Income Tax Appellate Tribunal - Lucknow
M.I. Builders Pvt. Ltd. vs Income-Tax Officer on 7 September, 2007
Equivalent citations: (2008)117TTJ(LUCK)42
ORDER
D.C. Agrawal, Accountant Member
1. In this case the assessee has raised the following grounds:
1. 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 29.3.04 issued by ACIT. Range IV Lucknow was devoid of proper jurisdiction and as such ab-initio void. Consequently the Id CIT(A) should have annulled the reassessment order Under Section 144/148 dated 24.3.05 passed by ITO 1(1). Lucknow for AY. 97-98.
2. On the facts and circumstances of the case and in law. the ld. CIT (A) should have held that the doctrine of estoppel does not apply against the statue the (i.e. I.T Act in the appellant's case) and consequently the notice Under Section 148 dated 29.3.01 issued by ACTT range IV. Lucknow was devoid of proper jurisdiction, even though the appellant inadvertently failed to challenge the jurisdiction of ACTT. range IV, Lucknow during the course of assessment proceedings for AY. 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 29.3.04 for AY 97-98 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 24.3.05 passed by ITO 1(1). Lucknow for 97-98 on this ground also
4. On the facts and circumstances of the case and in law and without rejudiced the ground no 3 above, the notice Under Section 147/148 dated 29.3.94 deserves to re 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 (IT Lucknow has accorded his approval for the issue of and notice u shout proper application of mind of mind, Consequently the reassessment order Under Section 144/148 dated 24.3.05 passed by ITO I(1). Lucknow for I) 97-98 deserves to be annulled on this ground also
5. On the facts and at circumstances of the case and in law and without prejudiced to the greatest Nos. 1 to 4 above the CIT(A) should have annulled the re-assessment order 24.3.05 also on the ground that as required by Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. Income tax Officer and Ors. 259 ITR 19 the before proceeding with assessment failed to pass a speaking to order to the objections raised by the appellant against the re opening of the vide its letters dated 19.8.04, 15.9.04 and 21.02.05.
6. On the and circumstances of the case & in law, the CIT(A) should have deleted the addition of Rs. 22,00,000/- Under Section 68 to the appellant's income of AY. 97-98 being the "advance" received by the appellant from M/s Skymoon Plantation & Finance Ltd against the booking of the office space in its building. New Janpath Complex. Ashok Marg. Lucknow which was under construction at the relevant time
7. Without prejudice to all the above grounds of appeal, and in view of the Supreme Court order in the case of Mangalore Ganesh Beedi Works v. CIT and Anr. 273 ITR 57 and in several other cases, the appellate order dated 23.11.05 passed by the CIT(A) in the appellant's case for A.Y. 97-98 needs to be cancelled and he/she must he directed to pass afresh order as the said order has been passed by the CIT(A) in a summary manner without recording reasons for confirming the order of ITO and as such it is not a 'speaking order', and also because the CIT (A) has not followed the principle of natural justice.
8. On the facts and circumstances of the case and in law, the ld. CIT(A) should have held that the A.O. has erred in passing the order Under Section 144 of the IT. Act as the appellant had complied with each and every requirement of the A.Os during the course of the reassessment proceedings.
2. The main grievance of the assesses is that an addition of Rs. 22,00,000/- has been made in the present assessment year by reopening the assessment Under Section 148 and passing an order Under Section 144 by the Assessing Officer on 24/3/2005. In the grounds of appeal above, the assessee has challenged the validity of notice Under Section 148 by the Assessing 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. Income Tax Officer and Ors. 259 ITR 19 (SC); 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 89-90 and onwards. It is engaged in the civil construction activity. The registered office of the company was located on 2nd floor, Karamat Market Complex, Nishataganj, 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 year 89-90 to 2000-2001 with ACIT, Company Circle Lucknow. Later there was change in the nomenclature of the Assessing Officers due to reorganization and re-structuring in the Income-Tax department and jurisdiction over the corporate assessees having their registered office in Nishataganj area vested with ACIT, Range-4. Lucknow. The return for assessment year 2001-2002 was filed with ACIT. Range-4. Lucknow In the meantime, the registered office of the assessee was shifted from above address to 6th Floor. New Janpath Complex. 9A, Ashok Marg, Lucknow with effect from 22/11/2001. For the purpose of shifting the registered office, the assessee followed the due process of law as provided under the Companies Act i.e. it passed a resolution in the meeting of the Board of Directors, gave due intimation to the Registrar of Companies and also put advertisement in the newspaper regarding change of address. It is claimed by the assessee that it intimated the Income-tax authorities accordingly. Relevant documents were filed before CIT(A) as well as before us. The CCIT, Lucknow meanwhile passed an order Under Section 120 effective from 1/8/2001 revising the territorial jurisdiction of the Assessing Officer. As per the new order of jurisdiction, the jurisdiction over the corporate assessees having their registered office at Ashok Marg/ Hazaratganj Lucknow are vested with Addl. CIT, Range-1, Lucknow. The assessee filed its returns of income for assessment years 2002-2003, 2003-2004 and 2004-2005 with the Addl. CIT, Range-1, Lucknow. These returns were duly accepted and processed by the Addl. CIT, Range-1, Lucknow.
4. However on 6/4/2004, the assessee received a notice Under Section 148 for the assessment year 1997-98 which was dated 29/3/2004 from the ACIT, Range-4, Lucknow calling upon the assessee to file return of income for the assessment year 97-98. The address given in the notice was that of New Janpath Office, Ashok Marg, Lucknow.
5. After receipt of notice, the assessee challenged the jurisdiction of the Assessing Officer. Range-4. Lucknow vide its letter dated 19/4/2004. It was pointed out to the Assessing Officer that with effect from 1/8/2001, the jurisdiction over the assessee vested in Ad. CIT. Range-1, Lucknow on account of his registered office having been shifted from Karamat Market Complex, Nishatganj to Ashok Marg/Hazaratganj area. It was also brought to the notice of ACIT, Range-4, Lucknow that Addl. CIT, Range-1. Lucknow has possessed 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 in 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. ACIT, 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. Range-4 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 proper jurisdiction and ab initio void. The fact that the Assessing Officer Range-4 impliedly conceded to the objection raised by the assessee and transferred the tile to Income Tax Officer-1(1) would be clear from the notings made by Income Tax Officer-1(1) in the impugned assessment order as under:
The assessee raised the issue of jurisdiction and contended that the jurisdiction over its case does not lies with ACIT, Range-IV, Lucknow. After considering the objection of the assessee. the case was transferred to Income Tax Officer-1(1), Lucknow. who is having the jurisdiction over the said case.
6. Thereafter, the Assessing Officer-1(1) continued the proceedings and finally framed the assessment by making addition of Rs. 22,00,000/- being alleged cash credits in the books of the assessee in the name of M/s Skymoon Plantation and Finance Ltd. which were allegedly advanced to the assessee for booking of office space in New Janpath Building which was to be constructed. The alleged credit was given to the assessee in the financial year 96-97 relevant to assessment year 97-98. In fact total amount found credited in the books of the assessee in the name of M/s Skymoon Plantation and. Finance Ltd. amounted to Rs. 49,00,000/-. Out of this. Rs. 8,00,000/- were claimed to have been received in assessment year 96-97 and Rs 19.00.000/- was claimed to have been received in the assessment year 98-99.
7. On merit of the case, the Assessing Officer-1(1) required the assessee to produce the persons along with the documentary evidence which could support the identity, capacity and genuineness of the money found credited in the books of the assessee. In response to summons, Shri Satpal Singh, Managing Director of M/s Skymoon Plantation and Finance Ltd. appeared before the Assessing Officer who recorded his statement on oath, During the course of statement Shri Satpal Singh stated that he has financed the sum of Rs. 22,00,000/- to the assessee during the assessment year 97-98 for booking of office space in New Japnath Complex. However, it seems that he failed to produce the books of account which was required by the Assessing Officer to be produced. According to the Assessing Officer. Shri Satpal Singh failed to produce the books of account and other documents and names and address, of the alleged depositors who were claimed to have deposited the money with M/S 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 but it seems that they were not produced before the Assessing Officer. Accordingly, the Assessing Officer treated the sum of Rs. 22,00,000/- received during this year as assessee's deemed income Under Section 68.
8. The learned CIT(A) dealt with the issue of jurisdiction in a rather short cut manner. She had reproduced the contention of the assessee which arc contained in para 2 to 10 of her order. In para 11, she has reproduced response from the Assessing Officer on the contention of the assessee. Thereafter she has passed one line order as under:
There is merit in Assessing Officer's contention and this ground is dismissed.
Since she has upheld Assessing Officer's contention on the issue of jurisdiction, it is pertinent to refer what he has commented on assessee's objection to jurisdiction:
During the assessment proceeding of A.Y. 2001-02 which was heard during the period 24.10.02 to 03.03.04 and order of which was on 23.3.04 assessee never challenged the jurisdiction Under Section 124(3)(a). Hence during the assessment proceedings the jurisdiction was vested with the ACIT Range-IV. Lucknow and therefore on date of issue of notice Under Section 148 the then AO had a jurisdiction in issue the notice. Assessee during the proceedings submitted all his replies in the teller head hearing new address i.e. "New" Janpath, Hasratganj" and also filed returns (or A.). 2002-03 & 2003-04 during the period the parted with Addl. CIT Range-1. Lucknow but he never objected on the jurisdiction. He raised the issue of jurisdiction only when notice Under Section 148 was issued.
9. Thus we do not find any reason of her own of learned CIT(A) while upholding the contention of the Assessing Officer and rejecting the detailed submission made by the assessee against the issuance of notice Under Section 148(1) by an officer who did not have jurisdiction over the case on the date when the notice Under Section 148(1) was issued. Even though I.d. CIT(A) has dealt with other objections of the assessee viz. (i) notice Under Section 148(I) was issued without obtaining prior approval of CIT(ii) the Assessing Officer has failed to follow the procedure laid down by Hon'ble Supreme Court in GKN Drivenshafts (India) Ltd. v. Income tax Officer and Ors. 259 ITR 19, however she has followed the same procedure i.e. reproducing the contention of the assessee and then submissions 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, II 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 AO, it is rather surprising that M/s Skymoon Plantation & Finance Ltd. has invested hulk 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 Mis Skymoon Plantation & Finance Ltd. on salary, commission or furniture was very nominal or nil and according to the AO it is not understood as to why M/s Skymoon Plantation & Finance Ltd needed on office space 8,000 sq.ft.
11. The learned CIT(A) had forwarded the remand report of the Assessing Officer to the assessee and invited its comments which were also reproduced by her in para 34. In para 35. She has given her findings on merits as under:
35. After due considerations of all facts and the catena of legal decisions relied upon by the AO and the appellant it is observed that the appellant has failed to prove that the transaction is a clear cut case of proven cash credit or of an advance given for property purchase. In appeal also the appellant was specifically requested to file details of agreements , stamp duty, registration, other documents to authenticate its to authenticate ,its stand but the such no such papers were filed. This is undoubtedly the appellant's own money routed through M/s Skymoon Plantation & Finance Ltd and has been rightly added Under Section 68 of the IT Act. In his order and reports, the AO has distinguished the cases relied upon by the appellant from the facts of the appellant's case Reliance is also placed on the cases (sic) on by the Assessing Officer. This ground is dismissed.
12. In brief, the contention of the Assessing Officer which have been upheld by I.d. CIT(A) while confirming the addition of Rs. 22 lakhs are as under
(i) Out of 14 credit entries in books, 11 credit entries are from M/s Skymoon Plantation & Finance Ltd.
(ii) Money has been received from M/s Skymoon Plantation & Finance Ltd as and when the bank balance of M/s M.I. Builders came to below Rs. 1,00,000/- or even below Rs. 25,000/- (The learned CIT(A) has reproduced the debit credit entries in the books of the assessee showing that money was received from M/s Skymoon Plantation & Finance Ltd. as and when balance were low). Thus, the coincidence is striking
(iii) M/s Skymoon Plantation & Finance Ltd. has also raised funds as and when assessee needed the funds. The similarity is striking.
(iv) M/s Skymoon Plantation & Finance Ltd. has consequently filed a loss return for the assessment year 96-97 at a loss of Rs 23,572/-, for the assessment year 97-98 at a loss of Rs. 22,978. for the assessment year 98-99 at a loss of Rs. 23,575 and for assessment 'year 1999-2000 at 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 31/3/97 and had paid a salary of Rs. 12,000, for the whole of financial year 96-97, therefore, it is not possible to accept that it would be requiring an office space of 8000 sq. ft.
13. The Assessing Officer also noted the following facts about M/s Skymoon Plantation & Finance Ltd.
1. Company successfully attracted deposits amounting to Rs. 32,71,500/- 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 & 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 how can a company fetch such a huge amount as deposits without making expences of even a single rupee on the head of advertisement and commission etc.
3. After getting deposits of such a huge amount, company did not opt for any business activity but made payment of Rs. 8,00,000/- in F.Y. 95-96 and Rs. 22 lacs in F.Y. 96-97 to M/s M.I. Builders Pvt. Ltd. out of its deposits of Rs. 32,74,500/- which comes to more than 90% of total public deposits.
4. Company did not have any rented or owned office space, as company had not paid any rent as per P&T. a/c and also not had any fixed assets in the form of building etc: as total assets of the company is in form of furniture and fixture of Rs. 3,083.20 only
5. Company is not paying any interest to its depositors.
14. Before us, authorised representative for the assessee raised the legal grounds which are reproduced in the grounds of appeal above.
15. Before us the ld. A.R. of the assessee raised several arguments. The first argument of I.d. A.R. of the assessee was that notice under Sections 147/148 could not have been issued by an officer who did not have jurisdiction over the case at the point of time when that notice was issued. If such a notice issued then it would be invalid and ab-initio void and assessment made on that basis would be a nullity, He relied on following judgments for this proposition:
i) Lt. Col. Paramjit Singh v. CIT 220 ITR 446 (P&H),
ii) Naginmara Veneer and Saw Mill Pvt. Ltd. v. DCIT 219 ITR 527 (Gau),
iii) Sri Nath Suresh Chand Ram Naresh v. CIT 145 Taxman 186 (All.) and
iv) Smt. N. Kassivisalam v. ACIT (2005) 93 TTJ 537 (Chennai).
16. Regarding reasons recorded before issuance of notice Under Section 148, Ld. A.R. of them assessee submitted that reasons cannot be supported, enlarged or strengthened by subsequent material. No outside material/affidavit could be imported to throw light on such reasons. For this proposition, he relied on following authorities:
i) Extract of page 485 of the book Chaturvedi & Pithisaria's Income Tax Law fifth edition,
ii) Saradbhai M. Lakhni v. ITO 231 ITR 779 (Guj),
iii) Hindustan Lever Ltd. v. R.V. Wardar ACIT 268 ITR 332 (Bom),
iv) N. Subhakaran v. CIT 198 ITR 720 (Ker) and
v) East Coast Commercial Ltd. v. ITO 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 276 ITR 532 (P&H),
ii) East Court Commercial Ltd. v. ITO 128 ITR 326 (Cal).
iii) K.C.P. Ltd. v. ITO 146 ITR 284(AP) and
iv) United Electrical Co. v. CIT 258 ITR 317 (Del).
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. v. ITO 259 ITR 19 (SC). 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 reason for issuance of such notice. After receiving reasons the assessee is also given right to object to the reopening of assessment and reasons recorded by the Assessing Officer. The Assessing Officer has to thereafter pass a speaking order meeting out the objections raised by the assessee. Only thereafter, the Assessing Officer can proceed with the reassessment. In this proposition, the Ld. A.R. of the assessee relied on following authorities:
(i) GKN Driveshafts (India) Ltd. v. ITO 259 ITR 19 (SC),
(ii) Fisher Xomox Sanmar Ltd. v. ACIT 271 ITR 393 (Mad),
(iii) Tolins Rubbers v. ACIT 270 ITR 280 (Ker),
(iv) Gehna v. Union of India and Anr. 267 ITR 782 (Raj) and
(v) K.S. Suresh v. DCN 279 ITR 61 (Mad)
19. On merit of the case, the Ld. A.R. of the assessee submitted that the sum of Rs. 22 lacs was received as deposit by the assessee from M/s. Skymoon Plantation & finance Ltd. (in short SP&FL). It is a company duly registered under the Companies Act. It has its own identity. Money was paid by account payee cheques. It was also explained to the Assessing Officer that SP&FL received the money from its depositors for the purpose of plantation but in order to purchase office space money was deposited with the assessee company. Thus, identity, creditworthiness and genuineness of the transaction have been proved. The assessee has no control or even any onus to prove as to how SP&FL brought money into its books. The source of source or origin of origin is not required to be established by the assessee. for this proposition, Ld. A.R. of the assessee relied on following authorities:
(i) CIT v. Jauharimal Goel (2005) 147 Taxman 448 (All),
(ii) S. Hastimal v. CIT ,
(iii) Tolaram Daga v. CIT ,
(iv) CIT v. Daulat Ram Rawatmull and
(v) Sarogi Credit Corporation v. CIT .
20. The I.d. A.R. of the assessee then submitted that order passed by the Ld. CIT(A) who is a quasi judicial authority is not a reasoned order. She has confirmed the order of the Assessing Officer without applying mind of her own. It is a non-speaking order and therefore it is required to be set aside. He relief on the following authorities:
(i) Manglore Ganesh Beedi Works v. CIT 273 ITR 56 (SC),
(ii) Extract of page 108 of the book "Law of Income Tax" by Sampath Iyengar. 10th edition and
(iii) Kusumben M. Parikh v. CBDT 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 sheet to that effect and the charge that Learned CIT did not apply his mind before according approval is baseless. He had actually applied his mind before according approval to the issuance of notice Under Section 148(1). The Assessing Officer has dealt with the objection in the assessment order and rejected them. On merits the Learned D.R. submitted that in spite of repealed notices and opportunities assessee did not produce the books of accounts of SP&FL so that Assessing Officer could know the credit worthiness of SP&FL. The Learned D.R. referred to the order of the Ld. CIT(A) wherein comments of the Assessing Officer on the remand report are reproduced and which suggests that assessee has borrowed money from SP&FL as and when there was deficiency for its cash balance. SP&FL have collected funds from the so called depositors for the purpose of plantation but no plantation as such has taken place. Without examination of the books of SP&FL it is not possible to know how the funds had developed in the books of SP&FL and also to find out whether deposits in the books of the creditor were genuine and hence, credit in the books of the assessee are also genuine. Without showing the books of SP&FL it is not possible to come to the conclusion that the credit worthiness of the creditor is established. The Learned D.R. supported the orders of the Assessing Officer and the I.d. CIT(A) submitting that assessee and the creditor SP&FL have not cooperated with the Assessing Officer and he was constrained to pass an order Under Section 144.
22. In rejoinder I.d. A.R. of the assessee submitted that assessee had objected to the issuance of notice Under Section 148(1) by the ACIT, Range-IV, Lucknow within one month of issuance of such notice and therefore, it is well within the limitation provided Under Section 124(3)(a). He however, could not object within time to the assessment proceedings carried on by the Assessing Officer for the assessment year 2001-02 for which return was filed with ACIT. Range-IV, Lucknow prior to change of jurisdiction by the Learned CIT Under Section 120. Merely because assessee did not object to the jurisdiction of ACIT, Range-IV, Lucknow over him for the assessment year 2001-02, it will not grant validity to the jurisdiction of the Assessing Officer for the assessment year 1997-98. The principles of estoppel are not applicable to the income tax proceedings. No jurisdiction could be granted by consent. For this proposition, he relied on following authorities:
i) Anant Mills Ltd. v. CIT 206 ITR 582 (Guj),
ii) CIT v. D.P.F. Textiles Limited 241 ITR 548 (Mad) and
iii) CIT v. Mrs. V. Chandra 245 ITR 610 (Del.).
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-1. Lucknow vide order dated 1.8.2001 passed Under Section 120 by the CCIT, Lucknow. Clearly on 29.3.2004 jurisdiction over the assessee vested with Addl. CIT. Range-1, Lucknow. There cannot be situation where two Assessing Officer would have simultaneous jurisdiction over the assessee, one being Addl. CIT. Range-I, Lucknow and other being ACIT, Range-IV, Lucknow, unless concurrent jurisdiction is specifically given to them by the CCIT. There is no such claim of the revenue that concurrent jurisdiction was given to two officers in respect to the assessee. Therefore, ACIT. Range-IV, Lucknow did not have jurisdiction over the assessee on 29.3.2004 and clearly the notice Under Section 148(1) was issued by the Assessing Officer having no jurisdiction over the assessee. Hon'ble Kerala High Court in P.A. Ahamed v. CCIT held that at any given point of time only one Assessing Officer can have regular jurisdiction over an assessee for assessment under the scheme of the Act. Therefore, when a transfer is effected, the entire file old, pending and the returns to be filed will get transferred to the officer to whom the file is transferred by the CCIT. The use of word "case" means the entire proceeding under the Act which are transferred to the new officer and the old officer ceases to have jurisdiction. The officer to whom the files are transferred only can make the assessment.
24. The Hon'ble Allahabad High Court in CIT v. Metal Goods Manufacturing Co. Pvt. Ltd. held that a court or a tribunal deciding the matter must possess the jurisdiction. It also should have power to decide the matter before it. Hon'ble Kerala High Court in K.V. Kader Haji (Deed) v. CIT clarified distinction between Sections 120 and 127. It was held that Section 120 uses the expression 'jurisdiction' whereas Section 127 uses the expression 'power' having different meaning and content. While exercising Section 127 gives power to the Chief Commissioner to transfer case from one officer to another officer whereas Section 120 gives jurisdiction to the Assessing Officer to make assessment over the assessee assigned to them.
25. The Hon'ble Calcutta High Court in ITO v. Ashoke Glass Works held that there is no right to an assessee to be heard by a particular officer. He can be heard by an officer having jurisdiction over the matter. The jurisdiction is transferred to another officer as soon as an order to this effect is passed by 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 nonce 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-1V Lucknow ought not to have proceeded with the reassessment proceedings. In any case, according to the protest by the assessee, ACIT, Range-IV. Lucknow transferred the proceedings for the assessment year 1997-98 to the Addl. CIT. Range-1. 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 initialed 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 jurisdiction cannot be assumed by consent. It has to be given by the statute or by the authorities under the statute who are empowered in this behalf. Firstly, the Assessing Officer, ACIT, Range-IV, Lucknow ought to have transferred the proceedings relating to assessment year 2001-02 to the addl. CIT, Range-1, Lucknow immediately after receipt of order Under Section 120. An order Under Section 120 operates not only against the assessee but also against the Assessing Officer holding jurisdiction at the time of passing of the order Under Section 120. To continue with the proceedings after passing of the order Under Section 120; by the same old officer would be without jurisdiction and hence would be bad in law. Learned D.R. submits that Section 124(3) protects assessments so framed if the assessee does not object within a month of initiation of such proceeding. In our considered view, this validation of proceeding by virtue of Section 124(3) is specific from proceeding to proceeding and Section 124(3) cannot correct or create a jurisdiction in respect of other proceedings if the Assessing Officer otherwise does not have jurisdiction. In other words, the failure to object by the assessee within a month of the initiation of proceedings validates only that proceeding and assessment made thereafter if so provided Under Section 124(3) and does not validate any other proceedings if undertaken by the same Assessing Officer having otherwise no jurisdiction over the assessee. In this regard it would be pertinent to refer to Section 124(3).
(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer.
(a) where he has made a return [under Sub-section (I) of Section 115WD or] under Sub-section (I) of Section 139, after the expiry of one month from the date on which he was served with a notice under Sub-section (1) of Section 142 or [Sub-section (2) of Section 115WE or] Sub-section (2) of Section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under [Sub-section (2) of Section 115WD or Sub-section (1) of Section 142 or under Sub-section (1) of Section 115WH or under Section 148 for the making of the return or by the notice under the first proviso to Section 115WF or under the first proviso to Section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.
26. 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 initialed 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 imitation 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 I48(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 30.11.1997 along with the annual accounts and auditors report. An intimation Under Section 143(1)(a) was issued by ACIT, Range-IV, Lucknow on 24.7.1998. Thereafter the Assessing Officer (ACIT, R-IV, Lukcnow) issued notice Under Section 148(1) on 29.3.2004. The protection of proceedings initiated Under Section 148(1) is covered by Clause (b) only and not by Clause (a) (if assessee does not object within a month). Clause (b) is applicable only in respect of those assessees who have not filed any return Under Section 139 for the relevant assessment year. Since the assessee had in fact filed a return Under Section 139 for the assessment year 1997-98 the protection to the proceeding initiated Under Section 148(1) in the case of this assessee will not be available to the revenue by virtue of Clause (b). But such protection will also not be available (on failure to protest within one month of the proceedings) under Clause (a) as that is not applicable to a proceeding initialed Under Section 148(1). Thus, in the present ease, it would be immaterial whether assessee has objected within one month of the issuance of notice Under Section 148 or not. Notwithstanding as the assessee has protested within one month of the issuance of notice Under Section 148(1) then right course to the Assessing Officer was to refer the matter to the Chief Commissioner as provided under Sub-section (2). In any case, invoking of Section 124(2) would arise if there was any chance of validation of proceedings by virtue of Section 124(3) which in our view is not available to the Assessing Officer in the present case either under Clause (a) or under Clause (b) of Section 124(3).
27. In the instant case, the assessment has been framed by Addl. CIT. Range-1, Lucknow in pursuance to the notice issued Under Section 148(1) by the ACIT. Range-IV. Lucknow. Even though the Addl. CIT. Range-1, Lucknow held jurisdiction over the assessee to frame the assessment but as the initiation of reassessment proceedings Under Section 148(1) are bad in law, therefore, reassessment so framed cannot be held to be legally valid. Hon'ble P&H High Court in Lt. Col. Paramjit Singh v. CIT (Supra), relied on in the I.d. A.R. of the assessee, held that reassessment framed by an officer having no jurisdiction would be invalid. In that case the notice was issued Under Section 148(1) by ITO. Jalandhar to reassess the assessee for the assessment year 1988-89 but it was quashed by Hon'ble P&H High Court, on the ground that assessee is being assessed regularly at Pune and his case has not been transferred from Pune to Jalandhar even though, the assessee has shifted his residence from Pune to Jalandhar. Similarly, Hon'ble Gauhati High Court in Naginmara Veneer and Saw Mill Pvt. Ltd. v. DCIT (Supra), relied on by the I.d. A.R. of the assessee, held that notice issued Under Section 148(1) by DCIT was invalid as he did not have jurisdiction to do so even though his ITO did have jurisdiction to issue such notice.
28. The argument of Learned D.R. that since the assessee has not objected to the assessment framed for the assessment year 2001-02 and, therefore, ACIT. Range-IV. Lucknow can validly issue notice Under Section 148(1) is not sustainable in law. As discussed above. protection of the proceedings and assessment thereafter on account of failure of the assessee to object within the time allowed Under Section 124(3) is available to specific proceeding and not to every proceedings. Erroneous assumption of jurisdiction cannot, in general, be validated. Such validation is specific in Section 124(3). Secondly, principles of estoppel are not applicable to Income tax proceedings. What may be acceptable or held in one year or in one proceeding cannot be in general held to be applicable to other proceedings. It is held by Hon'ble Gujarat High Court in Anant Mills Ltd. v. CIT (Supra) that estoppel is not applicable to successive assessments. In any case, estoppel cannot be made applicable to assumption of jurisdiction. It has to be specifically provided in the statute. We, therefore, do not find any force in the arguments in this regard submitted by the Learned D.R. The same are, therefore, rejected. So far as the merit of the case is concerned, in our considered view they arc merely academic as reassessment is cancelled as having been initialed without jurisdiction.
29. As a result, we hold that the issuance of notice Under Section 148(1) by ACIT, Range-IV. Lucknow was without jurisdiction and therefore, invalid. The assessment framed on that basis by Addl. CIT. Range-1. Lucknow will also be invalid and therefore, is cancelled. The appeal of the assessee is therefore, allowed.
30. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 7/9/07.