An issue of jurisdiction can be raised at any time even in appeal or execution

Brief- High Court of Bombay at Goa has held in the case of In the case of M/s Mavany Brothers vs. CIT that that it is settled position that conferment of jurisdiction is a legislative function and cannot be conferred by consent of petitioner. An issue of jurisdiction can be raised at any time even in appeal or execution.

Brief fact of the case

The assessee filed its original return of income along with its balance sheet and profit & loss account on 22/09/1997 which was processed u/s 143(1)(a) of the Act. On 13/11/2000, a notice u/s 148 of the Act was issued seeking to re-open the assessment. In response, appellant filed a fresh return of income on 17/11/2000 and indicated that the other documents viz balance sheet and profit & loss account had already been filed with the original return of income and consequently the same again was not being filed. However, the appellant was called upon to furnish the same. The appellant by a further letter supplied copies of balance sheet and profit & loss account to the A.O. while reiterating again that the original return of income did contain the documents namely balance sheet and profit & loss account sought by Revenue and there was no difference between the original return of income filed in 1997 and the present return filed on 17/11/2000. The reason sought by the appellant in support of notice dated 13/11/2000 was also communicated by the A.O. which was mainly based on correspondence with various parties and partnership deed dated 08/08/1995 and the confidential report dt. 05/10/1999 received from DDIT(Inv), Panaji. The appellant did not object to the reasons recorded for reopening the assessment and attended the hearing before the A.O. Being aggrieved with the additions made by the A.O. based on the reasons recorded, appellant filed an appeal to the CIT(A). At that stage the appellant for the first time raised an objection to the reopening notice dated 13/11/2000 under Section 148 of the Act that it was without jurisdiction on the ground of non-furnishing of confidential report of the DDIT to the appellant and that the return of income filed in 1997 was not available with the Revenue. Consequently, there could be no occasion for the Assessing Officer to have any reason to believe that income chargeable to tax had escaped assessment. In support of this the appellant placed reliance upon an inspection of the records of the Revenue with regard to the appellant on 08/09/2004. Besides, the appellant also raised various contentions with regard to the issue of no capital gains being attracted in the facts of the present case. The CIT(A) by its order dated 30/11/2004 dismissed the appeal holding that the non availability of the original return in the record of the Assessing Officer on 08/09/2004 does not mean that the original return was not available on 13/11/2000 i.e. the date when the notice under Section 148 of the Act was issued to the appellant and also confirmed the order of A.O. w.r.t to transaction being transfer within meaning of section 2(47) of the Act. On further appeal, the Tribunal by the impugned order upheld the order of the CIT(A) both on issue of reopening of assessment as well as on the issue of capital gains. Being aggrieved, the appellant filed appeal before the High Court and appeal was admitted on following substantial question of law:-

(1) Whether the Tribunal was right in affirming the determination of the capital gains at Rs.72,28,175-00 (or Rs.72,46,825-00) in place of the loss shown in the return of income filed under Section 148?

(2) Whether having regard to the family arrangement entered into in order to put an end to civil litigation commenced against the appellant by late Tajdin and later continued by his legal heirs, no capital gains at all is liable to be assessed?

(3) Whether alternatively the payment of Rs.66 lakhs should be deducted from out of the consideration for the transfer `received by the appellant’ or should go to enhance the cost of acquisition of the land and only to view order, not for print the cinema building and accordingly the capital gains if any should be reduced by the aforesaid sum of Rs.66 lakhs?

(4) Whether on the facts and in the circumstances of the case, the assessment of the appellant for the AY 1996-97 was validly reopened and the notice under Section 147 was valid in law?

However, the High Court first addressed the basic issue raised by the appellant viz the re-opening notice without jurisdiction as the foundation of proceedings on the other issues was the validity of the reopening notices.

Contention of the Assessee

The ld. counsel submitted that re-opening of the notice dt. 13/11/2000 was completely without jurisdiction as on that day the A.O. did not had on record the original return of income filed by the appellant. This was apparent from the fact that the appellant had while filing the return of income on 17/11/2000 consequent to the reopening notice on 13/11/2000 had indicated that profit and loss account and balance sheet were part of the original return and therefore were not being separately attached. The return as filed on 17/11/2000 was identical to one filed on 22/09/1997. Inspite of the same on 20/11/2000 the Assessing Officer called for the profit and loss account and balance sheet on the ground that the same is not attached to the return of the income filed on 17/11/2000. If the return of income was available with the Assessing Officer there would had been no occasion for him to call for the balance sheet and profit and loss account again by letter dated 20/11/2000 from the appellant. Thus the conclusion of the CIT(A) as well as the Tribunal that the original return of income may have been available on 13/11/2000 when the notice for reopening was issued without any evidence/basis cannot be sustained.

Contention of the Revenue

Ld. counsel of Revenue submitted that it was not open to the appellant to raise an issue of jurisdiction to issue notice under Section 148 of the Act before the first appellate authority. This was particularly so as the appellant had not made grievance with regard to lack of jurisdiction before the A.O. Even otherwise, it was further submitted that the fact that income chargeable to tax has escaped assessment need not necessarily flow out to examination of return of income and the same could be from any other source. Thus, the requirement of having a return of income available at the time of issuing of the notice was not necessary.

Held by High Court

After considering the rival contentions, Hon’ble High Court pronounced that the jurisdiction under Section 147/148 of the Act is an extra ordinary jurisdiction and can only be exercised when condition precedent as provided in Sections 147/148 of the Act are satisfied. In the absence of the Assessing Officer having the original return of income available it would not be possible for him to have a reasonable belief that income chargeable to tax has escaped assessment. The view of the Revenue that the issue of jurisdiction could only have been raised before the Assessing Officer and not having been raised before him, the appellant had waived its rights to raise the same is not entirely correct. It is well settled that mere acquiescence will not give jurisdiction to an authority who has no jurisdiction. Mere participation by a party in proceedings without jurisdiction will not vest/confer jurisdiction on the authority. Reason to believe that income chargeable to tax has escaped assessment is a jurisdictional fact and only on its satisfaction, the Assessing Officer acquires jurisdiction to issue notice. An objection to it can be raised at any time even in appeal proceedings. The mere fact that no objection is taken before the Assessing Officer would not by itself bestow jurisdiction to the A.O. Moreover, the Apex Court in its recent decision in Kanwar Singh Saini V/s. High Court Of Delhi reported in 2012(4) SCC 307 has held that it is settled position that conferment of jurisdiction is a legislative function and cannot be conferred by consent of petitioner. An issue of jurisdiction can be raised at any time even in appeal or execution. The revenue in the present case proceeded on the basis that the return of income filed in 1997 was available with the Assessing Officer at the time when the notice dated 13/11/2000 was issued under Section 148 of the Act to the appellant. Nothing in support of the submission was placed by the Revenue before the authorities under the Act. In fact the authorities have proceeded on the basis that the original return filed in 1997 may have been available at the time when the notice on 13/11/2000 was issued under Section 148 of the Act. This conclusion has been drawn by the authorities ignoring the appellant’s contention as is evident from the revised return of income filed on 17/11/2000 wherein the appellant had specifically mentioned that the profit and loss account and the balance sheet was enclosed to the original return of income filed on 22/09/1997. The Assessing Officer had on 20/11/2000 called upon the appellant to produce the balance sheet and profit and loss account for the assessment year 1996-97 as the same were not attached to the return of income filed on 17/11/2000. In case the Revenue had in its possession the 1997 Return of Income then it would have had relied upon the annexures filed with the original return of income and no occasion to call for it from the appellant could arise. This aspect has not at all been considered by the authorities under the Act, including the Tribunal. In view of the above the impugned order of the Tribunal holding that the notice dated 13/11/2000 was issued under Section 148 of the Act was within jurisdiction was set aside. However, the same was being restored to the Tribunal to consider afresh the contentions of the appellant as well as the Revenue with regard to the existence of the original return of income filed on 22/09/1997 in the record of the Assessing Officer at the time when the notice dated 13/11/2000 was issued. The Tribunal is directed to decide the appeal afresh on all issues after hearing the parties.