notices issued by the Dy. CIT, Kurnool and ADIT (IT) Hyderabad and the assessee's income tax returns for the A.Ys 2010-11 and 2011-12. As regards the merits of the additions also, the assessee has also filed a paper book supporting his contentions.
5. The learned DR, on the other hand, supported the orders of the Asstt. DIT (IT) Hyderabad and submitted that he has exercised his jurisdiction correctly. The written submission of the Dy.CIT-2 (IT) dated 13.06.2018 addressed to the Sr. AR, ITAT is also filed before us. In the said letter, it is stated that the first notice for scrutiny i.e. u/s 143(2) was issued by the Dy. CIT, Kurnool on 6.8.2013 and thereafter, it was found from the return of income that the assessee is an NRI and that the jurisdiction of the assessee vests at ITO-I Hyderabad and hence the Dy.CIT, Kurnool transferred the case to ITO-I Hyderabad on 26.10.2013 i.e. even before the commencement of the case. It is submitted therein that the jurisdiction over foreign entity including NRIs vested only with the AO attached to International Taxation Wing of the I.T. Deptt. and at the relevant point of time of the assessment proceedings such I.T. Officers were situated only at Hyderabad, Vizag, Kurnool and Nellore and prior to bifurcation of the States during 2014, the jurisdiction with regard to the ITO Kurnool was vested only at Hyderabad. It was submitted that the assessee's case falls u/s 127(3) as it did not entail transfer of case from one jurisdiction to the other, but it was only a transfer from Page 5 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
the AO who had no jurisdiction to the AO who actually had the jurisdiction. It was also submitted that the assessee has never raised any objection regarding the transfer of the case to Hyderabad during the scrutiny proceedings and therefore, he cannot raise a ground at this stage.
6. Detailed written submissions to the above effect have also been filed by the learned DR. It was submitted that after the return was filed electronically, the case was allocated to the AO at Kurnool because the PAN of the assessee was mapped with the AO code of the Dy.CIT Circle-1 Kurnool as declared in form No.49A which is the form for application of PAN by the assessee and since the assessee has not made any submission thereafter, requesting the migration of PAN, consequent to change in his residential status, the system continued to hold the Dy. CIT, Kurnool as the jurisdictional AO and hence the return of income filed by the assessee was entrusted to the AO at Kurnool. It was submitted that the return was processed by the Dy.CIT, Kurnool u/s 143(1) and refund was issued accordingly and that the assessee did not request for PAN migration even at this stage. It was submitted that the PAN No.is to be applied with the jurisdictional AO and once PAN is allotted, it is automatically mapped with the AO code of the jurisdictional AO declared by the assessee in Form No.49A for application of PAN and accordingly intimations, notices, summons etc., generated online in respect of an assessee, are generated under the AO code declared by the assessee and if there is any change in the status, nature of income, address etc., it is the duty of the assessee to request for corresponding PAN migration to the new jurisdictional AO. It was Page 6 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
submitted that since the assessee did not request the Dy.CIT, Circle-1, Kurnool for migration of PAN consequent to his residential status getting changed from N.R.I, the return filed by the assessee was processed by the CPC on 16.04.2012 and refund was issued to the assessee. Subsequently when the return was picked up for scrutiny under CASS, notice u/s 143(2) was generated online, which was served by the Dy. CIT, Circle-1 Kurnool and therefore, the Dy.CIT, Circle-1 Kurnool cannot be held responsible for the assessee's failures to apply for PAN migration for correct mapping of PAN consequent to change of his residence which was also in the case of the assessee. He relied upon the provisions of section 139A of the Act which casts obligation on every person who has not been allotted a PAN to apply for a PAN to the AO for the allotment of a PAN. He submitted that since the AO at Kurnool noticed that the assessee is a non-resident and that he should be assessed by the Dy.CIT (IT) Hyderabad, he transferred the records of the assessee to the ITO (IT) at Hyderabad for continuation of proceedings initiated by issuance of notice u/s 143(2) dated 6.8.2013. He submitted that the ACIT (IT) Hyderabad, issued another notice u/s 143(2) out of abundant caution and is only to be understood as an opportunity to the assessee, to explain his return of income before him, in continuation of proceedings triggered by issuance and service of notice dated 6.8.2013. He therefore, vehemently argued that this is not the case where there is a change in the jurisdiction of the AO and according to him, it is only a transfer of record to the correct jurisdictional AO.
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7. The learned Counsel for the assessee rebutted the said contention of the learned DR by referring to the provisions of section 127 of the I.T. Act.
8. Having regard to the rival contentions and the material on record, we find that undisputed facts are that the assessee has filed the returns electronically and the AO at Kurnool pursuant to the selection for scrutiny under CASS, had issued a notice u/s 143(2) of the Act dated 6.8.2013 to the assessee. This notice is well in time. Thereafter, the ACIT (IT) at Hyderabad has issued another notice u/s 143(2) dated 6.11.2013 which is beyond the specified time. It is true that the assessee has not raised any objection to the jurisdiction of the Dy.CIT (IT) Hyderabad, during the assessment proceedings. The CIT(A) has relied on the provisions of section 292B to hold the issue against the assessee. Therefore, let us first see if these facts attract the provisions of section 292B of the Act. For the sake of convenience and ready reference, the relevant provision is reproduced hereunder:
"292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act".
9. On a literal reading of section 292B, we find that it only provides that a notice or summons or other proceedings cannot be treated as invalid or shall be deemed to be involved, merely by reason of any mistake/defect or omission in such return of income, assessment, notice, summons or other Page 8 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
proceedings if such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act. Therefore, it is clear that notice u/s 143(2) dt. which is challenged by the assessee should be in accordance with the Act. The jurisdictional defect pointed out by the assessee cannot be considered to be in conformity with the intent and purpose of the Act. According to the assessee, there is a change of jurisdiction from the AO at Kurnool to the AO at Hyderabad and as per the provisions of section 127(1) of the Act, it is only the Principal Director General or the Pr. CIT or Chief Commissioner of Income Tax or the Pr. CIT, who may, after giving the assessee a reasonable opportunity of being heard in the matter for doing so, transfer any case from one or more than one AO subordinate to him to other AO or AOs also subordinate to him. He submitted that the contentions of the learned DR that sub-section 3 of section 127 is applicable to the assessee's case is without any substance. Before applying the provisions of section 127 of the Act, we deem it proper to re-produce the same hereunder:
"Section 127 of the I.T. Act.
(1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,-
(a) where the Directors General or Chief Commissioners or Commissioners,. to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, Page 9 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;
(b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub- section (1) or sub- section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.
(4) The transfer of a case under sub- section (1) or sub- section (2) may be made at any stage of the proceedings, and shall not render necessary the re- issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Explanation.- In section 120 and this section, the word" case", in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year".
10. We find that u/sub-section 3 of section 127, it is provided that provisions of sub-section 1 & 2 are not applicable and no such opportunity is to be given to the assessee, where the transfer is from any AO, to any other AO where the Offices of such officers are situated in the same city, locality or place. We find that the AO at Kurnool had transferred the file to the AO at Hyderabad and therefore, even if they are both under the jurisdiction of the same Pr. CIT at Hyderabad, the notice u/s 127(1) has to be given to the assessee and it is only the Pr. Director General or the Pr. CIT or Pr. CIT who can transfer the case u/s 127 of the Act. No such procedure has been followed by the Deptt. Therefore, we are of the opinion that the issuance u/s 143(2) by the Dy. CIT (IT)-1, Hyderabad is without any authority Page 10 of 11 ITA No 947 of 2016 Vijay Vikram Dande Kurnool.
and also beyond the period of six months from the date of filing of returns and therefore, is barred by limitation and hence, not sustainable and the consequent Assessment order passed by the Asstt. CIT (IT) Hyderabad is void ab initio.
11. Since the assessment order itself has been held to be null and void and set aside, the other grounds of appeal on merits of the additions are not dealt with at this stage as it would only result in an academic exercise. Therefore, assessee's grounds of appeal 1 to 3 are allowed and the other grounds are rejected.
12. In the result, assessee's appeal is treated as partly allowed.
Order pronounced in the Open Court on 18th April, 2019.
Sd/- Sd/-
(S.Rifaur Rahman) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 18th April, 2019.
Vinodan/sps
Copy to:
1 Gandhi & Gandhi, C.As, 1002, Paigah Plaza, Basheerbagh, Hyderabad 500063 2 Asstt. Director of Income Tax (International Taxation)-II Aayakar Bhavan, Basheerbagh, Hyderabad 3 CIT (A)-10 Hyderabad 4 CIT - (IT& TP), Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 11 of 11