Case Law Details
Pritthvi Global Ventures Pvt Limited Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that reasons for reopening of the assessment recorded by an Authority who was not having territorial jurisdiction over the assessee is unsustainable in law and accordingly the entire reassessment proceeding is liable to be quashed.
Facts- The assessee has shown long-term capital gain at Rs.7,31,66,678/- in the original return of income. It claimed set off of brought forward long-term capital loss of A.Y. 2004-05 amounting to Rs.2,97,870/-. The assessment order thereafter is silent about the status of the original return whether it was processed u/s. 143(1) or u/s. 143(3).
The assessment order narrated about the reopening of assessment by issuance of a notice u/s. 148. AO thereafter passed the assessment order u/s. 147 read with section 143(3). He determined the taxable income at Rs.7,27,60,833/-, which is slightly lesser than the capital gain shown by the assessee in the original return.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that reasons for reopening of the assessment were recorded by an Authority, who was not having territorial jurisdiction over the assessee. The ld. DCIT, Circle-3, Guwahati, who has passed the impugned assessment order ought to have recorded reasons to reopen the assessment after considering the material came to his notice, but he has not recorded any reason for taking action against the assessee, rather he has taken the proceeding from the stage when it was communicated to him. The initiation of the proceeding against the assessee was not correct in the present case. It can be appreciated in a different manner namely, had the information considered by the ld. ITO, Ward-1, Tinsukia was made available to DCIT, Circle-3, Guwahati, then it was for the DCIT, Circle-3, Guwahati to form an opinion whether reassessment proceeding is to be initiated or not. This aspect was not taken care in this case. Hence, the reopening is bad in the eyes of law and consequently the assessment order is not sustainable. Accordingly we allow the appeal of the assessee and quash the orders of both the Revenue Authorities below.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), Guwahati-2, Guwahati dated 23.01.2020 passed for Assessment Year 2010-11.
2. The assessee has taken ten grounds of appeal. In Grounds No. 1 to 6, the assessee has challenged reopening of assessment.
3. Brief facts as emerging out from the assessment order are that the assessee has shown long-term capital gain at Rs.7,31,66,678/- in the original return of income. It claimed set off of brought forward long-term capital loss of assessment year 2004-05 amounting to Rs.2,97,870/-. The assessment order thereafter is silent about the status of the original return whether it was processed under section 143(1) or under section 143(3). The assessment order narrates about the reopening of assessment by issuance of a notice under section 148 on 26.03.2015. The ld. Assessing Officer thereafter passed the assessment order under section 147 read with section 143(3) on 31.03.2016. He determined the taxable income at Rs.7,27,60,833/-, which is slightly lesser than the capital gain shown by the assessee in the original return.
4. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee. The ld. CIT(Appeals) in an ex-parte order dismissed the appeal of the assessee.
5. The assessee has originally filed a brief paper book containing nine pages. Thereafter it has filed four more pages. The ld. Counsel for the assessee submitted that assessment of the assessee was reopened by ld. ITO, Ward-1, Tinsukia by issuance of a notice dated 26.03.2015. He placed on record copy of the reasons recorded by the ld. ITO, Ward-1, Tinsukia. The ld. Counsel for the assessee thereafter drew our attention towards letter dated 29.07.2015 by ld. ITO, Ward-2, Tinsukia vide which the case of the assessee was proposed to be transferred to ld. ACIT, Circle- Tinsukia because monetary limit of escaped income was more than Rs.6.81 crores. It was observed that the income, which is taxable to the extent of Rs.20 lakhs, was to be assessed by the ld. ITO and beyond that is to be assessed by ld. ACIT. Thereafter ld. Counsel for the assessee took us through the assessment order and submitted that assessment order has been passed by ld. DCIT, Circle-3, Guwahati. When assessee prayed for providing the copies of the reasons, then the reasons transmitted to the assessee by ld. DCIT, Circle-3, Guwahati is the reasons recorded by the ld. ITO, Ward-1, Tinsukia. On the strength of all these details, it was contended by the assessee that ITO, Ward-1/2/ACIT, Tinsukia were not having any territorial jurisdiction over the assessee. Hence the assessment of the assessee was erroneously reopened by the ld. ITO, Ward-Tinsukia. He further contended that the assessment passed by the ld. DCIT, Circle-3, Guwahati is not sustainable because no reasons were recorded by the Competent Officer for reopening of the assessment. On the strength of the reasons by the ld. ITO, Ward-1, Tinsukia, the assessment cannot be framed by the ld. DCIT, Guwahati.
6. The ld. D.R. was unable to controvert the submissions made by the ld. Counsel for the assessee.
7. We have duly considered the rival contentions and gone through the record carefully. It is pertinent to note that in the scheme of assessment of the income of the assessee, it has been provided that there would be territorial jurisdiction of the Competent Authorities over an assessee or group of assessee in a particular Range. In other words, the whole country has been divided in a hierarchy of authorities for determining of taxable income of the assessee, namely from Income Tax Officer up to the Commissioner of Income Tax under whose jurisdiction determination of taxable income is to be worked out. The case of the assessee is that jurisdiction over the assessee rests with the Range of DCIT, Circle-3, Guwahati. The Competent Officer, i.e. ld. ITO or ld. DCIT has not recorded any reason for taking action against the assessee under section 148. It is the ld. ITO, Ward-1, Tinsukia, who has recorded the reasons for reopening. On the strength of such reasoning, income of the assessee cannot be determined under section 147 because ITO, Ward-1, Tinsukia was not having territorial jurisdiction over the assessee. During the course of hearing, the judgment of the Hon’ble Bombay High Court in the case of Ashok Devichand Jain –vs.- Union of India 452 ITR page 43 was brought to our notice. In this judgment, the question, which was considered by the Hon’ble High Court was, whether the reassessment order passed by an Authority on an invalid notice issued under section 148 is sustainable or not. The Hon’ble Bombay High Court has held that if an Officer, who has issued notice under section 148 was not having jurisdiction over the assessee, then, subsequent assessment order upon the assessee by the Officer, who is having territorial jurisdiction will not be valid.
8. For buttressing our conclusion, we deem it appropriate to take note the copy of the notice issued under section 148 as well as request for transfer from ITO, Ward-2, Tinsukia to ACIT. The following letters read as under:-
“Notice under Section 148 of the Income – Tax Act, 1961
Office of the ITO W-1 TINSUKIA
PAN : AAACG6834B
Dated : 26/03/2015
To
M/S. PRITTHVI GLOBAL VENTURES PRIVATE LIMITED
PRITTHVI GLOBAL VENTURES PRIVATE LIMITED
4B DIHANG ARCADE
G S ROAD NEAR RAJIV BHAWA
GUWAHATI
ASSAM 781005
Sir/Madam,
Whereas I have reasons to believe that your income chargeable to tax for the assessment year 20910-11 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961.
2. I, therefore, propose to assess/re-assess the income for the said assessment year and I hereby require you to deliver to me within 30 days from the service of this notice, a return in the prescribed form of your income for the said assessment year.
3. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income Tax, the Central Board of Direct Taxes.
Sd/-
Signature of Officer
Name: B.C. Paul,
Income Tax Officer,
Ward-1, Tinsukia”.
“OFFICE OF THE INCOME TAX OFFICER; WARD-2: TINSUKIA AAYAKAR BHAWAN, BORDOLO! NAGAR, TINSUKIA.
F.NO.T-6/ITO/W-2 /TSK/2015-16/
DATED-.29-07-2015
To
The Assistant Commissioner of Income-tax,
Circle,
Tinsukia.
Sir,
Sub:-Transfer of the case in which notice u/s.148 has been issued for Tax evasion through client code modification -regarding
Please refer to the above.
Assessment records of M/S.PRITTHVI GLOBAL VENTURES LIMITED(PAN-AAACG6834B) for the assessment year-2010-11 in one part was received from Income-tax Officer, Ward-1, Tinsukia vide his letter F. No. T-3/ITO/W-1/TSAK/2015-16/107 DT. 04.06.2015, stating that the jurisdiction over the case lies with the undersigned and he also stated in his letter that notice u/s.148 has been issued on 26-03-2015 to the assessee on the basis of information received from Pr. CCIT, Guwahati vide F.NO.T- 5/Pr. CCIT(NER)/GHY/Tech/2014-15/21317-18 dt. 11/03/3015, the details of which are on assessment records.
On verification, it is found that the total income of the aforesaid assessee for the assessment year-2010-11 is Rs.6,81,95,270/- (Six Crore Eighty One Lakhs Ninety Five Thousand Two Hundred Seventy). Therefore, the assessment record of the aforesaid assessee for the assessment year-2010-11 is transferred to you as the monetary jurisdiction over the case lies with you.
It may be noted that the case will get time-barred by limitation on 31-03-2016.
Yours faithfully,
Sd/-
(R. Das)
Income-tax Officer, Ward-2, Tinsukia.
Memo No. F,No.T-6/ITO/W-2 /TSK/2015-16/669-70 dated 29.07.2015
Copy to:
1) The Addl. Commissioner of Income-tax, Range-Tinsukta, Tinsukia.
2) M/S.Pritthvi Global Venture Pvivate Limited, 48, Dihang Arcade, G.S. Road, Near Rajiv Bhawan, Guwahati(Assam)-781005.
Sd/-
(R. Das)
Income-tax Officer,
Ward-2, Tinsukia”.
“OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX,
CIRCLE – 3, GUWAHATI
7/4, AAYAKAR BHAWAN, G.S. ROAD, GUWAHATI – 781005
Telephone: 0361-2345664
PAN: AAAC66834B/2010-11/1157 Dated 25th January,2016.
To
M/s Prithivi Global Ventures Pvt Ltd [Formerly Garkot (India) Pvt. Ltd]
Dihang Arcade,4B,Near Rajiv Bhawan
ABC, Guwahati 781 005
Sub: Proceedings u/s 148 of the I.T. Act, 1961 for Assessment Year 2010-11
Sir/Madam,
Please find enclosed copy of reasons for re-opening your case for AY 2010-11 as per your request dated 12/04/2015.
Encl. as stated:
Yours faithfully,
Sd/-
[ M.C.Omi .Ningshen]
DCIT, Circle.- 3, Guwahati
Contact Nos: Mobile: 9401981523
Phone: 0361 2345664
E—mail ID: [email protected]”.
9. A perusal of these three correspondences would indicate that reasons for reopening of the assessment were recorded by an Authority, who was not having territorial jurisdiction over the assessee. The ld. DCIT, Circle-3, Guwahati, who has passed the impugned assessment order ought to have recorded reasons to reopen the assessment after considering the material came to his notice, but he has not recorded any reason for taking action against the assessee, rather he has taken the proceeding from the stage when it was communicated to him. The initiation of the proceeding against the assessee was not correct in the present case. It can be appreciated in a different manner namely, had the information considered by the ld. ITO, Ward-1, Tinsukia was made available to DCIT, Circle-3, Guwahati, then it was for the DCIT, Circle-3, Guwahati to form an opinion whether reassessment proceeding is to be initiated or not. This aspect was not taken care in this case. Hence, the reopening is bad in the eyes of law and consequently the assessment order is not sustainable. Accordingly we allow the appeal of the assessee and quash the orders of both the Revenue Authorities below.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 19.07.2023.
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